The free market is poised to deal with climate change. Is Wyoming prepared?
Many scoff, but climate change is real. Changes around the world are producing business costs and stimulating markets to respond. The Wall Street Journal reported, for example, that PG&E, California’s largest utility, filed for bankruptcy this year because of climate-related fire liabilities.
Financial firms like Goldman Sachs “believe that urgent action by government, business, consumers and civil society is necessary… [and have] committed to catalyzing innovative financial solutions and market opportunities to help address climate change.” Similarly, the Bank of England, tasked with protecting the British financial system, is currently undertaking climate “stress tests” of the firms it oversees to evaluate potential risks to investments.
The insurance industry, which has money on the line during every natural disaster, takes the issue seriously. Swiss Re, a global leader in insurance, estimated that their claims from natural catastrophes reached $2.2 billion last year, but that climate change will continue to increase the losses in the future. The U.S. faced $14 billion in weather and climate disasters in 2018 with total losses reaching $91 billion. Consumers and businesses will face rising costs as a result.
The Department of Defense also sees the issue as a costly strategic concern, already threatening places like the Ronald Reagan Ballistic Missile Defense Test Site in the Marshall Islands.
Perhaps we can live with the environmental impacts in Wyoming, but we must face this new economic reality. The rest of the world feels threatened and they are going to make economic decisions accordingly. As they do, Wyoming’s economy will be increasingly at the center of the bull’s eye. Even in the absence of any federal actions on climate change, economic forces have already impacted our coal economy. It won’t end there. What is our backup plan? How will we pay for state services, including education?
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We need to pay attention to climate science and the changes going on globally, if for no other reason than to plan for our economic future. Smart investors watch market indicators and make business decisions accordingly. Are we? Rising temperatures are one of those indicators and, like any smart business, we need to assess our risks.
We have warmed as a state by 1.5 degrees Fahrenheit since 1970, 2 degrees since 1900. Before 1980 we had only 8 years since statehood when the state’s average temperature rose above 41 degrees, but since 1981 we have had 18 such years, 11 since 2000. Our summer skies have become increasingly smoky, many of our forests are dead and our snowpack is diminishing. The impacts threaten our water supply, our agriculture and tourism, our second largest economic sector.
Denying such a reality has been our norm, but it is risky. Yes, there is uncertainty about this future, but it cuts both ways. The outcomes may turn out to be mild, but they could equally well be catastrophic. Ignoring the issue is like a homeowner ignoring the risk of a house fire and not buying insurance. Our house is already smoldering, literally, in places like Fishhawk Creek in Park County.
As a state, ignoring the problem is the climate equivalent of a “no-deal Brexit.” Markets will increasingly respond to climate change because of catastrophes like fires, floods, crop damage, hurricanes and other costs, but in the absence of a plan, Wyoming will be left with costs and increasingly fewer buyers for our energy supplies.
The alternatives are not limited to heavy regulation or a Green New Deal. Climate insurance can exist in a market-driven manner where fees on the use of carbon provide a pool of funds available to cover the damages.
We should encourage our senators and congressional representative to embrace real, good faith discussion about such solutions. Plans like the proposed American Opportunity Carbon Fee Act, which has been praised by leaders such as William D. Ruckelshaus, EPA administrator under presidents Richard Nixon and Ronald Reagan, would minimize the chaos of a no-plan climate transition by defining the costs to the economy, allowing businesses and states to plan accordingly and then returning dividends aimed specifically at aiding transitions in carbon-intensive sectors. That is the type of forward-looking approach that Wyoming needs. We need to stop ignoring it.