Paying for Global Climate Change

As Alaska and Greenland experienced temperatures that were 30 to 40 degrees Fahrenheit warmer than their compatriots in the American Midwest and Eastern Seaboard, they truly understood that the polar vortex was actually global warming. Those in “cold land” below had trouble getting their hands around the fact that it was warm air that displaced and pushed all that bitterly cold arctic air into their environment. For the second time in under a month, traffic, business, schools and too many flights in “cold land” slowed to a crawl or just plain stopped.

The macro-costs – increased pressure on infrastructure, climatic disruptions as noted above, drought management, fire management, disease control, massive erosion and land loss, severe damage from deep-impact weather-related catastrophes – are obvious and mounting. But exactly how is the hard-dollar cost of climate change going to be apportioned between and within societies as a whole (read: taxpayers), private insurers and individual members of impacted regions.

We are looking at trillions and trillions of dollars over an indefinite period. My recent blog on the potential of a short-lived mini-ice age notwithstanding, the coming years of climate change are literally going to change the lives of virtually everyone on earth.

When Superstorm Sandy smashed into the United States in October of 2012, it became the second most damaging hurricane in our history (Katrina in 2005 was first), inflicting north of $65 billion in measured damage to our nation. Funny how the two most impactful hurricanes in America’s history have occurred in recent times, just a few years apart, at a time when global climate change began to gather speed. State and federal funds were offered to some Sandy-victim homeowners not to rebuild, since additional massive storm surges are completely probable… and expected in the not too far into the future. Too many homeowners elected to rebuild or were simply not in an eligible buyout zone.

If you recall, the Tea Party movement initially convinced the 2012 GOP House majority not to approve relief to the Sandy-hit areas – conveniently mostly Democratic strongholds and notwithstanding Democratic support for Katrina-aid in mostly Republican districts. It was not until New Jersey GOP Governor Chris Christie intervened, summoned the big GOP campaign contributors on Wall Street to make the right moves, to reverse this movement. The aid that was approved is currently part of the dispute between Christie and some of his Democrat mayors, all part of the “Bridge Gate” controversy.

The fact that Americans in one defined region are loath to come to the rescue of other regions in times of dire need, that willingness to share the burdens of catastrophe across the board, has seeds that could grow and allow the cost of climate change to tear the United States into a number of smaller (and angry) nations, independent of each other.

While the 2012 do-nothing Congress finally did manage to pass a taxpayer-subsidized flood insurance program, today’s austerity-driven Congress is beginning to question the wisdom of giving cheap insurance to homeowners who live in areas that live in highly susceptible regions, particularly coastal and low-lying areas where flooding seems inevitable. The problem, of course, is that those who live in these areas, who maybe were not remotely aware of the risks when they bought or built long ago, are facing private insurance costs that are nine-to-ten times or more higher than the subsidized government rates. Simply put, too many such homeowners cannot foot this bill.

“[The Senate was] expected to approve a measure that would block, repeal or delay many of the key provisions of the Biggert-Waters Flood Insurance Reform Act, which was sponsored by Representative Judy Biggert, an Illinois Republican, and Representative Maxine Waters, a California Democrat…

“The Biggert-Waters measure sought to reform the nation’s nearly bankrupt flood insurance program, ending federal subsidies for insuring buildings in flood-prone coastal areas. Over the past decade, the cost to taxpayers of insuring those properties has soared, as payouts for damage from Hurricanes Katrina, Irene, Isaac and Sandy sent the program $24 billion into debt… The aim of the measure was to shift the financial risk of insuring flood-prone properties from taxpayers to the private market. Homeowners, rather than taxpayers, would shoulder the true cost of building in flood zones…

“[T]he White House released a statement criticizing the effort to gut the law, saying it would further erode the financial position of the national flood insurance program, and that it would reduce the government’s ability to pay future claims. But the administration did not threaten a veto.” New York Times, January 28^th.  

In the end, it was just too soon for to pull the plug, even if it restored an insolvent system: “The Senate on [January 30^th] passed a bill to delay sharp increases in flood insurance rates for millions of property owners in coastal and flood-prone areas… The bill, co-sponsored by Robert Menendez, Democrat of New Jersey, and Johnny Isakson, Republican of Georgia, passed by 67 to 32. It would effectively gut a 2012 law that had aimed to overhaul the nearly bankrupt National Flood Insurance Program.

“Although the effort had strong bipartisan support in the Senate, it has drawn criticism from a broad spectrum of outside groups, including fiscal conservatives, environmental groups, bipartisan research organizations and budget watchdog groups… ‘It will return the program to a state of insolvency,’ said Shai Akabas, an analyst at the Bipartisan Policy Center, a Washington research group. ‘General taxpayers will be footing the rest of the cost.’ New York Times, January 30^th. In other words, when the fund runs out of money, Congress has just reached into the general fund to make up the difference.

But the clock is ticking, and the signs clear that Congress isn’t going to support this subsidy much longer. Growing bi-partisan support suggests that this is a likely path for a deficit-impaired government as it struggles to figure out how to pay for the massive expected costs of climate change. And the shift from public to private insurance is a very, very large reallocation of this burden, pretty much making living in such flood prone regions more a luxury for the wealthy or those simply willing to take the risk. What about farm insurance that covers regions that seem destined for never-ending drought? Costs associated with living in earthquake-prone or tornado-run areas?

The policy issues are massive. Should such reductions be phased in over years? Should they occur at all? Should they apply to new homeowners who knowingly move into an area that has in fact experienced recent storm surges and flooding? What about the obvious impact on the values of homes? Is that even a concern that Congress should address? What, simply, can a government do that cannot actually afford the aggregated cost of almost-certain massive climate change-induced damage? And why isn’t our government failing effectively to address the root cause of climate change itself?

I’m Peter Dekom, and if you think the disruption and cost increases from climate change are huge now, you probably ain’t seen nothing yet!