The U.S. incurs a yearly cost of around $150 billion due to climate change, and this price tag is expected to continue escalating. People may be forced to abandon their homes, leading to extra costs in transportation, lodging, and job income. Additionally, health care costs, insurance premiums, food prices, and property damages are anticipated to rise. Consultants have suggested taking action to get ready.
Climate change has been described as a lurking danger. The threats posed by it to ecosystems, biological diversity, and the US economy are not to be underestimated. These financial losses are mainly caused by extreme weather occurrences. Last week, the White House released the Fifth National Climate Assessment, which is put out by the federal government every four to five years, warning that heat waves, heavy rains, wildfires, droughts, floods and hurricanes are growing in prevalence and intensity. Andrew Rumbach, senior fellow and co-lead of the climate and communities program at the Urban Institute, said, "It's no longer just a problem for Florida, or just a problem for Louisiana and New Orleans. More and more people are encountering these extreme events and they carry all kinds of direct and indirect costs for those families." CNBC spoke to Rumbach and David Pogue, host of the podcast "Unsung Science" and author of "How to Prepare for Climate Change: A Practical Guide to Surviving the Chaos" to find out more about how climate change could affect personal finances.
The White House report cites an estimate of at least $150 billion in damage to the U.S. annually, the result of weather-induced disasters, which it considers to be a conservative figure. Noting that a billion-dollar disaster is now on average occurring every three weeks as compared to every four months during the 1980s, the report provides insight into the escalating trend of weather-related destruction.
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The economic repercussions of water shortages, agricultural losses, disruption of tourism, declines in real estate value, and harm to property and infrastructure are anticipated to expand. According to Rumbach, "Every minor rise in climate change will give rise to a corresponding raise in economic losses." Likewise, the White House report revealed that a 2°F rise in global temperatures is predicted to result in twice the economic harm brought by a 1°F increase.
Pogue remarked that the effects of climate change can be "odd and difficult to foresee," and he prefers the term "worldwide weirding," as it takes into account more than simply heating up.
Rumbach noted that the U.S. Census Bureau's Household Pulse Survey revealed that in the previous year, over 3 million American adults were displaced because of extreme weather events. A study by the Urban Institute revealed that this is equivalent to 1 in 70 adults. For these people, the evacuation caused significant costs to their daily lives, from transportation to lost wages due to being away from work. This, added to hotel costs, resulted in the costs really piling up.
Furthermore, it has been established through scientific research that for each additional "hot day" in a year, particularly in Western states, workplace injuries increase between 5% and 15%, noted Rumbach. Moreover, it is estimated that there is an extra $10,000 in emergency room costs per 100,000 people, particularly for the elderly. Adding to that, Rumbach mentioned that for each 1% decrease in crop yields, 0.1% of the population could potentially move out, which has a considerable effect on both the departing and receiving communities. It is expected that a reduction in agricultural output could lead to a rise in food prices, and a boost in property damage is likely to result in increased insurance rates.
It is essential for Americans to understand the potential carbon footprint and take steps to prepare for the repercussions of climate change. According to Pogue, governments and companies have been taking such precautions and adapting for a long period of time. For instance, sea walls are being built and Starbucks is locating new mountains to cultivate coffee beans. However, such preventive steps are much needed for all individuals. Pogue states that the initial thing to do is to inspect one's homeowners or renters insurance policy. People buy these plans mostly to save costs, but they need to keep in mind that they may not cover flooding.
Rumbach advised those with renters or homeowners insurance to check if they are underinsured. Homebuyers can use tools, such as Redfin's climate risk assessment, to choose residences with lower vulnerability to climate change. To have a positive influence on the environment, investors can look into "green" initiatives. Pogue commented that investing in solar and wind companies isn't the most effective approach because they are becoming increasingly inexpensive. A better option would be to back utility companies that rely solely on renewable energy, due to current mandates in 38 states. He also mentioned that buying stock in firms that develop electric-vehicle batteries or mine lithium, a source in electric car batteries, could be an interesting option.
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