You're listening to the Bloomberg Opinion podcast count US Saturdays at one and seven pm Eastern on Bloomberg dot Com, the iHeartRadio app, and the Bloomberg Business App, or listen on demand wherever you get your podcasts.
Welcome to Bloomberg Opinion. I'm Amy Morris, and this week we are taking a look at the cost of climate change and how it's created some volatility with what is traditionally the safest of stocks. We'll also look at how fossil fuels are having a heartbreaking impact all the weight to the South Pole. But first we begin with the economic cost of an increasingly warmer planet. Natural disasters like deadly hurricanes and wildfires from Canada to Louisiana are tragic
in terms of lives lost. Louisiana Governor John Bell Edwards.
Nobody alive in Louisiana has ever seen these conditions. It's never been this hot, this dry, for this long.
That is not to say we should dismiss the economic damage, which is often substantial. FEMA Administrator Diane Criswell says the Disaster Relief Fund can cover the wildfire disasters in Maui, Louisiana, and the hurricane damage in Florida.
For now, if we continue to see more storms, we're going to continuously monitor very closely the health of the disaster Relief Fund to determine what more may be needed. But right now, as situation stands, the supplemental request will get us through the end of this fisical year.
Let's talk about this with Bloomberg opinion columns Claudias som Now. Claudia is the founder of Some Consulting and a former Federal Reserve economist. She joins me, Now, Claudia, your column on the Bloomberg terminal minces no words. You actually call heat the silent killer. What do you mean by that?
We can see on the news when there's a hurricane, a tornado, like it's very apparent heat is another extreme Heat is another natural disaster another way, and yet we don't, I mean, we don't see it, Like there's nothing on the news where you can say, oh, there's you know, ninety degree weather. Now this summer there was more. I mean, this was a really hot summer. So that's what they mean by a silent killer. You don't necessarily see it coming.
Right because normally when we think of natural disasters, we think of the hurricanes, the wildfires, the storms, the flooding. We don't usually think of triple digit temperatures m hmm.
And people do suffer from them and it's hard to get your work done. I mean, that's what the post is talking a lot about what it means for work and productivity in addition to the human costs like the silent killer.
So let's get into that. How higher temperatures are actually impact in the economy. And the obvious answer, of course, is there's a lot of damage done by the wildfires and the hurricanes and the flooding. But you actually dig deeper, getting into the labor sector. Tell us about that, right well.
And one reason to do this is I want to underscore the economic impacts the damage done are not just where the damage is done, right, So it's not just the rebuilding. It affects all of us because it makes workers less productive. It may, for example, farm workers that are trying to bring in the crops like they it's very difficult for them to do it. They have to shift the hours when they do it. Well, that shows up in our prices. They're higher, maybe there's less veture.
So it's not just where the natural disaster happens, that the economic damages, it's all of us. It's spread all and again we don't see that. But that's a really important and that's what I wanted to say, is the economic cost of these disasters. We experience them too, right, they're everywhere. And again it's because in the same amount of time, when it's really hot, workers just they can't get as much done, or it's just or they can't do anything right because it is just too hot.
So we're talking beyond the localized impact that you might see work folks who are like construction workers, let's say in Houston, unable to finish their day because it was dangerously hot, so they had to cut off early, or they had to modify their workday or what have you. That somehow from Houston will impact folks elsewhere beyond Houston, beyond Texas.
Well. It adds to a housing crisis, so it pushes up the housing prices, maybe fewer people move there. And they say in other areas, I mean it's you know, for some industries, it's maybe harder to tell the story of labor productivity, but it's there. Again, we can't see it, and productivity is so important for not just economic growth, but that's really what we think of as the engine
of our prosperity. Right, and if the extreme weather events are cutting into that, they are already cutting into that, let alone the fact that with climate change they will get worse.
I want to get into that. I want to also look at some of the other sectors that might be struggling with this more than others. We've we've already mentioned agriculture. What else is out there along with because agriculture is really the most obvious one.
Yeah, right, and it actually is one of these smaller groups of workers, Like they're very affected, but agriculture workers are not a huge part of the labor force, right, and so, but there are other industries in heat exposed industries, and in fact, if you add them all up, they're about twenty percent of the workforce.
Right.
So these and other examples would be communication, if you're out there putting up the telephone polls, you know, working outside. Transportation is another one which makes sense, and in fact, in the new union contract that UPS negotiated, part of their deal was air conditioners in the trucks.
Right, right, That's that's exactly you at all that they know.
Because this is part I mean human comfort, right, like you're driving around a ninety degree weather, and yet that's exactly an example of I mean, it was making them hard and miserable to do their jobs. So an air conditioner, well that has environmental effect like air conditioning, is not always the solution. But that was an example to me of AHA that they are trying to and will raise that productivity, right, because that's an example of a heat
exposed sector. So those are communication, transportation, those are some of the construction, like you mentioned, those are some of the bigger industries that are heat exposed.
And we are talking with Bloomberg opinion columnists Claudius Slam about how the heat is already showing up as a drag on economic productivity. Let's talk about the other demographics. Does it matter what your income is, Does it matter where you live?
Absolutely another aspect of heat exposure, So it's not just when you're at work. There are there are real disparities in who is exposed, in where they live, the neighborhoods they're in. There was one study that estimated that in Washington, d C. There can be a seventeen degree difference across the city in terms of how hot it is, right,
And that's I mean, that's enormous. And where that comes from is that that some areas of the city, particularly lower income areas of the city, are what are called heat islands. So the way the buildings are built, there's not a lot of trees there is, so there's not a way to you know, kind of absorb the energy. The heat it like bounces off and it's all in the neighborhood where in more affluent parts neighborhoods, there are more trees, there are solar like there are ways that
really blunt the effect of the heat. Now it's hot there too, But again and by income, these huge differences in heat obviously mean that when it's hot outside, it's going to be even hotter in areas with low income. And these are areas they often don't have air conditioning, they don't have a way to really protect themselves from adverse effects of the heat.
Like areas neighborhoods that may have more lawns, more shrubbery, more trees, are going to definitely see a difference in temperature than areas that are all asphalt and concrete.
Right exactly, does.
This also impact more social programs like education.
Howso right, these are some of these studies are I think some of the most depressing. I mean, we're not just hurting labor productivity now, I mean workers' ability to do their jobs. Now, we are undercutting the productivity the ability to work and be prosperous of future generations. So there is study that shows in schools when it is
hotter in the school, students' educational outcomes are worse. So and they measure this with you know, p s AT scores, SAT scores, So that's and and then in schools where it's cooler or they have air conditioning or you don't, you don't see these effects. So I mean it makes sense if you're in a hot, sticky room, being able to concentrate and do your work is difficult. Again, this
is one where you see racial income disparities. And and again this is showing we're we're affecting the next generation like right now.
So I want to end this on at least a hopeful note if there is one, because it is depressing and it's not going away, this isn't changing. Is there a solution? What do we do?
Well?
Big picture, the solution is you know, dealing with the rising heat, right, and these are these are problems that you know, national level. You know, we have part of the Inflation Reduction Act was to have a climate change policy, and those kind of policies have to be at the national level and frankly at the global levels. Right. So
a real fix to this is big picture. There are areas of the country that have tried to put ordinances in place, plant more trees, various things to deal with the higher temper Like Phoenix is the hottest, hottest city in the country. They can't lower the temperatures, but they can take steps that will help the workers.
Bloomberg Opinion columnists Claudia Som. Claudia is the founder of Some Consulting and a former Federal Reserve economist. She's also the creator of the Psalm rule, which is a recession indicator. Now coming up, we're going to continue this conversation from a different point of view, how climate change is actually upending traditionally dependable utility stocks. That's just ahead. You're listening to Bloomberg Opinion.
You're listening to the Bloomberg Opinion podcast. Catch us Saturdays at one and seven pm Eastern on Bloomberg dot Com, the iHeartRadio app, and the Bloomberg Business app, or listen on demand wherever you get your podcasts.
You're listening to Bloomberg Opinion. I'm Amy Morris. Let's continue the discussion about climate change and its economic impact. Now we've talked about the cost of labor and the impact on agriculture, construction, manufacturing, even education and other heat exposed jobs.
Now we're going to look at utilities. You know about lawsuits against Hawaii Electric after the wildfires in Maui and in Texas where a heat dome for much of the summer baked the state with triple digit temperatures, the power grid has been under considerable strain. Tom Overbye is with the Smart Grid Center.
We have eight urban search and Rescue team teams staged ready to go, thirty three ambulance strike teams, fifty five hundred National guardsmen. We also have the Coastguard on standby should that be necessary.
Let's talk now with Liam Denning, a Bloomberg Opinion columnist who covers energy and commodities. Liam, thank you for taking the time with us. The conventional wisdom has been for decades that utilities are the safe bet On Wall Street. Climate change seems to be upending that bring us up to speed.
Well. The short story on that is that they were always seen as safe stocks because you know, if you think about what utilities do, they build and maintain essential infrastructure for a service that none of us can can
do without. The reason they're peculiarly exposed to climate change is for the same reason their infrastructure, particularly in certain parts of the country, is very exposed to the sorts of natural disasters that are likely to become frequent and more intense less predictable due to climate change, And as we've seen in the recent case with Hawaiian Electric, they can also find themselves blamed for those natural disasters, particularly wildfires,
where power lines get implicated in sparking them.
Is there a possibility that it could forgive the terminology, but that it could somehow also help.
It can up to a point if climate change demands that you strengthen the grid hard on it, maybe you know, do something like burying power lines in the ground in order to avoid wildfire risks, that sort of thing, then the utility will make a return on that investment. Where,
of course it can go too far. Is that if you have a huge natural disaster that leads to extensive damage, leads to fatality and the resulting lawsuits from victims, then obviously the utility can be confronted with costs but simply overwhelm it. We saw this, you know, most famously with PG and E in northern California in the wildfire that happened there in twenty seventeen and twenty eighteen.
Are we seeing more of that impact lately? And you've cited two examples, Maui and northern California, both of them with wildfire being the natural disaster. Are we seeing more of it lately? Are you expecting to see more of it lately?
We've seen similar cases. We've seen We've seen a case involving Pacific Corp. Which is part of Berkshire Hathaway, relating to a fire in Oregon, and also Excel, which is
a utility operating in Colorado. I think it's fair to say that, based on the track record of the last the five or so years, if you are a utility in a mountainous territory in the western US, in particular the drier parts of the US, then your risk of wildfire is elevated but those aren't the only places where you know climate change is likely to lead to more intense disasters. I mean, Florida obviously is no stranger to hurricanes, but those hurricanes are likely to get more intense over time.
We've seen extreme weather events in Texas that took down the grid in early twenty nineteen. So my feeling would be that as climate change leads to less predictable and more intense weather impacts, that will have a disproportionate effect on infrastructure, particularly power grid infrastructure that was built for a different time. Remember most of our power grid built
during the twentieth century. It's built at a time when we sure we had natural disasters, but we didn't really contemplate what something like climate change might portend.
And we are talking with Bloomberg opinion columnist Liam Denning about the impact of climate change on what you know, conventional wisdom would call more stable stocks like utilities, But that's all changing now. Liam. You mentioned that this is bound to keep just getting worse, with more natural disasters, more wildfires. Can green grids help with this? The push towards smart grids green grids are they helping?
You know? The long term mitigation effort against climate change is obviously decarbonization, so that involves using a lot more renewable energy, electrifying a lot more of our industrial and transportation processes over time. It's you know, that's kind of think of that as kind of your long term insurance plan against climate change getting much worse. In terms of more immediate fixes, distributed energy can can help I E. Use of things like micro grids, uh, you know, home
and business cited energy systems can help you. You know, in the event that the grid goes down, you'll you'll be able to potentially supply your own power for a bit. Of course, a lot of those systems remain more expensive relative to the grid, but over time you may find communities paying that extra premium if they feel that they're exposed to the natural disasters that might take down their their local their local grid. To think of it as an insurance premium.
How does this impact customers versus the companies?
I mean, ultimately all of this cost comes back to the customers. You know. One thing you need to think about with regards to utilities is, you know, say you have a utility that is found absolutely liable for a major wildfire disaster, is confronted with a mass and bill that would force it, you know, to go into bankruptcy, as PGNE did. Now with a normal business, what happens is you go into bankruptcy. Generally the equity and a
lot of the debt gets wiped out. The company emerges with a clean balance sheet, and it carries on utilities. The problem with the utilities is once you get through the initial shock and aftermath of a wildfire or other natural disaster, you still need to keep the lights on,
which means you still need a functioning utility. The state has an interest in making sure that maybe equity holders and especially debt holders don't get wiped out, because once you're through that period, that company still needs to go
back to capital markets. And so with PGNE, you had a very weird bankruptcy where it emerged with something like three times the debt it had going into it, and that was because they wanted to keep bondholder whole, and they found different ways of basically, you know, handling the costs of that disaster. But ultimately it all flows down into your electricity bill. It has to be paid for
and it will end up jacking up the rates. And I think in a place like Hawaii, especially which already pays the highest electricity rates in the country, that those are going to rise quite a bit further. Climate change and the associated effort of decarbonization. These are things that just didn't really exist in a real sense, you know, thirty or forty years ago, certainly not in the minds
of ourselves or in the minds of economists. And so that's effectively a new cost that's been put onto society, and it has to be paid for. They can be paid for broadly in two ways. One is paying for efforts to mitigate it or paying for the cost of cleanup. I would suggest that mitigating it is probably the better investment, but either way it has to be paid for.
W Liam Denning a Bloomberg opinion columnist who covers energy and commodities and also a former investment banker. Now don't forget, We're available as a podcast on Apple, Spotify or your favorite podcast platform. Around parts of Antarctica last year, entire colonies of Emperor penguins lost all of the chicks that they'd incubated through weeks of darkness, one hundred mile per
hour winds, and brutal sub zero temperatures. The US Fish and Wildlife Service has listed the emperor penguin as endangered. They depend on sea ice as a platform to breed and raise their chicks, but the ice is melting too early and the flocks of chicks lost all drowned. Let's find out what's going on. Fayflam As a Bloomberg opinion columnist who cover science and hosts the follow the Science podcasts. She joins me now, Fae, always a pleasure. Thank you
for taking the time with me. Baby penguins. There's no way anybody can see the headline about baby penguins on the Bloomberg terminal and not go oh, I have to read about this.
Yes, they are what people would call it charismatic species, you know, which sometimes is used in a good way and sometimes sort of a way to say, well, people pay too much attention to these ones that are cute, and we should pay attention to other species. So they're charismatic for good reason, because they're such interesting animals in so many ways.
Now, how dire is this? And to be clear, your column isn't just about fossil fuels and baby penguins. That's just the hook. What you're talking about is the impact of climate change in global warming and man's role in that on species? Penguins just happen to be what's going on now?
Yeah, that was just in the news, and it just made me think about this bigger philosophical question. You know, so often when we talk about endangered species, we talk about the potential use for humans. You know, maybe some rainforest plant have the cure for cancer, or disappearing frogs might have a chemical that's useful for medicine in their bloodstream. And you know, it sort of got me thinking, well, what about animals that may or may not be useful
to humans? You know, should we care about them? And why? And I think that often is just something people feel intuitively but don't really think about that. Many of us are just singnituative. Of course we should care because they make the world a better place. So I thought it would be interesting to kind of open that discussion up.
And I think even though a lot of people argued about the role of global warming, you know, there are lots of natural fluctuations that can affect penguin colonies, but there is you know, a huge scientific consensus that there is an overall trend warming trend that is caused by human activities, and that is causing the biggest changes at the polar regions of the planet.
So how dire is this? Are penguins going extinct? Are other animals at risk?
Yeah, I mean a lot of animals are going to go extinct in the next few decades if global warming sort of continues at the pace it's continuing, and some even if we, you know, change things, we'll go extinct. Emperor penguins. Actually, there are quite a few colonies that are still doing okay, that are in more stable regions of Antarctica, but if the trend continues unabated, they would eventually go extinct because they I mean, they're sort of contradictory.
They're like the toughest animals you can imagine when you think about them spending this time, you know, and minus fifty degrees and the wind and they sit on they're out there incubating these eggs. But they're also delicate in a way because they depend on conditions being just so. They have to have the sea ice last through the winter. If it gets too warm and they lose the ice, then the chicks can get wet, and that's just deadly.
Then you know, as one of the scientists that they turn to little ice cubes and hundreds of them can die.
So how is this linked to the use of fossil fuels? Going to push back against you a little bit because.
I mean it's all yes, that is the main you know main I when you talk about human activities and climate change, you know, that's the big one. There's also deforestation, you know, there there's methane, you know, there's the the cattle industry. But fossil fuels, that's the you know, that's
the big one. That's the one that is putting the the you know, that's changed the amount of CO two in our atmosphere, and that uh is has been long predicted to cause global warming, and now we're really seeing the consequences in a way that people had predicted decades ago.
What else are scientists noticing, Well.
I mean, the the the polar regions have the biggest you know, are are showing the biggest changes. And you know, years ago people talked about polar bears and that was sort of the iconic species. And because the sea ice is melting in the Arctic and now you know that they're seeing some of the same kinds of changes in Antarctica that the polar regions, you know, are are warming, and there's this sea ice that is melting much earlier or not even ever forming. So that's you know, and
that's a big consequence. There's also apparently the sea ice in the Antarctic region is important for the growth of krill, which are the you know, the little plankton at the bottom of the food chain, and if we lose a lot of those, that could actually cause a collapse in the populations of fish that people depend on for food.
Now we're talking with Bloomberg opinion columnist Faith Lamb about how global warming may be exacerbating the elimination of baby penguins among other species. Now, Fay, Antarctica is definitely a brutal place, but it also seems like a unique gauge for the health of the planet.
Well, I mean, yeah, it's and over time, you know, Antarctica has been it's been warm there, it's changed over long, long, long periods of time. But we're seeing changes that are really fast, and so animals that are adapted to that area, you know, these penguins have become adapted to it, and it's the things are changing. They're so fast that they just can't They're not going to be able to hold on, and they're seeing you know that these whole colonies depend
on they to replace themselves. They have to raise a chick every year, and a lot of them die, and if they go too many seasons without producing enough offspring, then the whole colonies will disappear. So yeah, in some ways it is, you know, we're seeing the most extreme effects there, but we're seeing you know, we're seeing these effects all over the planet.
Who cares if we lose a species? Why is that important?
Yeah? That was something I just felt like wasn't a philosophical problem that we should all talk about because I think people sort of take for granted that, you know, people that think it's important just think that that species have a right to exist and make the planet a better place sort of take for granted that everybody feels that way, and some people don't. So I think that's
a philosophical question that we should start talking about. And one of the books I think that was really influential that touched on that with Silent Spring by Rachel Carson, and she talks about how the world is just a lesser place without these wonderful sounds of birds in the spring, and that it's not trivial, it's not silly, it's not something that only silly people worry about. You know, this is and these changes can be permanent.
Is their hope to reverse this? Can we slow it down? Where's the break? How do we put a brake on this?
Yeah, there's still a lot of room. You know, there's still time to there's there's still you know, people look at these models and they're not perfect, but they can see the trajectory if we do nothing. They can see a different trajectory where it doesn't get as warm if we start to cut back. So there's certainly are ways if we made big changes in the next couple of decades, that we could see much less global warming. So there's
a huge amount of room to make changes. I mean, there are a lot of complications there, but there is definitely it's not too late, it's not all in. A certain amount of warming is, as they say, baked into the system. But there's still a huge range of what could happen over the coming decades depending on how humans make changes in our sources of energy.
Are you surprised at all, just on a personal level, the amount of data and information that you put out there in your columns on the Bloomberg terminal, and sometimes there are people who will not be swayed when it comes to global warming, and there's that pushback.
Yeah, which is part of the reason I wanted to open up some of these deeper issues about why people care and why people should care, because I believe in understanding. I don't believe in demonizing people who disagree with you.
I think that the only way we're going to move forward is to talk it out, not to have people screaming at each other and calling each other names, but you know, to acknowledge and try to find out why people feel so strongly that we shouldn't make changes, and that are you know, we're so polarized in this country and people are sometimes just picking that side because that's where their political tribe lies. But I think it's it's such an important issue that we should all be talking
about why we care about it. And science can only tell you know so much. It can't it can't tell you what to care about, where to put your priorities. In some ways, that is a human decision.
Faith Lamb is a Bloomberg Opinion columnist. She covers science and she is the host of the follow of the science podcast. Bloomberg Opinion continues as we wrap up our look at extreme weather and climate change and what we it might be facing in our own hometowns. This is Bloomberg.
You're listening to the Bloomberg Opinion Podcast. Catch us Saturdays at one and seven pm Eastern on Bloomberg dot Com, the iHeartRadio app, and the Bloomberg Business App, or listen on demand wherever you get your podcasts.
You're listening to Bloomberg Opinion. I'm Amy Morris. Extreme weather is coming to your town too. It's not just a question of if, but when and whether your property, your power grid, and your politicians are going to be ready for it. We welcome Bloomberg Opinion columnist Jessica Carl, author of the Bloomberg Opinion Today newsletter. She's got a whole chunk of the newsletter devoted to this. Now, Jessica tell us about the newsletter itself.
Of course, it's called Bloomberg Opinion Today. It's a daily flagship newsletter for the opinion team. Has opinions on everything from business, economics, to politics, Technology, and it's delivered to your inbox every afternoon. I write it Monday through Thursday, and then we have a weekend edition as well. You can subscribe by going to Bloomberg dot com slash Opinion and you'll see a sign up bar on the right hand side.
In the newsletter, you include information from the different columns that we've been talking about regarding climate change. You know, Los Angeles just saw its first tropical storm in eighty four years. Florida, Georgia, the Carolina is hammered by Hurricane Nadalia, Louisiana, Hawaii, Canada dealing with wildfires. There was that massive heat dome over more of the country than not. But there are still those folks who are completely unfazed, in part because
they're not feeling the impact yet. What do you say, yes.
I mean in a state like California where we saw Hillary it was a once in a lifetime type of tropical storm. Only two percent of homes in that state have flood insurance. So there are like huge lots of the country that just aren't accounting for these risks, which
are becoming more veried. You don't know where these storms are going to hit you don't know, you know if it's going to be a snowstorm or wildfire or a flood, and it's just there are a lot of households that are ditching home insurance because it's becoming more expensive because of that risk. So it's just kind of snowballing and getting worse and worse in Florida. And only one in five Floridians has flood protection, which kind of gives you
an idea. In a state where you're expecting floods, only one in five of them are covered.
And you make the point in the newsletter that part of the problem is the flood map by FEMA is out of date. This is not good, this is critical.
No.
Yeah, And that flood map is insure. It hinges on everything. So lots of businesses it helps dictate their building standards, It helps dictate what, when and where people can build homes. And those flood maps are not forward looking at all. They're very much backward looking. And that's what insurans are realizing. They're playing this game of catch up. They're contacting their reinsurance to help them, which is why people are seeing
their premiums rise in the double digits. Because you know, they're realizing that, oh, shoot, the maps that we've been using are not you know, accounting fully for the risk. They're actually undercounting it.
So what's the government's role in this? The National Flood Insurance Program is part of this. Tell me about that.
Yes, so it's a five decades old program, so it's existed for quite some time. Managed by FEMA, it's called the National Flood Insurance Program, and it's the primary source of flood insurance for over five million Americans and it expires actually on September thirtieth, which would be a great time for them to kind of reinvigorate this program and make it stronger. But what Congress has been doing ever since twenty seventeen is just reauthorizing it. They're not really
improving it by much. So our colonist Jonathan Livin, which is one of the people that covers climate and insurance for US at Boomberg Opinion, he says that the government should stop with those short term things that actually strengthen it to make it better for homeowners, which part of that would be updating those flood maps and allowing homeowners and insurers to account for the risks which you know, would just the insurance fees wouldn't come all at once,
they would be more gradual over time, which would allow that program to actually be sustainable, which it currently is not. And if they further build up their debt, that's just it's gonna all tumble down eventually, and it's not going to be good for the government or its coffers.
So what is the guidance at this point? What do we do?
I think the biggest thing homeowners are feeling the crunch of inflation all around them. But they shouldn't look at their insurance premium and go, oh, this is the time for me to just stop, you know, paying it and just ditch insurance, home insurance altogether, flood insurance. At least, they need to get used to those fees and build it into their budgets. I know that, you know, putting it on the consumer is not ideal, but and insurers
are realizing that as well. And it's just an unfortunate price that we're gonna have to pay as the weather gets more extreme.
Bloomberg Opinion columnist Jessica Carl is author of the Bloomberg Opinion Today newsletter. And that does it For this week's Bloomberg Opinion. We are produced by Eric mollow and you can find all of these columns on the Bloomberg terminal. We're also available as a podcast on Apple, Spotify, or your favorite podcast platform. Stay with us. Today's top stories and global business headlines are just ahead. I'm Amy Morris. This is Bloomberg