Inaction on climate change to cost Puerto Rico nearly $400B by 2050
A new study details economic losses by sector.
The economic cost of climate change inaction in Puerto Rico will reach $379.27 billion, equivalent to 18.3% of the island’s gross domestic product, by 2050 if global temperatures rise by 2 degrees Celsius above pre-industrial levels, according to a new local study.
This cost would represent 18.3% of the island’s GDP accumulated between 2021 and 2050.
“The Cost of Inaction on Climate Change for Puerto Rico” was commissioned by the Committee of Experts and Advisors on Climate Change of Puerto Rico and the Department of Natural and Environmental Resources. It was conducted by Estudios Técnicos and Tetra Tech.
The study analyzed climate inaction in the context of average global temperature increases of 1.5, 2, 3 and 4 degrees Celsius above pre-industrial levels. It calculated the effects of climate change in Puerto Rico based on sea level increases of 3, 5, 7 and 8 feet, as well as the incremental frequency and intensity of hurricanes.
The island will suffer significant damage from rising sea levels, erosion, catastrophic hurricanes and other climatic factors, according to the study, which highlighted the need for climate adaptation, mitigation and resilience policies.
“Without a direct, urgent and viable policy on the part of the government, Puerto Rico’s economic growth patterns will worsen due to climate change,” the study stated.
Cost of inaction per economic sector
“Climate change has a cost,” Graham Castillo, president of Estudios Técnicos, told News is my Business.
“We see the cost of climate change in input, transportation, labor, insurance costs, as well as business interruptions and property values. Construction costs, too, are higher because of stricter building codes, as are the costs of capital needed to adapt for climate change because of higher demand for that capital,” he said.
Following are the costs of inaction by 2050 for the 2 degrees Celsius temperature rise scenario per economic sector.
Tourism: Based on direct, indirect and induced losses in accommodation infrastructure, the study projected an impact of $3.7 billion, 1,155 jobs per year and $1.1 billion in payroll. Additionally, a 5.3% reduction in tourist arrivals would translate into an economic loss of $4.15 billion and put 748 jobs at risk annually, representing a payroll of $693.7 million.
In total, $7.8 billion in tourism activity would be at risk due to climate change inaction, impacting more than 1,900 jobs per year and an annual payroll of $1.8 billion.
In the case of built infrastructure, tourism assets such as hotels and commercial marinas are particularly vulnerable to sea level rise and storm surges caused by hurricanes. Approximately 10.5% of this infrastructure would be exposed to flooding under a 1-foot sea level rise scenario, 19.9% under a 3-foot scenario and 18.9% to storm surges from a Category 4 hurricane. Four of the island’s 13 airports and all seaports are susceptible to flooding from a Category 4 storm surge.
Agriculture: By examining the loss of land and the differential value of agricultural inputs caused by an increased dependence on imports, the study projected an agricultural GDP loss of $2 billion by 2050 and $13.34 billion in losses of land, machinery and equipment.
Manufacturing: In a 2 degrees Celsius temperature increase scenario, this sector would experience a GDP loss of $235 billion and job losses representing $10.87 billion in annual payroll.
Services: Climate change inaction in Puerto Rico’s services sector would result in $99.95 billion in lost GDP and $21 billion in payroll.
Utilities: Inaction would cost the utilities sector $3 billion in lost GDP, as well as $2.32 billion in damages to productive infrastructure and $580 million in payroll loss.
Construction: The study found that construction is the only sector that would not experience a loss in economic activity due to climate change inaction, possibly because other sectors would drive reconstruction and mitigation projects. However, the sector could face $7.61 billion in damage to its productive infrastructure.
Wholesale and retail trade: This sector would lose an estimated $37.1 billion in GDP and $9.1 billion in annual payroll.
In all sectors, for each additional percentage point of structures at risk under the 2 degrees Celsius temperature increase scenario, the cost of inaction on climate change would increase by $6.4 billion.
A tough nut to crack
Climate change is an extremely complex issue involving numerous players, systems and conflicts, Castillo explained.
“We see consumers who are concerned about climate change, but those same consumers have air conditioning, drive cars, use computers. We can blame the U.S. and China for producing the most contaminants, but for whom do they do it? It’s not just for consumers in the U.S. and China, but for consumers everywhere,” he said.
“So, there’s a conflict in how we live, what we want and what we, as individuals, are willing to do,” Castillo continued, stressing that education, technical innovations and investments in resilience and measures that help societies adapt to climate change are critical.
“We need technological advancements that can help us satisfy our needs while causing the least environmental impact,” he added.
Castillo said companies need to understand their climate change risks and account for them.
“You should have these risks on your books. If you don’t build reserves to address climate change issues, each dollar you earn, you’re earning it at the expense of a risk you’re accumulating,” he said.
