As climate change garners increased attention in the news, much focus has been on the costs associated with transitioning from a fossil fuel-based global economy to one reliant on renewables. However, a recent study utilizing data from the National Center for Environmental Information highlights a different aspect: large-scale climate disasters in the U.S. have incurred a staggering burden of over $2 trillion in recovery costs over the past 40 years, coinciding with a significant rise in such events.<\/p>\n
This realization is causing operators of critical infrastructure, including power utilities, railway operators, and national defense entities, to quietly acknowledge that the costs of inaction are beginning to outweigh the cost of action.<\/p>\n
One challenge for such companies as they consider to which projects<\/a> they should devote scarce corporate resources, or try to put a case for climate change-related activities to sometimes skeptical shareholders is that the costs of disasters are often seen in aggregate: at a global, or at best national level. But this, too, is beginning to change as understanding of how climate change affects all societies and communities improves among insurers, consumers, taxpayers, policy makers and others.<\/p>\n For example, in\u00a0August\u00a0last year, a historic drought led to exceptionally low water<\/a> levels in the Panama Canal, obliging ships to carry less cargo or use lengthy alternative routes. As delivery times spiraled, carriers paid as much as $4 million each at auction to skip the line to\u00a0use the canal: 23 times the average cost in the previous year.<\/p>\n In\u00a0September, heavy rain caused considerable flooding in New York City disrupting the New York City subway system, commuter rail, and bus services, costing hundreds of millions of dollars\u00a0in property damage and insurance costs\u00a0and additional costs to the city for accelerated public<\/a> safety and emergency response.<\/p>\n While the cost of climate change is becoming clearer at the level of individual corporations, there is also an increasing realization that adaptation<\/a> is as necessary as prevention. After all, as commentators including the\u00a0World Economic Forum\u00a0have<\/a> pointed out, while mitigation of the climate crisis is essential, the negative effects of climate change are already being seen and will continue for at least the medium term. Here, too, costs are becoming easier to quantify at the level of individual organizations. For example, in\u00a0an analysis of climate change and the power utility industry, the costs of modernizing the grid for improved resilience were estimated at $700 million to $1 billion per utility<\/a>, far lower than the costs incurred from estimated climate-change-fueled storms at $1.7bn per utility over 20 years. And that is just the cost to the company. The benefits of modernization offset the costs further with improved efficiency and productivity<\/a> gains from enhanced automation and predictive maintenance capabilities, and much more.<\/p>\n