Weathering the economic storm

May 9, 2014

A group of scientists, in conjunction with the federal government, released a new assessment this week on the state of climate change in the US, and the news is not good. ”Climate change, once considered an issue for a distant future, has moved firmly into the present”, says the report. Average global temperatures have increased more than 1.5 degrees Fahrenheit since 1880, and the world is likely to see between 3 and 10 degrees of warming by 2100. In April, the levels of carbon dioxide in the atmosphere reached the 400 parts per million threshold for the first time in human history.

The US is already seeing the effects: summers are hotter, winters are rainier, and storms are more intense. All of those things have an impact on the economy. Danny Vinik went looking for estimates of the cost of climate change on global output and found it’s probably going to cost 1-3% of global GDP over the next century, although the cost will vary wildly from region to region. Africa is likely to fare worse, while Eastern Europe may even see a benefit.

“You can’t outdrive a storm on a flooded highway, and you can’t jet away after a storm if airport runways are flooded” writes John Upton of the US’s $4 trillion transportation system, which is already being affected by climate change. The problems associated with Hurricane Sandy in New York — flooded streets, closed airports, unusable rail systems, and a $32 billion price tag — are virtually certain to become more common, especially in coastal cities. Hurricane risk is increasing, says MIT climate scientistKerry Emanuel, even if the increased damage from the small amount of big storms that make landfall in the US isn’t yet statistically significant.

Paul Krugman suggests the US needs to take quick, unilateral action, like it did when it regulated overfishing as fish populations collapsed in 1980s. “Fighting climate change isn’t really all that different from saving fisheries; if we ever get around to doing the obvious, it will be easier and more successful than anyone now expects”, he says. One thing the US could do that would have a huge positive impact, Krugman has suggested previously, is directly regulate electricity production to cut down on coal emissions.

Following the release of the climate report, President Obama announced a series ofexecutive actions that are meant to promote solar energy and reduce reliance on fossil fuels, including a $2 billion investment in making Federal buildings more energy efficient. Congress, however, is likely to continue stalling on climate action.

Kevin Grier points out that even if the US could get its act together it wouldn’t make a huge difference globally. Rebounding American fisheries didn’t do a lot for the global fish population, which is still declining dramatically. “Our fish stocks are rebounding, and our carbon emissions are falling, but much of the rest of the world is moving in the wrong direction on both issues”, he writes. Welcome to the world’s most threatening examples of the tragedy of the commons. — Shane Ferro

On to today’s links:

Oxpeckers
A correction isn’t enough: Margaret Sullivan on Buffett vs Nocera - NYT

Standoffs
Amazon holds polite and productive meetings with publishers - The Awl

Regulations
The most successful anti-doping cases come from investigation, not testing -ProPublica

Alpha
Hedge funds are buying lots of student loan ABS - IFRE
Sell-side research and research paid for by the company being analyzed are equally (in)accurate - Jonathan Weil

Think of the Children
Teens who can write about money - NYT

Metaphors
A golden bull piñata stuffed with 1,000 dollar bills - Hand and Eye

Trend Stories
Anecdotally, young bankers are decamping for the tech industry - Bloomberg

Please Update Your Records
“Modern art is much more Bitcoin than Leonardo” - Izabella Kaminska
The Chinese economy isn’t as big or as wealthy as America’s - Jim Pethokoukis

Burn Unit
“Self-help for the reader who worries he isn’t counterintuitive enough at parties” - Nick Summers

Deals
“Apple is an iPhone company. Everything else it does is window dressing” - Kevin Roose
Publicis-Omnicom fails: “The idea for a merger started as a joke” - WSJ

Charts
The world overwhelmingly prefers terrible coffee - Quartz
3% of Americans still prefer to pay for things by check (and other details about our daily transactions) - BI
Spurious correlation of the day: Maine’s divorce rate vs US consumption of margarine -BI

Housing
1 in 3 US home sales in the first quarter were all cash - WSJ

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