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Global warming, rising sea levels, fiercer and more frequent hurricanes and environmental degradation could result in $350 billion in losses over the next 20 years on the Gulf Coast, America's oil and natural gas nerve center, according to a risk assessment released Wednesday by power company Entergy Corp.
The analysis of hazards, assets and vulnerabilities - including the offshore oil and gas world in the Gulf of Mexico - paints a bleak picture for the energy corridor between Texas and Alabama.
"Sitting here doing nothing is not a plan that is acceptable," said Wayne Leonard, the chairman and CEO of Entergy, a Fortune 500 power provider based in New Orleans.
Entergy is one of the largest nuclear power providers in the United States and an advocate of expanding nuclear power as an alternative to fossil fuels that generate greenhouse gases.
Leonard called the report a "call to arms" to the Gulf Coast's governors, policy makers and oil and gas companies to wake up to the threat of climate change and do much more to invest in preparing for a risky future.
He said the report showed that losses from hurricanes and other environmental hazards would take a toll on the region's economy. For instance, losses of $350 billion - which amounts to rebuilding New Orleans' entire asset base six times - would consume about 3 percent of the region's gross domestic product each year, the report said.
"It's a road map for us to adapt to a world we don't really want to be living in, but we really may not have a choice," Leonard said.
The $4 million study was done by McKinsey & Co., an economic research firm, and Swiss Re, a company that specializes in risk assessments. The report was presented at a conference on problems with the world's deltas in New Orleans organized by America's Wetland, a nonprofit seeking to get Congress and the White House to restore the Mississippi River delta from eroding away.
The Entergy study focused on climate change, hurricanes and subsidence, the gradual sinking of coastal lands, a phenomenon particularly bad in Louisiana where the delta is eroding. About 25 square miles of the delta is turned into open water each year.
On average, the Gulf region suffers losses of about $14 billion a year, the Entergy study found. But over the next 20 years, losses are expected to rise to between $18 billion and $23 billion a year, depending on the severity of global warming.
Looking ahead even further, the study said losses could increase to between $26 billion and $40 billion a year after 2030 if global warming worsens.
Of course, losses could be averted by spending tens of billions of dollars to prepare for future hazards, the study said.
The study looked at the benefits of tougher building codes, better levees, restoring wetlands and beaches, changing practices in offshore drilling, such as higher standards for offshore platforms and replacing semi-submersible drilling rigs with drill ships, and strengthening electric utility systems.
If $76 billion in private funds and $44 billion in public funds were spent by 2030, the region would incur nonetheless heavy losses of about $14 billion a year, the study found.
Still, the analysis said spending $50 billion by 2030 would avert about $135 billion in future losses and investing $120 billion would avert $200 billion in future losses.
Leonard said the best course of action would be to cut down on greenhouse gases and fight global warming.
"Even all the measures we can possibly take doesn't even begin to solve the problem of climate change," Leonard said.