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The Economic Impact of Climate Change

The past decade or so has been dominated by political debate over climate change. I’m not going to get into that too much, but I do want to discuss the impact the changing climate is having on economic activity globally, nationally and locally. 

There are obvious points of view about why we are experiencing climate change. Either we are in a normal climate cycle, or human behaviors are causing temperatures to rise — leading to rising sea levels, more frequent catastrophic events, and melting glaciers. It doesn’t matter why it’s happening; the potential impacts are very real and very serious. 

Almost 20 years ago, J.B. Smith, a noted expert on climate change impacts and a principal at Stratus Consulting, wrote that “a small increase in our global mean temperature (up to 2 degrees Celsius) would result in net negative impact on developing nations and short-term net positives on developed nations.” 

The health impacts of a 1.5-degree global temperature shift could cost 80 million jobs or $2,400 billion in productivity, with workers in agriculture, construction, tourism and sports most affected. 

For centuries, outdoor enthusiasts have observed that changes in temperature impact the migration patterns of all kinds of animals. Most recently, scientists have studied how changing sea and land temperatures affect the global ecosystem. Bird, fish and mammal migration is most obvious — and we can see it for ourselves as dolphins, redfish and shrimp move in and out of the coastal waters of the Lowcountry. 

And certainly, temperature plays a role in bringing the monarch butterfly on its journey through Hilton Head Island every year, as well as the arrival of the great-crested flycatcher in early March. 

So what are the potential impacts on global, national and local economies? 

I have already mentioned lower productivity in various key industries. At the current rate of temperature change, global GDP could be reduced by as much as 10%. 

In the near term, rising temperatures could result in a net positive for the United States. With the relative superiority we enjoy in areas such as agriculture, technology and infrastructure, the U.S. can take advantage of the economic disruption in the developing world and actually grow our GDP significantly. Unfortunately, any positive impacts will be short-lived as the global economy eventually stalls. 

For example: American farmers are preparing for significant changes in crop growing cycles through the use of artificial intelligence; satellites are collecting data on changing wind patterns, temperatures and rainfall, and farmers will use that data to adjust their crop rotation, planting and harvesting schedules. Soon we may see the day when we are harvesting wheat in the Midwest in October, making the “bumper crop” a normal occurrence. But the price of wheat will fall unless we can find new buyers.

The Lowcountry is especially prone to impacts from a minor rise in average temperatures. Changing wind patterns and warmer ocean waters will certainly bring more severe weather. 

Hurricanes will be more frequent and more severe. Flooding will increase in low-lying areas and will reduce the size of our beautiful beaches. 

Animal migration patterns will change, and we’ll notice a difference in the species that fill our local waters. And you can be sure the economic impact on the Lowcountry will be remarkable. 

Tourism patterns will change, insurance costs will rise and the cost of rebuilding after storms will increase as building codes will be strengthened.

At the end of the day, the debate over whether the current climate trend is cyclical or man-made isn’t the important issue. Instead, we should be focusing on how it will impact our economy. We have the intellectual capacity to mitigate the effects, but we need to stop arguing about why this is happening and start talking about what we are going to do about it. 

Elihu Spencer is a local amateur economist with a long business history in global finance. His life work has been centered on understanding credit cycles and their impact on local economies. The information contained in this article has been obtained from sources considered reliable, but the accuracy cannot be guaranteed.