New Support for the Interconnectedness of the Environment and the Economy

A mighty industrial society discharges its waste unchecked into the environment. New reports emphasize the importance of understanding the relationship between the environment and the economy. Two new reports reiterate the scientific veracity of anthropogenic climate change while reinforcing the interconnectedness of the economy and the environment. The World Economic Forum (WEF) Global Risks Report 2013 clearly points to the interrelationship between the environment and the economy.

A draft of the third National Climate Assessment Report indicates that climate change is both an environmental and economic issue. The draft report was prepared by a federal committee and offers a comprehensive analysis of the latest and best peer-reviewed science on the extent and impacts of global warming on the US. The report restates the fact that climate change will have a wide range of impacts ranging from agriculture to water.

The draft report was prepared by a Federal Advisory Committee known as the “National Climate Assessment and Development Advisory Committee” (NCADAC). The report was mandated by Congress in 1990 with the passage of the Global Change Research Act, which requires that a national climate assessment be conducted every four years and the results be issued to the President and Congress. As a consequence of the 1990 legislation, the US Global Change Research Program was formed, which is an inter-governmental body involving 13 federal agencies and departments.The 2013 NCADAC report, which engaged more than 240 authors, indicated that one of the salient reasons given for the rapidly changing climate is the copious burning of fossil fuels. Following two consecutive years of extreme weather, the report makes the connection between the increased incidence and severity of extreme weather and anthropogenic climate change.

According to Munich Reinsurance America, the North America has seen a five-fold increase in natural disasters in the past 30 years. In 2011, the German reinsurance giant also produced a report called “Severe Weather in North America.” According to the report, between 1980 and 2011, the overall losses from weather catastrophes was over $1 trillion. In 2012, there were a record number of extreme weather events which were eclipsed only by the number of such events in 2011. Hurricane Sandy alone cost an estimated $60 billion.

In an emailed statement, Gene Karpinski, the president of the League of Conservation Voters, said the NCADAC report confirms what many Americans already know:

“Hurricane Sandy and the historic droughts, floods and heat waves happening across the country aren’t a fluke, but the result of a climate warming much faster than previously thought,” he said. “If we put off action on climate change, the costs of addressing its impacts will only rise and this extreme weather will be just the beginning. This report should serve as a wake-up call that it’s time to act.”

The 2013 draft report states that the climate is changing and this is attributable to human activities. The report provides elaborate explanations on mitigation and adaptation, as well as how to improve scientific understanding and concludes that Americans must face the necessity of reducing greenhouse gas emissions.

“Climate change presents a major challenge for society,” the NCADAC committee’s leadership said in a letter addressed to the American people. The committee’s letter went on to say:

“Summers are longer and hotter, and periods of extreme heat last longer than any living American has ever experienced. Winters are generally shorter and warmer. Rain comes in heavier downpours, though in many regions there are longer dry spells in between.”

The letter references drier weather, wildfires and receding sea ice and the draft report states that sea levels are expected to “rise by another 1 to 4 feet in this century”. The report further indicates that the US requires better national plans for adaptation to a changing climate.

“This [NCADAC] draft report sends a warning to all of us,” said Sen. Barbara Boxer, the California Democrat and chairwoman of the Environment and Public Works Committee, in an emailed statement. “We must act in a comprehensive fashion to reduce carbon pollution or expose our people and communities to continuing devastation from extreme weather events and their aftermath.”

Why is it so hard to get science-based legislation through Congress? The reason is that the Republicans control the House of Representatives.

For more than a decade, Republicans have vociferously resisted climate science. When it was published in 2000, the first NCADAC report was attacked by conservatives. The Bush administration went so far as to suppress its findings.

Today’s Republicans are far more conservative then they were when George W. Bush was President. Despite the extremism of many Republicans in Congress, many GOP voters think their leaders are not conservative enough. This view was articulated in a Rasmussen Poll, which found that 63 percent of Republicans across the country believe congressional Republicans are out of touch with the party’s base. In addition, only 30 percent of likely GOP voters think Republicans in Congress have done a “good job representing their party’s values over the past several years.”

The economy is the only concern that seems to resonate with many on the right. While Republicans are infamous for their war on climate science, perhaps the GOP will be motivated to consider the environment when the problem is rendered in terms of GDP.

As was written in the NCADAC committee letter, “climatic changes are having wide-ranging impacts in every region of our country and most sectors of our economy,” The 2013 National Climate Assessment draft concluded that efforts to address climate change “paves the way for economic opportunities”.

The interconnectedness of the environment and the economy is made clear in the WEF’s eighth edition of its Global Risks Report for 2013. This report ranks climate change from rising greenhouse gas emissions as a major global threat. Also high on the list is the failure of governments and businesses to mitigate or adapt to climate change.

The WEF works with governments to develop mechanisms for managing risk. The report rates the top global risks based on a survey of over 1000 experts from industry, government and academia. The 2013 report sampled respondents from more than 100 countries, although the majority came from Europe and North America. A total of 40 percent of respondents came from a business background.

The 2013 report indicates that ongoing economic weakness detracts from our ability to tackle environmental challenges. At the report’s launch, John Drzik, the CEO of the risk and insurance services group Oliver Wyman, said, “We see two big risks coming together, one is an environmental storm and the other is an economic storm, and we see them on a collision course.”

Climate change poses very significant cost to governments. As Drzik pointed out, governments are having to step in to help those impacted by extreme weather events. However, economic difficulties put constraints on government’s ability to respond.

While the costs of climate change are significant, the situation will only get worse if we continue with business as usual. According to a September 2012 study titled “Climate Vulnerability Monitor: A Guide to the Cold Calculus of A Hot Planet,” the current economic impacts of climate change are more than $1.2 trillion a year or 1.6 percent of global GDP. By 2030, the cost of climate change and air pollution combined will rise to 3.2 percent of global GDP. In the US, climate change is expected to shave a full 2 percent points off the GDP by 2030.

According to a study released by the UN-backed Principles for Responsible Investment (PRI) and UNEP Finance Initiative, global environmental damage caused by human activity in 2008 represented a monetary value of $ 6.6 trillion, which is equivalent to 11% of global GDP.

The UNEP Finance Initiative report titled Putting a Price on Global Environmental Damage” estimates that global costs could rise to $28 trillion by 2050 or almost half of the current global GDP.

As these reports indicate, the failure to protect the environment and respond to climate change will incur much greater costs down the road. The longer we wait the greater the costs and if we are too slow to acknowledge the value of the environment, we may find that we hit irreversible tipping points from which no amount of money will enable us to recover.
Richard Matthews is a consultant, eco-entrepreneur, green investor and author of numerous articles on sustainable positioning, eco-economics and enviro-politics. He is the owner of The Green Market Oracle, a leading sustainable business site and one of the Web’s most comprehensive resources on the business of the environment. Find The Green Market on Facebook and follow The Green Market’s twitter feed.

Image credit: Mike Licht,, courtesy flickr



Richard Matthews
Richard Matthews
Richard Matthews is a consultant, eco-entrepreneur, sustainable investor, and writer. He is the owner of THE GREEN MARKET, one of the Web’s most comprehensive resources on the business of the environment. He is also the author of numerous articles on sustainable positioning, green investing, enviro-politics, and eco-economics.

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