Recent floods and mudslides in Peru — driven by extreme precipitation linked to exceptionally warm waters off the coast — have devastated the country, claiming more than 100 lives and damaging 130,000 structures. The destruction is so extreme that the Peruvian government estimated immediate reconstruction will cost the country as much as $3 billion over the long term, and as much as $9 billion over the next five years.
In Colombia, similar precipitation triggered a flood that left parts of the southern city of Mocoa completely destroyed, and killed at least 293 people. After the flood, the president of Colombia issued a dire warning: the country needs to prepare for more disasters like this as climate change continues to fuel extreme precipitation.
“We are confronting a natural disaster caused by climate change,” he said, according to the New York Times. “We need to prepare because the rains that are coming will be more intense.”
The question of who should bear the costs of climate change—the literal financial costs of mitigating carbon emissions and adapting to the consequences of the changing climate—has plagued international negotiations for decades.
Before leaving office in January, President Barack Obama contributed $500 million to the Green Climate Fund — the United Nation’s tool for climate investment — bringing the total for U.S. contributions to $1 billion. The administration had promised to contribute $3 billion in total to the fund, with a spokesman describing it as a “critical tool that helps catalyze billions of dollars in public and private investment.”
But with the Trump administration now in charge of U.S. domestic and international climate policy, the United States’ appears ready to drastically reverse course. Both on the campaign trail and as president, Trump has pledged to stop making payments to both the Green Climate Fund and the Climate Investment Funds, and has threatened to pull the United States out of the Paris climate agreement altogether.
And while there are certainly strong humanitarian arguments to be made against such actions — the world’s poorest nations will be hardest hit by the impacts of climate change — financial experts are beginning to use a different tactic in arguing that the Trump administration should remain engaged in global finance: because it’s a good business decision for the United States.
“Getting involved in climate finance is good business for the United States,” James Bond, former senior adviser to the executive director of the Green Climate Fund, said at a Capitol Hill briefing on the benefits of foreign climate aid this week. “Supporting the Green Climate Fund is good business for the U.S.”
That’s because the Paris climate agreement — wherein 186 countries pledged to keep the world well below 2°C of warming above pre-industrial levels — triggered a surge of investor interest in climate-friendly infrastructure in emerging economies, according to Bond. One analysis, from Brookings, estimates that the world will need to invest some $90 trillion over the next 15 years in infrastructure, mostly in emerging economies.
“Getting involved in climate finance is good business for the United States.”
By participating in institutions like the Green Climate Fund, the United States will maintain a seat at the table in shaping how those investments move forward, helping to ensure that American businesses can benefit from the wave of investments being made in climate-friendly infrastructure.
“[The Paris agreement] has triggered a huge surge in development of a new asset class, known as climate friendly infrastructure in emerging economies,” Bond said. “I think it is in the U.S.’ interest to be a founding partner at the table and to make sure that U.S. companies and banks and investors profit from this new class and new economy.”
China, for instance, has committed to invest some $360 billion in clean energy, anticipating that it will create 13 million jobs by 2020. And India, whose energy demand is expected to grow more than any other country by 2040, has already seen billions in clean energy investments from international investors in Japan and France.
But there’s more for the United States to gain from climate finance than an opening for American businesses to profit from an emerging economy. The impacts of climate change will be expensive, and they will be global — rising sea levels will harm American economic centers like New York and Miami, and more frequent droughts or extreme precipitation events will harm American economic sectors like agriculture or outdoor recreation. One study estimates that keeping climate change under 2°C could save the global economy $12 trillion by 2050.
It’s important to note, of course, that the Trump administration does not accept the scientific consensus regarding both the existence of manmade climate change and its severe economic consequences. Trump has called climate change a hoax created by the Chinese, and a White House official, in advance of the Trump administration’s executive order on climate and the environment, told a reporter that he was unfamiliar with studies that showed sea level rise having detrimental impacts on the United States economy.
But that doesn’t change the fact that climate change is happening, and that the consequences will be costly. And because climate change is a global problem that no one country can solve alone, it’s important for the United States to play a role in helping emerging countries deploy technology that can help mitigate greenhouse gas emissions as much as possible.
“Without global action, we’re not going to crack this nut, and we need a global instrument like the Green Climate Fund to bring these increasingly emitting countries on board,” Bond said. “This is good for the U.S. because it reduces the cost of things like insurance for major storms, or costs of changing agricultural patterns.”
Climate change also poses a risk to U.S. national security and military operations abroad, a view held by the Pentagon and Secretary of Defense James Mattis. That’s because climate change is likely to exacerbate global challenges like hunger, create a scarcity of natural resources, and generally lead to greater instability in regions across the globe.
By investing in climate mitigation — and helping emerging regions invest in climate-adapted infrastructure — the United States would essentially be investing in national security, something Trump has said is a priority for his administration. The United States’ commitment to the Green Climate Fund is $3 billion; under Trump’s proposed “skinny budget,” military spending in the United States would increase by $54 billion, 18 times America’s pledged contribution to the Green Climate Fund.
“If the U.S. doesn’t want to do it, it will be done by others.”
International climate finance is a long-term investment, but one that could have a massive payoff for the United States: increased access to investments in clean energy, reduction in the costs associated with climate consequences, and overall greater international stability. Other countries, like Germany, have signaled that they intend to maintain their commitments to the Green Climate Fund — suggesting the global economy intends to move forward with or without Trump’s approval.
“It will be done anyway,” Bond said of global climate investment, especially with regards to emerging markets. “If the U.S. doesn’t want to do it, it will be done by others.”