Seed maker DuPont Co., wind-turbine manufacturer General Electric Co. and insurer Zurich Financial Services AG are devising products to help the world adapt to climate change, a potential $135 billion-a-year market by 2030.
The companies are driven in part by the failure of international efforts to cut the greenhouse gases that scientists say contribute to global warming. Discussions last year in Copenhagen yielded little progress, and officials leading more than 190 countries in talks that begin today in Cancun, Mexico, say they don’t expect to achieve a binding agreement on measures to slow the growth of emissions.
Damages from climate-related disasters are mounting. Insured losses from storms and floods have risen more than fivefold to $27 billion annually in the past four decades, Swiss Reinsurance Co. said in a September report. By 2030, the world may need to spend $135 billion a year on flood protection, buildings that can withstand hurricanes and drought-resistant crops, Swiss Re said, citing United Nations data.
“Climate change presents a direct threat to our business,” Jim Hanna, director of environmental impact for Seattle-based Starbucks Corp., the world’s largest coffee chain, said in an interview. “We are already hearing some anecdotal evidence that shifting weather patterns and increased erosion and pest infestation are starting to impact coffee crops.”
Adaptation strategies, such as rewarding farmers for taking extra steps to prevent erosion on vulnerable land, will help Starbucks prepare, Hanna said.
Richer, Poorer Nations
Relatively rich nations such as the U.S. are devoting more attention and resources to adaptation and are negotiating a fund to help poorer countries cope with the higher sea levels, droughts, heat waves, more severe storms and erratic weather predicted by climate scientists.
“Sooner or later all businesses will have to climate-proof their operations,” Christiana Figueres, the UN’s climate chief, said in a September speech in New York. “Adaptation will be imperative if businesses want to avoid climate-change impacts that could drive them out of business.”
Crops better able to resist drought can help DuPont expand its $8.2 billion agriculture business, according to Jim Borel, vice president in charge of seed operations for the Wilmington, Delaware-based company, the world’s second-biggest seed maker behind Monsanto Co.
“Real business opportunity comes from using science to help improve productivity for farmers, and they will have to do that to deal with climate change over the next few decades,” Borel said in an interview.
Zurich is offering policies letting businesses and homeowners replace storm-damaged property with structures better able to withstand extreme weather, said Lindene Patton, chief climate-protection officer for the Zurich-based insurer.
“There is more social demand on our customers and other stakeholders in the sense that when governments are not acting, people fill gaps with whatever tools are available,” Patton said.
The Cancun climate talks through Dec. 10, led by Figueres, will seek incremental steps after last year’s failure at meetings in Copenhagen to agree on a new binding international accord to cut heat-trapping greenhouse-gas pollution.
U.S. vs China
While China looks like it will incorporate its Copenhagen pledges into domestic law next year, the situation in the U.S. is “difficult” at the moment after elections earlier in the month changed the composition of Congress, said Artur Runge- Metzger, lead negotiator for the 27-nation European Union.
“China is certainly trying to make efforts to put the pledges they made into Copenhagen into their 5-year plan,” Runge-Metzger said in an interview in Cancun last night. “It’s a tough task for the Obama administration to take this matter forward because it’s heavily politicized.”
Even if nations were to implement ambitious emissions cuts now, some climate-change effects are unavoidable because of carbon dioxide already in the atmosphere, the Arlington, Virginia-based Pew Center on Global Climate Change said in an August report.
Effects Locked In
“There are climate impacts locked into the system because of the inertia of the atmosphere,” said Andrew Voysey, secretary of ClimateWise, an association of insurers based at the University of Cambridge in the U.K. that works to reduce the damage from climate change. “The increased focus on adaptation is certainly welcome, but we have to be quite conscious of the limits of what we can adapt out of.”
Lack of progress toward global cuts in carbon emissions means higher adaptation costs in the future, said Joel Smith, a principal at Boulder, Colorado-based Stratus Consulting Inc. and a lead author on U.N climate-change reports.
“The less we do to mitigate the more we’re going to have to deal with the consequences,” Smith said in an interview.
Nations have been slow to live up to commitments to help developing nations, said Frances Beinecke, president of the Natural Resources Defense Council, a New York-based environmental group.
“We have put some money on the table,” Beinecke said in an interview. “Not nearly enough. There’s going to be more and more conversations about adaption and the need to take it seriously.”
‘People Are Hurting’
Making the argument to spend millions of dollars today to deal with effects that may not be seen for decades is difficult, said Ruben Kraiem, a partner with the law firm Covington & Burling LLP in New York and an adviser to the Coalition for Rainforest Nations, a New York-based group that works to preserve tropical forests.
“When people are hurting as many people are, it’s extremely difficult to make that case,” Kraiem said. “How much does it make sense to pay for a more robust piece of infrastructure today to protect against potential damage in 30 or 40 years?”
President Barack Obama failed to win passage in Congress this year of legislation to cap carbon emissions linked to global warming. Prospects for action will grow slimmer next year when Republicans take control of the House of Representatives and expand their minority in the Senate. Dozens of Republican lawmakers elected this month have expressed skepticism about global warming or action to curb it.
Obama’s task force on climate-change adaptation is urging government agencies to prepare for the “inevitable effects” of global warming.
“We’re not looking at climate-change impacts that are far in the future,” Shere Abbott, associate director of environment for the White House Office of Science and Technology Policy, said in an interview. “We’re already seeing impacts today.”
The U.S. Gulf Coast alone may face $350 billion in damages by 2030 as powerful storms fueled by climate change ravage the region, according to a study released last month that was commissioned by Entergy Corp. of New Orleans, an energy company that operates nuclear-power plants.
Texas Instruments Inc., the second-largest U.S. chipmaker behind Intel Corp., and Siemens AG, Europe’s largest engineering company, are among companies that say increased demand for energy-efficient appliances and other business opportunities may counter risks to business from climate change such as higher energy costs, according to a report released last month by the Carbon Disclosure Project, which is backed by 534 institutional investors with more than $64 trillion in assets under management.
GE of Fairfield, Connecticut, which has pushed for mandatory carbon limits in the U.S. and worldwide, is working on a project with Goldman Sachs Group Inc. to map water-related risks for investors. GE, the world’s second-biggest wind-turbine maker behind Vestas Wind Systems A/S, also views the database as a tool to help the company identify areas worldwide where a shifting climate is causing water scarcity, said Jeff Fulgham, sustainability chief for GE Water.
“We want to make sure we are on the ground in those high- stress areas,” Fulgham said in an interview. Revenue from GE’s business recycling water for use in power plants, agriculture and manufacturing is expected to grow at least 10 percent a year through at least 2016, he said.
Levi Strauss Cotton
While some businesses seek profit in adapting to climate change, others are preparing for the liabilities.
Levi Strauss & Co. says it’s worried higher temperatures and sea levels worldwide will cause diminishing supplies and soaring costs for the cotton used in its jeans.
The apparel-maker is mapping out its operations and supply chain to see where water scarcity may cause damage now and later, said Anna Walker, the San Francisco-based company’s senior manager of government affairs and public policy.
Negotiators pledged in Copenhagen to keep the global temperature rise since industrialization to 2 degrees Celsius (3.6 degrees Fahrenheit), part of a political pact nations settled upon after failing to reach a deal on curbing emissions. Average surface temperatures have risen by about 0.74 degrees Celsius during the 20th century, according to the UN.
“Adaptation needs more attention,” said Andrew Steer, the World Bank’s climate-change chief who became the first to hold the post in July. “I’m not saying adaptation is better than mitigation. It’s not. But unfortunately it’s unlikely we will be able to prevent temperatures from rising less than 2 degrees.”
To contact the editor responsible for this story: Larry Liebert at LLiebert@bloomberg.net.