The Risky Business Project was founded in 2013 with the aim of quantifying and publicizing the economic risks of a changing climate. Prominent Project co-chairs Michael R. Bloomberg, Henry Paulson, and Tom Steyer tasked the independent economic research firm Rhodium Group to compile the very first comprehensive financial assessment of the risks of climate change in the United States. The result is the newly released Risky Business: The Economic Risks of Climate Change to the United States.
The U.S. has already begun to feel the effects of climate change with events such as Hurricane Sandy, extreme heat waves, a longer wildfire season, and significant droughts. Risky Business focuses on three areas of significant, measurable economic impact:
- Damage from rising sea levels and increased storm surge,
- Changes in food production and energy demand, and
- The effect of higher temperatures on productivity and health.
Some of the economic aspects noted in the report are:
- Higher sea levels and storm surge will increase the average annual cost of coastal storms along the east coast and Gulf of Mexico by $2 to $3.5 billion in 15 years.
- Some Midwestern and Southern states could see agricultural yield declines in corn, wheat, soy, and cotton of more than 10% over the next 5 to 25 years.
- Increases in global temperatures within the next 5 to 25 years caused by greenhouse gases will necessitate a new power generation capacity equivalent to roughly 200 average coal or natural gas-fired power plants.
In conjunction with the release of Risky Business, Paulson wrote an op-edfor the NY Times on June 21st, 2014. In it he aligned climate risk issues – the so-called climate bubble – with the harbingers of the credit bubble that burst and became the 2008 economic downturn. He compares:
- Rising excesses – debt in the credit bubble, and greenhouse gases in the climate bubble.
- Flawed policies – allowing over-borrowing in the credit bubble; supporting overuse of fossil fuels now.
- Efforts to model huge, complex risks – by financial experts regarding the global economy then; by climate scientists regarding climate change interactions and chain reactions now.
- Devastating, modeled risks realized – the near collapse of the global economy in 2008; the global climate effects beginning to be realized with the irreversible melting of the West Antarctic ice sheet.
Paulson stresses the bipartisan concern of the matter. He writes, “Each of us must recognize that the risks are personal. We’ve seen and felt the costs of underestimating the financial bubble. Let’s not ignore the climate bubble.” The upshot of Risky Business and Paulson’s op ed piece is a call for pricing carbon emissions so that the market can regulate toward a low-carbon economy.