There’s long been concern about the impact of global climate change on our quality of life. But now there’s increasing concern that the negative effects could also be economic in nature.

Moody’s Investors Service has released a new report declaring that the growing effects of climate change, particularly involving rising temperatures and sea levels, are putting an increasing amount of credit pressure on state and local governments across the United States.

The report explained that governments stand to lose money because of both climate trends (long-term shifts that take place over several decades) and climate shock (major events such natural disasters, floods, and droughts that are exacerbated by climate issues).

As for climate trends, gradually emerging problems such as greater coastal storm damage, more frequent droughts and more severe heat waves can have a cumulative impact. Resulting economic challenges can include hunger due to decreased crop yields as well as damaged infrastructures and higher energy demands.

“While we anticipate states and municipalities will adopt mitigation strategies for these events, costs to employ them could also become an ongoing credit challenge,” Moody’s vice president Michael Wertz said.

Climate shock, meanwhile, has a more obvious and immediate impact on the U.S. economy, as the recovery effort after a major weather event is clearly costly. However, it’s worth noting that the long-term impacts are more significant than some may realize.

The Moody’s report pointed out that after Hurricane Katrina struck New Orleans in 2005, the city had to deal with more than just widespread infrastructure damage. Additionally, in the years following the storm, the city suffered a significant decline in revenue as a large percentage of the population left town. For this reason, it might be worthwhile for cities and states to invest in resources that can better protect them against climate shock.

“U.S. issuer resilience to extreme climate events is enhanced by a variety of local, state, and federal tools to improve immediate response and long-term recovery from climate shocks,” Wertz said.

A recent study from MIT may help these cities in their planning, because it shows how they can mitigate the effects of climate change.

Photo: Cities like New Orleans have already borne the brunt of climate shocks like Hurricane Katrina. Credit: Shutterstock