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Climate change study examines economic effect

 

 

By ANN HINCH

Associate Editor

 

MINNEAPOLIS, Minn. — Applying business risk analysis to climate, a new report on Jan. 23 warns agriculture of the potential disruptions to its economy that climate change could wreak in the coming decades.

The Risky Business Project last year published a climate-economic risk assessment through the year 2100 conducted by the Rhodium Group and commissioned by project chairs Michael Bloomberg, Henry Paulson Jr. and Thomas Steyer.

Paulson, secretary of the Treasury from 2006-09 for President George W. Bush and chair of The Paulson Institute, said that report was nationwide, focusing mostly on how climate change could affect industries along coastal regions.

Friday’s was the first of narrower Risky Business regional reports, and zeros in on effects specific to Midwest business interests – including agriculture. "(Climate change is) a very real economic issue, and it was an opportunity to give business leaders the tools they need to better understand the risks associated with climate, and the costs and risks of doing nothing," he said.

Its major findings for ag include changes in temperature and precipitation shifting growing patterns and crop yields; over the next 5-25 years, if farmers don’t adapt significantly, some in Missouri, Illinois and Indiana will likely see average commodity crop losses up 18-24 percent because of extreme heat each year. The report said growing seasons north of these could extend, allowing farmers to practice double-cropping.

"If we continue on our current emissions path without significant adaptation," the report notes, by 2100 the Midwest "will likely see overall agricultural losses for corn and wheat of 11-69 percent across the region as a whole, with a 1-in-20 chance of more than an 80 percent decline."

Other effects could lead to more hot days per year above 95 degrees Fahrenheit in the Midwest, for instance, and fewer fish as streams and lakes become warmer and threaten them and other sensitive water-based species.

This would cut fishing for sport and food in some areas (but perhaps increase them in others).

"The words ‘climate change’ are very polarizing in the farm community," noted Cargill Executive Chair Greg Page, who serves on the Risky Business Project Risk Committee. But, he said, Cargill believes the issue of being prepared to feed 9 billion people in 35 years is too big for agriculture "to just be perceived as deniers" of climate change’s potential effects.

"So often," he said of many discussions about climate change or global warming, "the discussion ends 30 seconds into the meeting because a lot of (other) studies lead with the answer, and the policy prescription."

Rather, Risky Business is approaching the range of potential climate change effects as challenges to doing business, so those industries and government can plan economically. So far, Paulson said climate change has been discussed in the language of science and environment, but not much in economics.

With more potentially hot days, he noted heat is "a big impact on agriculture, it’s an impact on manufacturing, it’s an impact on labor productivity, on energy use (for cooling) and even on safety, because crime rates go up when you have increases in heat."

Page pointed to how Mississippi River levels varying now because of drought affect inland waterways shipping; there could be more volatility to come. But climate change would affect local towns and counties, too, and he said this report may give local officials the chance to act when "refreshing capital" for roads, bridges and other projects – for example, what kinds of new culverts to put in now when having to replace them, to prepare for more frequent flooding this century.

One advantage to being an international ag company, he added, is Cargill already works with farmers growing corn near the equator. So it is learning how to adjust crops to warmer conditions such as those southern Indiana farmers, for example, might face in 25 years.

Paulson explained ag has time to avoid the worst outcomes if people begin to act soon. Business can’t do it alone, which is why the Risky Business team thinks industries need to play a bigger role in lobbying governments to take actions needed to prepare.

Having grown up on an Illinois farm, Paulson said what struck him from last year’s Risky Business national assessment was how differently effects of climate change could land on whole industries and regions – for example, how his state could someday no longer be a major corn producer. The Midwest, particularly, is a microcosm of farms, manufacturing, forests and big cities, which is why it was chosen for the first regional report. All data used in Risky Business reports are open-source, he said, which means anyone wanting to do their own calculations may do so.

Speaking on this report last Friday at the Economic Club of Minnesota luncheon, Paulson was asked about an op-ed he wrote last year in favor of creating a federal carbon tax to cut down on emissions. He skirted giving specifics of how he would do so, saying only, "I think a carbon tax is very easy to misunderstand" in how it could be levied and used.

What is available to businesses and small governments at this time, though, he said, are clean energy technologies for which there is "very little excuse for not using them now." Page pointed to how some dairies are using anaerobic digestion from cows to provide power on the farm right now, as an example of how ag is innovating; another leap forward, he said, is how it takes 40 percent less nitrogen now to grow a bushel of corn than it did 40 years ago.

To read the Heat in the Heartland: Climate Change and Economic Risk in the Midwest report in detail, visit http://riskybusiness.org and click on "Explore the Midwest Report."

1/28/2015