Climate risk, loss, and damage in North Carolina
Initial damage estimates from Hurricane Matthew in North Carolina are in the聽. A portion of that damage will be from waterways polluted by dead animals and animal waste from large-scale hog and poultry operations. Many of those operations were located on flood plains, and nearly all were contracted to produce for agribusiness giants like Smithfield and Perdue. Should these companies have seen this coming?
Climate models tell us that the number and severity of climate-related extreme weather events like Hurricane Matthew will increase. As a result, corporations are entering into a new era of climate risk that requires a re-evaluation of business models, production methods and supply chains. Governments are struggling to find the resources to pay for clean-up and re-building when disasters strike. These emerging climate challenges are particularly relevant for agribusiness companies.
The big hog and poultry operations in North Carolina fit almost any definition of climate risk. North Carolina is the second largest hog producing state in the country, with much of the production concentrated in largely African American counties (聽is pending with the EPA鈥檚 office of civil rights arguing that the poor regulation of CAFOs in North Carolina discriminates against people of color in rural areas). The proliferation of hog farms and associated manure lagoons prompted a moratorium on new hog operations in the state, passed initially in 1997, but operations that were already in place have been allowed to expand, and the hog moratorium did not extend to poultry.聽聽more than 6,500 CAFOs 鈥� a mixture of hog and cattle operations, and an additional 3,900 poultry operations 鈥� all in North Carolina.
North Carolina has already experienced a series of hurricanes that have overrun hog farms 鈥� with Fran in 1996 (loss of 16,000 pigs) and Floyd (30,000 pigs) in 1999,聽. After Hurricane Floyd, the state spent more than $18.7 million to buy-out 42 farms located in flood plains. However, according to the聽, 62 hog CAFOs, 30 poultry CAFOs and 166 open air waste lagoons are still located on flood plains 鈥� with many more close to flood plains.
When I visited Duplin County, North Carolina earlier this year, I was startled by how many big hog farms there were in such a small geographic area. I was also surprised how frequently they were located right next to big poultry operations. Many of the hog farms had signs indicating the presence of the聽聽(PEDv), which caused the death of millions of piglets in 2014. Manure from nearby CAFOs was being sprayed on fields where cows were grazing. All were located right next to waterways and in some cases flood plains. The concentration of different types of animal operations right on top of waterways is very different than what is seen in the Midwest, which has its own CAFO challenges.
Aerial surveys and imaging by the聽聽140 pig and poultry barns had been flooded, along with more than a dozen manure lagoons, by Hurricane Matthew. The flooding has killed up to聽, and fewer than 3,000 hogs, says the. The scope of the flooding damage associated with manure from the lagoons is still being assessed, but one concern is that it could contaminate the groundwater that provides the drinking water for many North Carolina citizens.
Smithfield, purchased by the Chinese company WH Group in 2013, operates the world鈥檚 largest hog processing facility in Tar Heel, North Carolina, slaughtering 30,000 hogs a day. The聽聽than 250 farms, and contracts with more than 1,500 farms in North Carolina. According聽, floodwaters reached the manure lagoons of three of Smithfield鈥檚 contract farmers, but no breaches (when the wall of the lagoon collapses) occurred.
The rising financial costs of climate change has spurred regulators to ask corporations to disclose the potential climate risks of their operations to shareholders. In 2010, the Securities and Exchange Commission (SEC) issued a guidance to聽as part of existing risk disclosure requirements. Companies were asked to consider how potential climate regulations and policies, but also physical risks like drought and flooding, would affect their business. Thus far, the level of climate risk disclosure, particularly from oil and gas companies, has not been sufficient, according to the聽. The聽with the guidance to determine whether tougher rules are necessary. House Republicans have passed a bill to block the SEC from enforcing its climate disclosure guidance. The Senate has yet to vote on a similar bill.
International regulators and investors are also emphasizing the importance of reporting climate risk. The聽聽has organized a task force on climate risk disclosure chaired by Michael Bloomberg to develop consistent rules for all G20 nations. Those new voluntary rules will be presented to the G20 in July 2017. And the world鈥檚 largest asset manager, BlackRock,聽聽earlier this year on how investors can no longer ignore climate change, and must adapt portfolios to reflect climate risk.
In the wake of Hurricane Matthew, we took a look at how a few of the major meat and poultry companies in North Carolina reported their climate risk. Smithfield does not explicitly mention climate risk in聽. The company does acknowledge that 鈥淣atural disasters, such as flooding and hurricanes, can cause the discharge of effluents or other waste into the environment, potentially resulting in our being subject to further liability claims and governmental regulation as has occurred in the past.鈥� 聽
One of North Carolina鈥檚 largest poultry companies is聽聽it lost about 250,000 chickens from Hurricane Matthew. In its聽, Sanderson Farms openly acknowledges climate risk to its operations: 鈥淓xtreme weather in the Gulf South and Mid-Atlantic regions where we operate, such as extreme temperatures, hurricanes or other storms, could impair the health or growth of our flocks or interfere with our hatching, production or shipping operations. Some scientists believe that climate change could increase the frequency and severity of adverse weather events. Extreme weather, regardless of its cause, could affect our business due to power outages; fuel shortages; damage to infrastructure from powerful winds, rising water or extreme temperatures; disruption of shipping channels; less efficient or non-routine operating practices necessitated by adverse weather or increased costs of insurance coverage in the aftermath of such events, among other things. Any of these factors could materially and adversely affect our results of operations. We may not be able to recover through insurance all of the damages, losses or costs that may result from weather events, including those that may be caused by climate change.鈥�
Tyson Foods, which has five food plants in the state, does mention聽, but not 鈥渃limate change鈥�: 鈥淣atural disasters, fire, bioterrorism, pandemic or extreme weather, including droughts,聽floods, excessive cold or heat, hurricanes or other storms, could impair the health or growth of livestock or interfere with our operations due to power outages,聽fuel shortages, damage to our production and processing facilities or disruption of transportation channels, among other things. Any of these factors could have an adverse effect on our financial results.鈥� 聽
As corporate compliance with the SEC鈥檚 climate risk guidelines evolves, new areas of climate litigation are also emerging. In the U.S., current climate-related litigation is largely focused on efforts by the oil industry to mislead the public about climate change. Earlier this year, 20 States Attorney General聽聽of Exxon and other fossil fuel companies, looking into allegations of fraud and suppression of climate science (Exxon is aggressively聽). A lawsuit from the聽聽charges that Exxon knew about the effects of climate change, but did not act to protect its facility on Mystic River from the coming effects of climate change, putting residents at risk.
The next phase of climate litigation is drawing from the ability to attribute historic pollution to specific companies, and efforts to deny climate change itself when companies knew better. 鈥淲hat is emerging is a new wave of climate litigation which, as was the case in tobacco litigation, benefits from enhanced scientific analysis and unequivocal revelations,鈥澛�.
Internationally, litigation around climate liability is聽聽in the energy and fossil fuel industry. A聽聽German energy giant RWE, one of Europe鈥檚 largest historic emitters, for its contribution to climate change as a giant glacier melts and threatens his farm. Pacific Island leaders are exploring legal action targeting leading fossil fuel companies. And the Commission on Human Rights in the Philippines has聽聽against 47 of the world鈥檚 biggest industrial polluters associated with the human rights impacts of climate change.
The backdrop of issues like climate risk and legal liability is the rapidly rising costs to governments of dealing with climate-related events like Hurricane Matthew (initial estimates are聽). At the UN climate talks, these costs are called 鈥淟oss and Damage.鈥� There is a broad range of estimates on the costs of聽, including up to a staggering $400 billion annually by 2030. Measuring loss and damage is inherently difficult, with hard to measure issues like loss of life, or loss of community, or loss of biodiversity, for example.
The Paris climate agreement includes聽聽on Loss and Damage, considered a victory for countries vulnerable to, or already experiencing, climate-related losses. The Paris article calls for increased action and support for efforts associated with Loss and Damage 鈥� and distinguishes that aid from climate adaptation. In other words, we can invest in more resilient infrastructure and agricultural systems 鈥� but events like Hurricane Matthew still will cause immense damage. Developing countries have been particularly vulnerable to extreme weather events (聽from Hurricane Matthew). The U.S. government resisted the use of the terms 鈥渓oss and damage鈥� in global climate talks because of concerns about liability exposure. In the Paris article on Loss and Damage, the U.S. won language explaining that the article 鈥渄oes not involve or provide a basis for any liability or compensation.鈥�
As countries gather in Marrakesh this week at the next global climate meeting following Paris, the challenge of providing adequate resources for 鈥渓oss and damage鈥� is returning. Many developing countries and civil society groups argue that it is developed countries, particularly those with the聽, who are most responsible for causing climate change 鈥� and thus have a particular responsibility to finance 鈥渓oss and damage鈥� efforts at the global level.
Climate-related loss and damage is already very real for many parts of the U.S. Earlier this year, an Alaskan community聽聽from a barrier island because of increasing storms and flooding linked to climate change. In January, the U.S. government helped to move聽, Louisiana because of continued flooding connected to climate change. On the eastern shore of Virginia and Maryland, government agencies are starting to confront decisions about which outlying communities are worth investing in to save, and which may disappear (聽where my grandmother grew up).
In the case of the CAFO model for large-scale animal production, the contracting companies, their investors, regulators and local governments should be assessing the climate risk posed by a system that produces giant manure lagoons vulnerable to intense rainfall. The rapid spread of animal disease, an expected by-product of climate change, is another costly risk that CAFOs have experienced in the last several years, with the PEDv in piglets (2014), and聽聽(2015). 聽
As with Hurricane Sandy in 2012, the clean-up and re-build in North Carolina will rely on significant public dollars. It is in the public鈥檚 interest to assess climate risk, and invest in resilience as re-building efforts begin. But corporations who invested in, and profited from, systems of production that are clearly risky, also bear some responsibility for clean-up costs and re-building damaged farms and communities. Acting now to reduce known risks, including those posed by CAFOs, can help limit the damage from the next hurricane.
Ben Lilliston is the Director of Climate Strategies at the Institute for Agriculture and Trade Policy (www.iatp.org). Ben has worked as an activist, researcher, and writer on issues related to corporate power, agriculture and climate change for more than 20 years. He鈥檚 a frequently published writer, including as a contributor to Mandate for Change (Lexington), and co-author of Genetically Engineered Foods: A Guide for Consumers (Avalon). His most recent report, The Climate Cost of Free Trade, examines how trade agreements like the Trans Pacific Partnership undermine our efforts to address climate change. Follow him on Twitter: @BenLilliston
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