Sea levels must rise to the top of the agenda in Washington

Sea levels must rise to the top of the agenda in Washington
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In the past year, there has been about $300 billion in damages due to environmental and climate disasters, strongly fueled by the series of hurricanes that struck the east coast of the United States. And this is just the beginning.

When climate change and its consequences were first extensively discussed in the 1990s, sea level rise was presented as a potentially devastating outcome. But early reports of the Intergovernmental Panel on Climate Change downplayed the magnitude of likely sea level rise, allaying public concerns and giving rise to climate change deniers. But there’s no denying the increasing evidence that sea level rise is, in fact, accelerating.

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Sea level rise is coming and it won’t only destroy our homes, but, more broadly, our cities and our economy.

 

Researchers have noted that the Greenland and Antarctic ice sheets are melting faster than had been anticipated, with their collapse being likely inevitable and strongly driven by the break-up of ice shelves in Antarctica and the accelerated melting of the West Antarctic Ice Sheet. There are also a growing number of paleo-climatological studies that have found that when Earth’s climate was last as high as projected by mid-century, sea levels were a cataclysmic 20 feet higher than they are today.           

The acceleration of sea level rise and the recognition that sea levels may be up to 5 to 15 feet over current levels this century carries major economic and financial implications. As much as several trillion dollars of property and infrastructure may be at risk in the U.S. alone. A sea level rise of six feet, for example, would flood roughly 100,000 homes in New York City and damage property in the amount of $39 billion. The equivalent figures for Miami are 54,000 homes and property damage of $14 billion. By 2050, one billion dollars’ worth of property would be at risk of regular flooding in Miami and ten billion dollars’ worth in New York City.

We pick New York City and Miami because they are iconic cities, but they are no more exposed than other coastal cities. Every coastal city or village in the world will be exposed to similar risks.

Coastal infrastructure also faces serious risks. During Hurricane Sandy, the three airports serving New York City were all flooded by the sea surge. According to the third U.S. National Climate Assessment, twelve major airports have at least one runway within twelve feet of current sea level, meaning that with a sea level rise of only eight feet they could flood regularly. 

But coastal cities aren’t just in trouble during extreme weather. The increasing incidence of sunny day flooding presents a continuous risk for gulf states and the east coast. For example, sunny day flooding in Charleston, S.C. has grown from 4 days a year in the 1980s to 50 days a year in 2016, and is forecast to rise to over 100 days annually — almost 1 in every 3 days — by mid-century.

As much of this at-risk property is financed by mortgages or bonds, there are concomitant risks to financial markets. Moody’s recently highlighted the risks of sea level rise leading to non-performing municipal bonds. The damage from sea level rise doesn’t come from the flooding associated with the ocean rising alone. The combination of sea level rise, storm surges and nuisance flooding can impact infrastructures, such as airports, roads and transportation, commerce and health services.

Much of this is physical capital financed by capital markets, with homes and commercial property funded by mortgages and public infrastructure by bonds, issued either by municipalities or by agencies. These mortgages and bonds are financial assets widely traded on capital markets, and a sudden drop in their value as a result of flooding could have repercussions throughout the financial system. The 2008 financial crisis resulted from a sudden realization that some components of mortgage pools were much less valuable than had previously been believed, and its costs to the U.S. and global economy were devastating, to a point unseen since the great depression of the 1930s. Assets at risk of abrupt revaluation due to recognition of sea level risks may be as extensive as the pool of sub-prime mortgages in 2007. 

Closely related to the financial risks posed by non-performing property and infrastructure loans is the risk of a collapse of a regional housing market. If it becomes clear that some property in a region cannot be sold because of flooding risks, there is a chance of contagion leading to an entire regional housing market freezing up. Buyers will stay out of a market where the risk of property loss seems real. Banks looking at financing coastal property may at some point decide that they can no longer give thirty year mortgages on the most exposed properties, and insurance companies may decide to stop covering property from storm and sea damage once the risk becomes too great.

The inability to finance or to insure property could be enough to precipitate a collapse of the local market. This seems a possibility in southern Florida. Such a collapse would lead to huge financial losses for local property owners, homes and businesses, and could have macroeconomic implications as those affected retrench to try to compensate for their losses. Studies indicate that prices of homes in areas liable to increasing flood risks, because of rising seas, are beginning to fall away from the mainstream. Another major storm could readily accelerate this.

Climate change and its consequences for sea level will lead to overwhelming losses for coastal property owners and municipalities, and those who finance their operations. Indeed, this process has already begun. There is no longer room for climate denial amongst policymakers. We have reached the point where action is mandatory to save our homes, our cities and our economy.

Geoffrey Heal is the Donald C. Waite III Professor of Social Enterprise and a Chazen Senior Scholar at Columbia Business School. His latest book, Endangered Economies – How the Neglect of Nature Threatens Our Prosperity, sets out the economic and business case for environmental conservation. Marco Tedesco is the Lamont Research Professor at the Lamont-Doherty Earth Observatory of Columbia University.