Tamminen: 3 Things That Will Cost More (and 1 That Will Cost Less) in 2012
President, Seventh Generation Advisors
What’s trending in the first quarter of 2012?
Here are three things that will cost more going forward and one that will definitely cost less — and the causes behind all four are the same.
California, New York and Washington recently mandated that insurance companies report how they plan to handle growing claims from extreme weather events related to climate change. No, a little extra paperwork won’t cause your premiums to rise, but rather the record-setting damages, and consensus by meteorologists that a year like 2011 won’t be an anomaly in the future — because of measurable impacts of climate change.
Yes, according to the Insurance Information Institute the insured losses in 2011 approached $36 billion from record-setting extreme weather catastrophes, forces that will most certainly raise premiums, especially because the actuaries and forecasters are convinced there’s more to come. The institute also reports that the 552 deaths caused by tornadoes were the most in more than 75 years. Some things are priceless.
Going Way Up: Water
Texas imposed restrictions on water use in 1,000 localities, as droughts worsened and numerous experts reported that this is not your granddaddy’s periodic dry spell, but rather the direct result of climate change.
Spicewood Beach, a community of some 500 homes near Austin, became the first Texas town to officially run out of water and now must buy the precious commodity by the truckload.
A bit farther south, severe drought in Mexico has cost farmers more than a billion dollars in crop losses; killed 60,000 head of cattle and weakened 2 million more; and forced the government to spend nearly $3 billion in emergency aid.
"Droughts are cyclical — we know that — but they are growing more frequent and severe due to climate change," says Juan Rafael Elvira Quesada, the minister for the environment and natural resources.
Oh, did I mention that when the price of water goes up, so does the price of food? Mexico's food imports leapt 35 percent last year.
Going Way, Way Up:Coastal Real Estate
Four South Florida counties have begun drafting plans to pay for the costs associated with the rising sea level, the direct result of climate change.
Home to some of the nation’s most valuable real estate, officials of Palm Beach and its neighboring communities believe the cost of protecting those assets will skyrocket. Equally important is that much of the effort will be a losing battle because more intense storms will erode vast chunks of trendy beaches, no matter how many seawalls or higher bridges are built, no matter how far inland they relocate drinking-water wells to protect them from contamination by salt water.
Going Down:Electricity Bills
Whew, at least some good news. Thanks to the California Energy Commission, those ubiquitous chargers for cellphones, iPads, laptops, et al, will become far more efficient.
These “vampire loads” waste about 60 percent of the electricity they consume, and the new standards will save enough electricity to power 350,000 homes and cut $306 million a year off energy bills in California alone.
What does this have to do with climate change? Well, nothing directly, but much of the impetus in California for saving energy comes from the need to deal with increased loads during hotter summers, the direct result of climate change.
The common thread in these trends is that we cannot afford to continue policy debates about whether climate change is real. Scientists have spoken. Governments have spoken. Markets have spoken.
More important, the solutions are speaking loud and clear; they’re saying we can save money by using the problem to inspire our ingenuity to make America more efficient, competitive and safe.
Terry Tamminen, former secretary of the California Environmental Protection Agency, is president of Seventh Generation Advisors and an operating partner at Pegasus Capital Advisors, and author of "Cracking The Carbon Code: The Key To Sustainable Profits In The New Economy").