Climate Change is Risky for Business in the Southeast

Chris Carnevale | July 29, 2015 | Climate Change, Energy Policy, Extreme Weather

Yesterday, a new report was released from the Risky Business Project about the economic threats to the Southeastern U.S. posed by climate change. The report, titled, Come Heat and High Waterhighlights that the current economic boom enjoyed by the Southeast is jeopardized by impacts of climate change, and that in order to continue our gains in prosperity, we must make significant strides in climate change pollution mitigation and adaptation.

The report specifically highlights economic impacts from climate change to manufacturing, transportation, and agriculture, as these industries comprise such a large portion of our region’s economy. The Southeast and Texas make up about 34% of U.S. manufacturing output and generate more than $700 billion. Recent trends indicate that manufacturing is undergoing a resurgence in the Southeast, evidenced by the major investments multinational companies have made in infrastructure in the Southeast. For example, BMW has committed to invest $1 billion in its Spartanburg, SC plant, growing it by 800 jobs; Nissan is investing $160 million in its assembly plant in Smyrna, TN, adding nearly 1,000 jobs, and DuPont recently built a $500 million plant near Charleston, SC.

This growth in the manufacturing sector has been a critical driver of post-recession economic development, yet climate impacts, such as increased incidents of extreme heat and flooding, could reverse this growth, especially without significant efforts to cut carbon pollution and build resilience to climate impacts. Manufacturing facilities are often sited beside assets, such as waterways for industrial cooling systems or transportation infrastructure such as rivers, ports, roads, and railways, all of which are at risk from climate change impacts such as rising temperatures and flooding risks from higher sea levels, increased extreme rainfall events, and heightened storm surge.

The gist of the report is laid out in this brief excerpt:

If we continue on our current greenhouse gas emissions pathway, the Southeastern U.S. and Texas will likely experience significant drops in agricultural yield and labor productivity, along with increased sea level rise, higher energy demand, and rising mortality rates. In particular, the region’s agricultural sector will be negatively influenced by the changing climatic conditions, with several commodity crops likely to face severe yield declines. Meanwhile, residents and businesses will likely be affected by higher heat-related mortality, increased electricity demand and energy costs, and declines in labor productivity, threatening the manufacturing base that is increasingly driving the regional economy. And in some cities, such as Miami and New Orleans, sea level rise will put significant amounts of existing coastal property at risk.

Below are some of the major findings from the report, which you can read in full here. Note that projected climate impacts are based on business as usual and assume no significant mitigative or adaptive actions, such as the Clean Power Plan, which will help avoid some of the worst impacts:

Extreme heat will increase. 
Extremely hot days will increase in frequency and the Southeast will likely suffer more temperature rises than any other part of the country. Over the next 5-25 years, residents of the region will likely see between two and four times more days over 95°F in a typical year, compared to the last 30 years. Over the course of this century, the average number of days above 95°F will likely increase by as much as 1400%, from nine days per year in recent decades to as many as 124 days per year.

Extreme heat will affect public health and labor productivity. Over the next 5-25 years, the increase in extreme heat may result in thousands of additional heat-related deaths every year. Such heat will increase the likelihood of unsafe working conditions and reduce labor productivity, specifically in “high-risk” industries involving outdoor work, such as manufacturing, agriculture and transportation.

Extreme heat will increase operating costs. Rising temperatures will likely lead to increased electricity demand for air conditioning, a decline in energy system efficiency, and an increase in the cost of electricity. Several of the Southeast’s largest manufacturing sectors, such as chemicals, paper, and wood manufacturing, are among the most energy intensive industries, which makes them especially vulnerable to increases in the cost of energy. Furthermore, decreases in water availability from climate change impacts of heat, drought, and precipitation changes can cause curtailments of power from water-cooled power plants and may affect efficacy of other cooling operations. 

Extreme heat and precipitation changes will decrease agricultural productivity and increase costs for food processors. Crop yields will be affected by increased extreme heat and reduced water availability in times of drought. Over the next 5-25 years, the Southeast will likely suffer losses in corn yields by as much as 21% and in soybean yields by as much as 14%, while over the course of the century, corn yields will likely decrease by as much as 86%, and soybean yields will likely decrease by as much as 76%. Some states in the Southeast may lose up to 70% of average annual crop yields over the course of this century. It should be noted that this loss in productivity may be offset by gains in productivity from warmer temperatures in certain crops such as wheat. Livestock may decrease in productivity as well, considering that increased body temperatures of 4°F to 5°F above optimum levels can disrupt performance, production and fertility, meaning less meat, milk or eggs, while higher temperatures can also increase risk of animal mortality. Ultimately, decreased agricultural yields increase food costs for consumers and food processors.

Flooding from sea level rise and increased extreme precipitation events will cost a lot. Global warming induced sea level rise will cause major damage to coastal property and infrastructure, with the Southeast region facing the highest risks of coastal property losses in the nation. Without significant carbon pollution reduction and/or adaptation efforts, between $48.2 billion and $68.7 billion in existing coastal property in the Southeast will likely be below sea level by 2050, and damage will be done to critical infrastructure such as water supply, energy, and transportation systems. Along with sea level rise, extreme weather, such as hurricanes and other intense rainfall events, will cause major flooding damage, with the Southeast as the single most susceptible region in the nation to additional losses from storm damage. By 2050, average annual losses from storms in the Southeast will likely increase by $3.6 to $6.8 billion. Some homes and commercial properties with 30-year mortgages in places with high vulnerability to sea level rise may be flooded before they are even paid off. Heavy precipitation can also make barge transportation difficult, which can delay shipments or force cargo to be re-routed to trucks and rail, affecting supply chains and commodity prices.

Mitigation efforts are feasible and can greatly reduce climate impact costs. The economic impacts projected by this report assume business as usual and no significant efforts to reduce carbon pollution or build resilience to climate impacts. Meanwhile, such opportunities abound, and the sooner we act, the better we will be able to avoid the worst impacts.  The report projects that up to 80% of projected economic costs resulting from increased heat-related mortality and energy demand can be mitigated by modest cuts in greenhouse gas pollution. In order to remain as competitive as possible in the face of emerging risks, businesses must incorporate climate mitigation into their everyday business practices and assess their climate risk especially in longterm infrastructure investments. Meanwhile policymakers must support strong efforts to cut carbon pollution, such as the Clean Power Plan–set to be released as early as next week–and transition to clean energy.

Chris Carnevale
Chris is SACE’s Climate Advocacy Director. Chris joined the SACE staff in 2011 to help with building public understanding and engagement around clean energy solutions to the climate crisis. Chris…
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