There was a time a decade or two ago when society could have made a choice to write off our massive investment in a fossil fuel-based economy and begin a policy driven shift towards a cleaner renewable infrastructure that could have forestalled the worst effects of climate change. But the challenges of collective action, a lack of political courage, and the power of incumbent pecuniary interests to capture the levers of power meant we did not. The bill is now coming due.
That means that many of our great, low-lying coastal cities are what we call “stranded assets.” GreenBiz founder Joel Makower defines a stranded asset as “a financial term that describes something that has become obsolete or nonperforming well ahead of its useful life, and must be recorded on a company’s balance sheet as a loss of profit.” Makower was talking about Exxon and other companies that built their businesses on the combustion of climate changing fossil fuels, not cities. But the concept easily transfers from businesses built on carbon to cities threatened by carbon’s impact …
… When the irrational exuberance about the value of coastal real estate pops and thousands of buyers collectively mark down those assets, it will make the housing bubble of ten years ago look like a small blip.
The consequences will reverberate through the economy, through society and through the political landscape. Depending on what Hurricane Irma does, we could get a sobering preview of what that will look like. We have already seen the devastation caused by Hurricane Harvey in Houston, a city that was also built on the flawed founding assumption of permanence. Houston’s city planners and businesses also ignored warnings as far back as 1996 that climate change would bring exactly the kind of disaster they city is currently suffering today. It’s hard to blame them. We’ve all ignored the warnings.
We can’t anymore. Business leaders and politicians need to begin wrapping their heads around the big idea that climate change may mean huge financial losses in the world’s great coastal metropolises.