By Liam Sigaud, American Consumer Institute
As the U.S. economy continues to be stifled by the outbreak of the COVID-19 pandemic, the potential for other major disasters loom and provide warnings of the importance of preparation and planning. The effects of climate change on the U.S. depend not only on the extent temperatures rise, but also on the measures we take to adapt to those changes.
Simplistic models of climate change’s social and economic impacts often ignore the capacity for human adaptation. Oren Cass, then-senior fellow at the Manhattan Institute, pointed out in 2018 that studies by the EPA and other federal agencies, as well as peer-reviewed papers, use naive extrapolations that don’t account for population shifts, wider adoption of mitigation technology, and other responses to slowly rising temperatures.
Through proactive mitigation and adaptation, the U.S. can sharply reduce the long-term costs of climate change — and doing so, unlike meaningfully curbing carbon emissions, does not require international consensus.
To that end, the SmarterSafer Coalition, a group dedicated to promoting natural catastrophe policies that are both environmentally responsible and fiscally sound, has released a new white paper on how federal and state governments should take bolder steps to spur climate change adaptation — rather than responding to disasters after they occur.
The uptick in major natural disasters is unmistakable, although not all can be scientifically linked to climate change. In just the last five years, the U.S. has been struck by 65 catastrophes with losses exceeding $1 billion. During the 2000s, 62 “billion-dollar events” occurred, compared to 53 during the 1990s and only 29 in the 1980s.
An urgent need is to reform the federal government’s approach to flood insurance. Flooding is by far the costliest type of natural disaster in the U.S. and, with sea levels rising, will become an even greater threat in the decades to come. According to NOAA, disruptive and expensive flooding is estimated to be at least 3 times more frequent within U.S. coastal communities than it was just 50 years ago.
The National Flood Insurance Program (NFIP), which covers more than 5 million properties nationwide, is facing a financial hemorrhage as claims vastly outstrip premium revenues. At the end of 2019, the program was more than $20 billion in debt, even after a major bailout in 2017.
Sensible reforms to the NFIP would include ensuring that premiums reflect actual flood risk (with means-tested financial assistance provided to low-income households) and taking steps to limit payments to properties that sustain flood damage over and over. From 1978 to 2004, these “repetitive loss properties” made up 38 percent of NFIP’s claim costs — despite accounting for only 1 percent of properties insured. The NFIP also needs to integrate new technology to improve its floodplain maps; accurate mapping underpins both current risk assessments and models of future conditions.
The federal government has many other opportunities to encourage cost-effective pre-disaster mitigation. The SmarterSafer Coalition report notes, to take just one example, that “higher temperatures and increased precipitation can create significant problems for roads and bridges, resulting in asphalt degradation, stress on bridge joints, and increased costs of construction and maintenance.” By enhancing minimum design standards for federally-funded projects and encouraging state and local authorities to adopt similar practices, Congress can protect taxpayer investments.
Another way to promote pre-disaster mitigation — and prevent deepening fiscal crises for governments already struggling to find a sustainable path — is to transfer more risk to the private sector. The insurance industry is well-positioned and capitalized to take on additional risks related to natural disasters and are strongly incentivized to prioritize mitigation. A larger role for private insurers, for example, could help the NFIP regain its financial footing and make affordable flood insurance more broadly available to consumers. Private insurers could also expand their role in helping vulnerable industries — such as agriculture and utilities — soften the economic costs of extreme weather.
The federal government has been slow to adapt to the realities of climate change. Disaster management programs and policies designed a half-century ago are proving wholly inadequate for the challenges we face today — and those we know are coming.
Liam Sigaud writes for the American Consumer Institute, a nonprofit educational and research organization. For more information about the Institute, visit www.TheAmericanConsumer.Org or follow us on Twitter @ConsumerPal.