Economic Outlook - December 2008

Always wanted waterfront property but couldnít afford it? If you buy land in the right place, rising sea level will bring the beach to you. Of course, that scenario will be a serious downer for current coastal residents. Itís just one of the economic impacts climate change will have on North Carolina and other states, according to a study by the Center for Integrative Environmental Research at the University of Maryland. Matthias Ruth, a professor of public policy, is the centerís director.

Why is the University of Maryland studying North Carolina?

We did this on the national level and recognized that pretty much every state and economic sector is affected. We picked more than a dozen states where thereís a lot of reason for concern, particularly along the coastline. What we wanted to do is reach out with that information to those states to provide a more sound basis for making policy decisions.

How do you define climate change?

Itís not just changes in temperatures and rainfall. It also means changes in the frequency and severity of extreme weather events. There always has been and always will be natural variation and fluctuation. But what we have seen since the industrial revolution is unambiguously related to the use of fossil fuels and emission of greenhouse gases, which trap heat. The heat affects the water cycle. That creates an impact on ecosystems. It means movement of species. It means melting of glaciers.

How has it affected North Carolina?

Over the last 100 years, the temperature increases were, on average, between four and six degrees. We anticipate that to continue and maybe accelerate if we donít do something about it. Extreme weather events became more frequent and severe. And we anticipate that to continue. Sea levels are expected to rise three to four feet by the end of this century.

Which would put much of our current coast under water.

Thatís right. Therefore, the buffers against heavy storm surges would be inundated and their effectiveness in preventing inland flooding during severe weather would be severely reduced.

You expect hurricanes to become more frequent and intense.

That will drive up property damage. It will drive up the cost of all goods and services, because businesses will most likely have shortfalls of production, problems with the delivery of their finished goods to the market if transportation networks get disrupted or problems getting inputs into the production process. So the cost of doing business and living in the state will go up.

Weíve had droughts here in the past 10 years. Will those also intensify and become more frequent?

Yes. And you could have 10 years of very bad droughts, and then the next two years you might have furious downpours and flooding. The vagaries in the climate will become more severe, and so the unpredictability and the risk will become larger.

That would have an obvious impact on agriculture.

It also means the risk of doing business gets higher, whether itís agriculture, tourism or even manufacturing if you donít know whether the supply of goods and services can be maintained under different climate conditions. The vagaries of the climate already are challenging agriculture, and we anticipate that will get worse. And itís not just temperature and drought and storms. We anticipate this change in ecosystems will create environments for invasive species, pests and diseases. The heat would also reduce livestock yields. If more energy goes to respiration and cooling your body off, your ability to grow and add muscle gets reduced.

Will there be any positive effects?

Temporarily. In the agriculture sector, some crops will benefit. In the forestry sector, some tree species will benefit. Probably in the short run, if you have warm summers, some in the tourist industry will benefit. But unfortunately those benefits are fleeting.

What can be done?

We need to cut emissions, but we also have to start adapting. We might build dikes and levee systems that help protect the shoreline. In other cases, it would mean a deliberate retreat. Through zoning, we preclude development of certain stretches.

You say that a seawall to protect the coast would cost nearly $2 billion.

And itís a Band-Aid. Itís not dealing with the root causes. Itís basically trying to channel natureís forces. Less expensive in the long run would be to change zoning requirements and land-use practices.

You mean prevent people from building along the coast?

Thatís right. Particularly in flood-prone zones. Or we could change the way in which we insure coastal properties. If we didnít have federal flood insurance in some of the most prone areas, I suspect the marketplace would regulate this. If people see their home go down twice and canít get the insurance for it, maybe theyíll make different decisions. Maybe theyíll move to the mountains.

Keeping people off desirable coastal property wonít be popular.

Iím totally sympathetic to that. But do we take the short view of boosting ó while we still can ó economic prosperity in the region at the very likely risk of losing it all, or much of it, just a few years down the road? Or do we start gradually preparing ourselves for the inevitable climate conditions that weíll need to deal with and then have a more robust and sustainable economic system in place?

Itís inevitable even if we cut emissions?

The more we cut emissions now, the less the long-term costs will be. But greenhouse gases have a mean residence time in the atmosphere of over 100 years. So even if we cut down to zero right now, for the next 100 years, we would have to deal with climate change.