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Extreme Drought is Exhibit A for How Climate Change Hurts the Economy

J. Mijin Cha

As we pointed out a few weeks ago, man-made climate change will make extreme weather events much more likely going forward and we are facing a pretty serious one now. More than half of the continental U.S. is currently facing moderate to extreme drought and one-third of the country’s counties have been declared federal disaster areas because of drought. Eighty-eight percent of corn and 87 percent of soybean crops in the country are in drought-stricken regions, causing corn and soybean prices to reach record highs last week. Officials expect significant reductions in production potential for corn and soybeans.

High corn and soybean prices impact consumers on a number of levels. Besides increases in the cost of corn and soybeans we consume, corn is used as feed for cattle and increased corn prices means increases in the cost of meat. Increases in the cost of meat will be accompanied by increases in the cost of dairy products. When cattle have less feed to eat, their milk becomes thinner so products that require milk, like cheese, require more volume of milk for the same output of cheese.

Beyond its impact on farming, drought conditions increase the risk of forest fires -- already a huge economic and environmental cost this summer. Drought also decreases water levels in reservoirs and major waterways, like the Mississippi and Ohio Rivers. This means that barge and towboat operators have to reduce the size of their loads because of low water levels, making more trips necessary to move the same volume of goods, which leads to increased transportation costs. Not to mention the impact drought has on drinking water supplies.

The WonkBlog points out that droughts will likely get worse as the planet heats up and under a “moderate” emissions scenario, here’s what the world could look like by mid-century (which is only about 40 years away).

 

The Palmer Drought Severity Index mid-century under a moderate emissions scenario. Under the PDSI, "a reading of -4 or below is considered extreme drought."

That’s a lot of red. And, it’s only a “moderate” emissions scenario. What would it look like if we continued our path of inaction? It’s a cost and a reality we just cannot afford.

Climate change has often been derided as an obsession of the tree hugging crowd. Yet with this summer's drought, we're seeing that it's hard headed business leaders who should be really worrried. Climate change has been bad news for the bottom lines of all sorts of businesses this year -- from ski resort owners to soybean farmers. And, unfortunately, more such bad news is almost certainly on the way.