Climate Risk Heats Up

Climate risks and regulations are on the rise.

I am struck by how regularly I was able to run outside last month. Chicago’s harsh winter conditions typically limit outdoor activity; even hardy, warmly-dressed runners will stay indoors to avoid injuries from the frozen ground. But this year, locals did not need to spend as much time on treadmills. Most of the U.S. had its warmest February on record, while the rest of the world logged the second-warmest February in history. Weather patterns are shifting, and the consequences go far beyond planning exercise routines.

We are economists, not meteorologists. We must take the changing weather as an exogenous shock, and make plans to deal with the commercial and policy implications of these changes. And the outcomes are starting to show up everywhere we look.

The increasing prevalence of droughts, wildfires and heavy storms are adding to the risks faced by food industries. Crop failures have become more common. Livestock eat a lot of grains and grass; higher input costs will raise the price of meat. Fish are also under stress, with changes to the temperatures and acidity of the oceans causing species to move or be depleted.

Difference Between Global Average Temperatures