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American Climate Prospectus: Economic Risks in the United States American Climate Prospectus Economic Risks in the United States Prepared as input to the Risky Business Project October 2014 (v1.2) 1 CHINESE DIRECT INVESTMENT IN EUROPE American Climate Prospectus Economic Risks in the United States October 2014 (version 1.2) Prepared as input to the Risky Business Project © 2014 Rhodium Group, LLC | 5 Columbus Circle, New York, NY 10019 Table of Contents About the Authors 1 Acknowledgements 2 Chapter 1: Introduction 4 Part 1: America’s Climate Future 11 Chapter 2: What We Know 12 Chapter 3: What Comes Next 14 Chapter 4: US Climate Projections 19 Part 2: Assessing the Impact of America’s Changing Climate 35 Chapter 5: An Evidence-Based Approach 36 Chapter 6: Agriculture 41 Chapter 7: Labor 54 Chapter 8: Health 61 Chapter 9: Crime 71 Chapter 10: Energy 79 Chapter 11: Coastal Communities 87 Part 3: Pricing Climate Risk 97 Chapter 12: From Impacts to Economics 98 Chapter 13: Direct Costs and Benefits 100 Chapter 14: Macroeconomic Effects 121 Chapter 15: Valuing Climate Damages 124 Part 4: Unquantified Impacts 129 Chapter 16: What We Miss 130 Chapter 17: Water 134 Chapter 18: Forests 140 Chapter 19: Tourism 145 3 AMERICAN CLIMATE PROSPECTUS Chapter 20: Security 150 Part 5: Insights for Climate Risk Management 155 Chapter 21: Mitigation 156 Chapter 22: Adaptation 163 References 170 Corregendum 200 Technical Appendices (available online at climateprospectus.org) TABLE OF CONTENTS ii About the Authors PHYSICAL CLIMATE PROJECTIONS ECONOMETRIC RESEARCH Robert Kopp, Lead Scientist Solomon Hsiang, Lead Economist Rutgers University University of California Berkeley Dr. Robert Kopp is an Associate Professor of Earth & Dr. Solomon Hsiang is an Assistant Professor of Public Planetary Sciences and Associate Director of the Rutgers Policy, Goldman School of Public Policy and a Faculty Energy Institute. He is also an affiliate of the Bloustein Research Fellow at the National Bureau of Economic School of Planning and Public Policy. His research Research. Dr. Hsiang is at the forefront of using focuses on understanding uncertainty in past and future econometrics to understand the social impact of climate climate change. change. DJ Rasmussen Amir Jina Rhodium Group Columbia University DJ Rasmussen is a scientific programmer with expertise Amir Jina is a doctoral candidate in Sustainable in weather, climate, and air pollution. Mr. Rasmussen Development and visiting researcher at the University of uses computational models to study climate, climate California Berkeley. His research focuses on climate change, risk management, and air quality. impacts in developing countries, using methods from economics, climate science, and ecology. Michael Mastrandrea James Rising Stanford University Columbia University Dr. Michael Mastrandrea is an Assistant Consulting James Rising is a doctoral candidate in Sustainable Professor at the Stanford University Woods Institute for Development. Mr. Rising studies and develops the Environment and Co-Director of Science for the frameworks to model the feedback loops between Intergovernmental Panel on Climate Change (IPCC) environmental and human systems. Working Group II TSU. DETAILED SECTORAL MODELS INTEGRATED ECONOMIC ANALYSIS Robert Muir-Wood Michael Delgado Risk Management Solutions, Inc. Rhodium Group Dr. Robert Muir-Wood is a British scientist, natural Michael Delgado is a Research Analyst on Rhodium disaster expert and published author. He is the chief Group’s energy and natural resources team. Mr. research officer of world-leading catastrophe risk Delgado specializes in developing quantitative tools for management firm, RMS. economic, energy and climate analysis. Paul Wilson Shashank Mohan Risk Management Solutions, Inc. Rhodium Group Dr. Paul Wilson is a Senior Director in the RMS model Shashank Mohan is a Director at the Rhodium Group, development team leading the ongoing development of and leads the development and management of the the RMS North Atlantic Hurricane and Storm Surge company’s suite of economic models and other Models. quantitative tools. PROJECT MANAGEMENT Kate Larsen Trevor Houser Rhodium Group Rhodium Group Kate Larsen is a Director at the Rhodium Group, and Trevor Houser is Partner at the Rhodium Group, and manages the firm’s work on domestic and leads the firm’s energy and natural resources work, international climate change issues. and a visiting fellow at the Peterson Institute for International Economics. 1 AMERICAN CLIMATE PROSPECTUS Acknowledgements Members of our Expert Review Panel– Kerry Emanuel, We thank Kerry Emanuel for supplying hurricane Karen Fisher-Vanden, Michael Greenstone, Katharine activity rate projections for RMS’s coastal flood Hayhoe, Geoffrey Heal, Douglas Holt-Eakin, Michael modeling, as well as for invaluable discussions along the Spence, Larry Linden, Linda Mearns, Michael way. We also thank the RMS Consulting group that Oppenheimer, Sean Ringstead, Tom Rutherford, facilitated the analytical work, specifically Alastair Jonathan Samet, and Gary Yohe – provided invaluable Norris and Karandeep Chadha, and all the members of critiques during the development of this report. We also the RMS Development team that have contributed to thank Sir Nicholas Stern, who provided excellent input RMS’s models over the years, especially Alison Dobbin and guidance, and William Nordhaus, for his and Alexandra Guerrero for their expert contribution in pioneering work in on climate economics and scoping modifying the RMS North Atlantic Hurricane model to suggestions early in the project. account for climate change. The authors thank Malte Meinshausen for providing We partnered with Industrial Economics, Inc. (IEc), the MAGICC global mean temperature projections. The sea- developer of the National Coastal Property Model, to level rise projections were developed in collaboration assess the extent to which investments in sea walls, with Radley Horton, Christopher Little, Jerry Mitrovica, beach nourishment and building enhancements can Michael Oppenheimer, Benjamin Strauss and Claudia protect coastal property and infrastructure. We are Tebaldi. We thank Tony Broccoli, Matthew Huber and grateful to Jim Neumann and Lindsey Ludwig of IEc for Jonathan Buzan for helpful discussion on the physical their excellent work on this project. climate projections. Our assessment of energy sector impacts was made We acknowledge the World Climate Research possible by the hard work of the U.S. Energy Programme’s Working Group on Coupled Modeling, Information Administration in developing, which is responsible for the Coupled Model maintaining, and making publicly available the Intercomparison Project (CMIP), and we thank the National Energy Modeling System (NEMS). participating climate modeling groups (listed in Technical Appendix I) for producing and making We thank Tom Rutherford, Karen Fisher-Vanden, Miles available their model output. We also thank the Bureau Light and Andrew Schreiber for their advice and of Reclamation and their collaborators for their guidance in developing our economic model, RHG- downscaled CMIP5 projections. For CMIP, the MUSE. We acknowledge Andrew Schreiber and Linda US Department of Energy’s Program for Climate Model Schick for providing customized support and economic Diagnosis and Intercomparison provides coordinating data. Joseph Delgado provided invaluable technical support and led development of software infrastructure assistance. in partnership with the Global Organization for Earth System Science Portals. We thank Michael Oppenheimer for his help in envisioning our overall approach and for his role in For their contributions to the impacts assessment, the shaping the career paths of two of the lead authors in a authors thank Max Auffhammer, Joshua Graff Zivin, way that made this collaboration possible. Olivier Deschenes, Justin McGrath, Lars Lefgren, Matthew Neidell, Matthew Ranson, Michael This assessment was made possible through the Roberts and Wolfram Schlenker for providing data and financial support of the Risky Business Project, a additional analysis; Marshall Burke, William Fisk, David partnership of Bloomberg Philanthropies, the Paulson Lobell and Michael Greenstone for important Institute and TomKat Charitable Trust. Additional discussions and advice; and Sergey Shevtchenko for support for this research was provided by the Skoll excellent technology support. We acknowledge the Global Threats Fund and the Rockefeller Family Department of Energy Office of Policy & International Fund. We thank Kate Gordon and colleagues at Next Affairs and the U.S. Climate Change Technology Generation for providing us with the opportunity to Program for providing seed funding for the Distributed perform this assessment and their adept management of Meta-Analysis System. the Risky Business Project as a whole. We are grateful to ACKNOWLEDGEMENTS 2 our colleagues at the Rhodium Group, Rutgers assessment. Most importantly, we thank our friends and University, the University of California at Berkeley, and families for their seemingly endless patience and Columbia University for their assistance in this support over the past 15 months. 3 AMERICAN CLIMATE PROSPECTUS CHAPTER 1 Introduction Weather and climate – the overall distribution of must weigh the potential economic and social impacts of weather over time – shape our economy. Temperature climate change against the costs of policies to reduce impacts everything from the amount of energy we GHG emissions (mitigation) or make our economy more consume to heat and cool our homes and offices to our
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