How climate change is disrupting the global supply chains

This story was originally published in Yale Environment 360as part of the Climate Desk collaboration.

The Pandemic COVIDThe majority of global supply chain disruptions that occurred in the past two years can be attributed to China. Experts and scholars agree that climate change is a much more serious threat to supply chain stability and is already being felt.

The pandemic is “a temporary problem,” while Climate change is “long-term dire,” said Austin Becker, a maritime infrastructure resilience scholar at the University of Rhode Island. “Climate change is a slow-moving crisis that is going to last a very, very long time, and it’s going to require some fundamental changes,” said Becker. “Every coastal community, every coastal transportation network is going to face some risks from this, and we’re not going to have nearly enough resources to make all the investments that are required.”

Of all of climate change’s threats to supply chains, sea-level rise lurks as potentially the biggest. But, even though sea-level rising is already threatening ports and other infrastructure along the coast, disruptions to supply chains due to hurricanes, floods and other increasingly extreme weather are disrupting the global economy. A sampling of these disruptions from just last year suggests the variety and magnitude of climate change’s threats:

• The worst involuntary power blackout was caused by the Texas freeze in February.^⁠In American history. Three major semiconductor plants were forced to close.^⁠This caused a global shortage of semiconductors, which in turn led to a pandemic. It also slowed down production of microchip-dependent cars. Railroad closures were also required, cutting off crucial supply chain links between Texas (and the Pacific Northwest) for three days.⁠

• Heavy rainfall and snowmelt last February caused some banks of the Rhine River, Europe’s most important commercial waterway, to begin to burst, triggering a halt in river shipping for several days. In April, Rhine water levels plummeted to the point that cargo ships had to load half of their usual capacity in order to avoid being stranded. In recent years, manufacturers relying on the Rhine “have increasingly faced shipping capacity reductions that disrupted both inbound raw material and outbound product delivery flows” as a result of drought, according to a Report May 2021Everstream Analytics tracks supply chain trends.
• Late July flooding in central China disrupted supply chains of commodities like coal, pigs, and peanuts^⁠A Nissan automobile plant was closed due to the disruptions. SAIC Motor, the country’s largest automaker, announced that these disruptions caused what Reuters called a “short-term impact on logistics” at its giant plant in Zhengzhou, capable of producing 600,000^⁠A year of cars
• Hurricane IdaThe fifth-costliest hurricane in American history was Hurricane ‘Emily’^⁠The sandstorm that struck the Gulf of Mexico Coast in August caused severe damage to industrial facilities.^⁠This generates a variety of products including pharmaceuticals and plastics. It also forces a diversion from trucks that are already in short supply in the country to be used in relief aid.
• Fires in British Columbia from late June through early October triggered by an unprecedented heat wave comprised the third-worst wildfire season in the province’s history and closed a transportation choke point at Fraser Canyon that idled thousands of rail cars and stranded their contents. In November, an unprecedented heat wave triggered wildfires in British Columbia. It closed a transportation choke point at Fraser Canyon, causing thousands of rail cars to be idled and their contents to become stranded. Atmospheric river, delivering what officials called “once-in-a-century” rainfall, caused severe flooding in the province. The flooding destroyed important railroad and highway infrastructure.^⁠ links to Canada’s largest port and forced a regional oil pipeline^⁠To close. The loss of the rail network caused provincial lumber companies to reduce their production, leading to price increases and shortages in lumber, paper pulp, and other wood products in the United States.
• TechWireAsia described December as the “Typhoon of December”.^⁠ “arguably the worst flooding in history in various parts” of Malaysia and severely damaged Klang, Southeast Asia’s second-largest port. That created a break in the semiconductor supply chain, since semiconductors from Taiwan, by far the world’s largest manufacturer of advanced microchips, are routinely shipped to Klang for packaging at Malaysian factories before being transported to U.S. companies and consumers. Some U.S. automobile manufacturers had to stop operations due to the packaging problem.

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“The Malaysia node in the global supply chain that hardly anyone was aware of turned out to be critical,” Christopher Mims, a Wall Street JournalTechnology columnist and author of Arriving Today: From Factory to Front Door — Why Everything Has Changed About How and What We BuyIn an interview, he said. “It illustrates how a bottleneck anywhere in the supply chain can interfere with the availability of critical goods.”

Scientists predict that climate-related disruptions will increase as the world heats. In addition, ports, rail lines, highways, and other transportation and supply infrastructure will be threatened by increases in sea level of an estimated 2 to 6 feet — and perhaps more — by 2100.

Around 90 percent^⁠ of the world’s freight moves by ship, and, according to Becker, inundations eventually will threaten most of the world’s 2,738^⁠The wharves of coastal ports are located just a few feet to fifteen feet above the sea level. The threat to port managers still feels remote. The future rate of sea-level rising is uncertain^⁠Solutions so difficult that only a few can find them^⁠Only a few port managers have tried to assess the threat and have taken measures to counter it.

As the ripple effects of what are likely to be ever-increasing and intensifying climate-related disruptions spread through the global economy, price increases and shortages of all kinds of goods — from agricultural commodities to cutting-edge electronics — are probable consequences, Mims said. The leap in the cost of shipping a container across the Pacific Ocean as a result of the pandemic — from $2,000 to $15,000 or $20,000^⁠ — may suggest what’s in store.

2020 paper^⁠In Maritime Policy and Management even asserted that if current climate science is correct, “global supply chains will be massively disrupted, beyond what can be adapted to while maintaining current systems.” The paper argues that supply chain managers should accept the inevitability of economic upheaval by the end of this century and embrace practices that support rebuilding afterwards.

However, not all experts agree that supply chain are highly vulnerable to climate changes. “I don’t lie awake at night thinking about what will happen to supply chains because of climate,” said Yossi Sheffi, director of the Massachusetts Institute of Technology’s Center for Transportation and Logistics and the author of numerous books about supply chains. “I think supply chain disruption is usually local and limited in time, and supply chains are so redundant that there are many ways to get around problems.”

Supply chains are basically strings of potential bottlenecks. Each stopping point is a node in a tree-like system that conveys raw materials from the system’s farthest tendrils to sub-assemblers along its roots to manufacturers, who are the system’s trunk. Products like smartphones possess hundreds of components whose raw materials are transported from all over the world; the cumulative mileage travelled by all those parts would “probably reach to the moon,” Mims said. These supply chains are so complicated and opaque that smartphone manufacturers don’t even know the identity of all their suppliers — getting all of them to adapt to climate change would mark a colossal achievement. Each node is vulnerable and could be the weakest link in the chain.

Particularly vulnerable are seaports. The port authorities have three options to address this problem sea-level riseExperts say that all of them are inadequate. They can choose to retreat to inland areas with river connections to oceans, but these locations are rare and costly. They can build expensive sea dikes around ports. However, even if they are strong enough to withstand the rising ocean, they must be constantly raised to keep up the sea-level rise. This will only buy time before being overtopped. They also divert floodwater away from coastal areas that aren’t protected by the dikes.

Finally, port officials can raise the minimum height of all port infrastructure by at least two metres to ensure that it can continue to function in the event of sea-level rise. Becker stated that the rate of rise is so uncertain that it is difficult to choose a cost-effective height. Even raising wharves or other port infrastructure would not protect the environment.^⁠ ports’ vital ground transportation links — railroads and highways — and, for that matter, the residents of adjoining cities.

In a 2016 paper^⁠In Global Environmental Change, Becker and four colleagues concluded that raising 221 of the world’s most active seaports by 2 metres would require 436 million cubic metres of construction materials, an amount large enough to create global shortages of some commodities. The estimated amount of cement — 49 million metric tons — alone would cost $60 billion in 2022 dollars. Another study that Becker co-authored in 2017 found that elevating the infrastructure of the 100 biggest U.S. seaports by 2 metres would cost $57 billion to $78 billion in 2012 dollars (equivalent to $69 billion to $103 billion in current dollars), and would require “704 million cubic metres of dredged fill … four times more than all material dredged by the Army Corps of Engineers in 2012.”

“We’re a rich country,” Becker said, “and we’re not going to have nearly enough resources to make all the required investments. So among ports, there’s going to be winners and losers. I don’t know that we’re well-equipped for that.”

Seaport managers have been largely unable to address the threat due to the long-term nature and cost of sea-level rise. 2020 Study Journal of Waterway, Port, Coastal, and Ocean EngineeringBecker’s survey found that only 29 percent of 85 U.S. maritime engineers responded to a survey that asked them if they had any sea-level rise planning documents or policies. Additionally, the federal government doesn’t offer any guidance regarding how to incorporate sea level rise projections into port designs. “This leaves engineers to make subjective decisions based on inconsistent guidance and information,” the study said, and “leads to engineers and their clients disregarding [sea-level change] more frequently.”

In response to the threat of increasing supply chain disruption, manufacturers are considering enlarging their inventories or developing “dual Supply chains” — supply chainsTwo different routes can be used to deliver the same goods, so that if one route fails, the other will not. But both solutions would increase production costs and would contradict the still-predominant “just in time” manufacturing approach, which relies on robust supply chains to eliminate the need for companies to keep extensive parts inventories in stock. American companies could reduce their supply chains by moving production facilities to the United States or another country. However, in many cases they would be removing factories from the network of suppliers that grew around them in countries like China and Vietnam.

On top of all this, there’s a built-in inertia in supply chain management.

“[Long-term] strategy and logistics are opposite things,” Dale Rogers, a business professor at Arizona State University, said in an interview. “Logisticians are always trying to execute the strategy but not necessarily develop it. They’re trying to figure out how to make something happen now, and climate change is a long-term problem.”