Global warming will change your personal finances. In the wake of this year's hurricane season, many Americans have had to rethink how they spend their money. Disaster recovery will occupy huge sections of Texas, Puerto Rico and Florida for years to come, with consequences for both spending and employment.
Although the news has focused on the billions of dollars FEMA will spend rebuilding these communities, individuals may be the hardest hit. The federal government can accommodate emergency spending better than most households, which is an issue that more Americans will have to begin considering.
In years to come, global warming will change personal finances in vast and unpredictable ways. Here are the top 10 that we can be reasonably sure of.
Banks use many variables to calculate a mortgage, but the likelihood of a property holding its value tops the list. If a borrower defaults, the bank wants to know if it can get its money back from the property, and also if homeowners can continue paying off their loan.
Lenders have already begun raising red flags about the changes that global warming will force on coastal and low-lying homes.
Many climatologists expect that climate change will cause severe flooding in vulnerable regions within the next 30 years, well within the lifetimes of existing mortgages. This, they worry, will drive homeowners out of those properties and thus drive down their value.
Awarding new loans for flood-prone regions will get riskier as time goes on. Interest rate calculations will begin to reflect this.
Insurance is about to change.
Flood insurance already requires subsidies from the government, because of the size of the damage that victims suffer. As global warming gets worse, that will only be the tip of the (rapidly vanishing) iceberg.
"If insured losses continue to grow in coming years or decades, insurance firms would likely pass the costs of coverage along to policyholders," said Mark Hamrick, Senior Economic Analyst with Bankrate (www.bankrate.com). "Would this be enough of a factor to dissuade people from moving to areas such as South Florida or along the Gulf Coast? There's been no significant indication of that happening yet, but this could be a slippery slope long-term."
Wind damage, water damage, fire damage from drought-wracked regions… insurers will pass all of these escalating costs on to consumers in higher premiums.
Some in the industry aren't sure even that will be enough.
Speaking with the Los Angeles Times, a prominent reinsurance expert estimated that that global warming will cost the industry more than $2 trillion in property and casualty losses. The scope of loss will be so severe, he said, that it "could bankrupt the industry."
It won't be enough to pass along higher costs to consumers. The insurance industry is going to have to start rethinking its entire business model, and make some tough choices about what it covers. Insurers won't need to protect homeowners from wind and fire damage, for example. Crop insurance is trending more expensive as extreme weather batters U.S. agriculture. Cars will face bad weather, and force costs up. Shipping and maritime insurers will also be affected.
Global warming will affect everything as insurance companies deal with unpredictable losses and their costs.
Buy property in Chicago, it's far from the ocean. Except don't, because the city is already built a little bit on a swamp and that water might come back.
Invest in farmland, because people will need food. Except don't, because the good farmland is going to (sometimes unpredictably) change.
Move to the Pacific Northwest, it's a temperate climate. Except don't, because wildfires are getting worse.
This will be one of the biggest challenges brought on by global warming in the coming century. No one precisely knows what will happen, but property values will certainly be one of the victims of that uncertainty.
Although researchers have a good sense about some impact models, such as coastal regions, the effects of global warming will be significant and not always easy to predict. Some areas to skyrocket in value, while investments in other parts of the country will collapse. Some land will become temporarily valuable, only to waste away. There aren't many good ways to know exactly where that all will happen.
Not everyone's job will survive this transition.
"We recently saw an impact from the hurricanes on monthly employment data where about 100,000 workers in the bar and restaurant trades were unable to report for work in September," said Hamrick. "These workers were effectively back-in-business for the October employment snapshot. This is an indication how dramatic weather events can affect the local economy, leaving aside the catastrophic impacts from massive damage which is self-evident."
In addition to farming and retail trades, all of which will face significant disruption as storms make both agriculture and shipping more difficult, leisure and tourism will face significant challenges as well.
According to researchers, climate change will accelerate the rate of damaging storms, which tend to hit popular vacation spots like islands and beach communities. That instability, along with the increasing cost to insure those facilities, will make those jobs increasingly hard to hold on to.
At the same time, the world will need many more workers for some skilled professions.
"As for employment risks, both negative and positive, related to sea level rise and damaging weather, sectors including construction, emergency services, retailing, leisure and hospitality could all see impacts," Hamrick said, continuing to also note that environmental sciences and weather forecasting will also see likely job market changes.
The labor impact of global warming will cause both gains and losses across many industries. Nailing down exactly who will face these changes is more speculative, although many analysts expect a green energy boom in the near future.
But we can be confident of robust growth in one sector: construction.
Wind and water cause more damage, which means that there will be more jobs in cleaning up and repairing from those storms. It's already happening.
Contrary to popular expectation, many researchers don't expect that global warming will lead to significant food shortages in the United States; at least not in the foreseeable future. What they do expect is that it will change what we eat and how much that food costs.
For starters, researchers believe that food is about to become a much bigger part of household budgets. In an interview with the Christian Science Monitor, a professor from the University of Madison suggested that food budgets could consume as much as 60 percent of personal spending in years to come.
Staples such as corn, wheat and soy have already begun rising in price as output drops worldwide. This trend will only accelerate, pushing farmers to take up more arable land with those basic needs. Prices will go up on basic products like a loaf of bread, as well as on meat as the food for livestock gets more expensive. Ripple effects will push up prices across other foods as well, as they get less and less field space allocated.
Some prices may remain stable, but that will come at significantly higher costs elsewhere.
There are many reasons why society hasn't acted more aggressively to turn off the flood of carbon dioxide that causes global warming, but the most important one: People who consume carbon dioxide don't pay for its costs.
The price we pay at the pump for gasoline, or the cost of fossil fuel-based electricity, reflects the cost of digging it up and delivering it. Those are the only costs the consumer sees, but usage creates far more costs downstream, referred to as "negative externality." Each unit of fossil fuel consumed contributes to the storms and pollution that cause physical and health damage worldwide, and add to the expense of fixing all that damage. The Federal Emergency Management Agency (FEMA) spends billions of dollars annuall on storm cleanup linked to global warming's impact.
Those costs aren't packaged into our energy expenses--but someday they will.
Eventually, when this problem gets too big to ignore, Washington will begin setting money aside specifically for cleanup and relocation related to global warming.
That money will have to come from somewhere--and the best way to raise it will be by increasing the cost of the source of all those problems: Consumers who will be forced to pay for their consumption. Energy prices inevitably will go up.
Expect tropical diseases in Nebraska.
As temperatures creep upward around the world, causing warmer winters and longer summers, tropical bugs carrying disease have begun thriving in new parts of the world. The World Health Organization expects an additional 250,000 deaths annually from conditions such as malaria, diarrhea, and heat stress as a direct result of climate change.
Insects that carry diseases like West Nile virus, dengue fever, and malaria are migrating north. These diseases are being found in greater numbers in Asia and Latin America, said Harvard's Dr. Francesca Dominici in an interview with NPR. The mosquitos that carry them are now being found in areas where, once, they would have died.
American hospitals are not prepared to treat tropical diseases. Building the physical, pharmaceutical, and institutional infrastructures necessary will mean additional costs for everyone.
"If there's one overarching dynamic to life in the current era," said Hamrick, "it is the pace of change, affecting everything from climate, demographics, technology, the economy, and financial markets… This pace of change serves as yet another reminder of the need to build emergency savings and retirement savings."
"Our Bankrate surveys have consistently demonstrated that the number-one financial regret is failing to save, either for retirement or an emergency," he said. "Negative surprises, such as storm damage, relocation because of bad weather, and unemployment are ultimately all interruptions to daily routines and, potentially, income streams. By having sufficient savings, we can arm ourselves with a kind of self-insurance to better be prepared, at least to the best of our ability."
Those savings will prove increasingly necessary for families living in affected areas.
As disruption grows more common, so, too, will expenses as disruption and displacement cause additional expense as people get themselves to safety. Living expenses will add up when workers can't get to their jobs, and insurance (for people who have it) won't always cover everything.