Today’s Senate hearing isn’t just about the science of climate change. It’s also about the actions that need to be taken now to adapt to the reality of a changing climate. Businesses and governments each have a critical role to play in building resilient communities and economies.
Business-as-usual is already being interrupted by extreme heat, historic drought, record-setting wildfires, and flooding. Events from water shortages to floods are disrupting the supply chains for such companies as Honda, Toyota, Kraft, Nestle and MillerCoors. By the end of 2011, the United States had recorded more billion-dollar disasters than it did during all of the 1980s, totaling about $55 billion in losses.
The Senate Environment and Public Works Committee holds a hearing tomorrow called “Update on the Latest Climate Change Science and Local Adaptation Measures.” This is the first Senate hearing focused directly on climate science in the 112th Congress, and we hope it won’t be the last. Climate change is happening, the news from peer-reviewed science is increasingly daunting, and the public needs to hear what credible scientists are learning about the risks and potential solutions.
Today we’re updating our online map providing an overview of extreme weather events in the United States since 1990. The map highlights memorable examples of extreme heat, heavy precipitation, drought, and wildfire, four types of events with clear trends connected to climate change.
I recently responded to a question on the National Journal blog, "Does climate change cause extreme weather like the heat waves much of the country has been enduring for the past few weeks?"
Late last week, in a heartening display of bicameral and bipartisan harmony, Congress passed a bill reauthorizing the National Flood Insurance Program (NFIP) and taking steps to steer it toward solvency. Among those steps is ensuring that climate impact projections are factored into future calculations of flood risk.
In a resounding victory for sound science and policy, the US Court of Appeals decided unanimously this week to uphold both EPA’s finding that greenhouse gases endanger public health and welfare and the agency’s initial set of regulations limiting emissions from vehicles and major new and modified industrial sources.
Given the choice, we’d much prefer to see a new law establishing a comprehensive market-based program to reduce greenhouse gas emissions. But until Congress gets its act together, regulating emissions under the Clean Air Act is really the only option.
With the Senate set to vote today on fixes to the ailing National Flood Insurance Program (NFIP), a new C2ES brief explains why the program is chronically in debt to the U.S. Treasury, and how to make it solvent. We urge, among other things, that Congress allow federal underwriters to begin taking into account rising flood risk due to climate change.
The 44-year-old federally-backed NFIP covers 5.6 million American households and more than $1 trillion in assets in flood-prone areas along rivers and coasts. Flooding is not an easy risk to insure, so historically private insurers chose not to. But in assuming that role, the NFIP has at times served to encourage rather than contain risk, and has racked up $18 billion in debt in the process.
Fixing A Broken National Flood Insurance Program: Risks And Potential Reforms
by Dan Huber
The National Flood Insurance Program (NFIP) insures 5.6 million American homeowners and some $1 trillion in assets. For many years, however, the premiums collected have not been sufficient to cover losses, resulting in a current debt to the U.S. Treasury of more than $18 billion. A number of factors, including increased flooding as a result of climate change, are likely to further widen the gap between revenue and risk. Reforms are needed to put the NFIP on the path to solvency and to reduce homeowners’ exposure to chronic and catastrophic flooding risk. Ideally, such reforms should fully account for the increased risks posed by climate change. At a minimum, steps are needed to adjust premiums, improve flood mitigation measures, and prepare for the catastrophic risk of events like Hurricane Katrina.
With government budgets still reeling from the effects of the recent recession, and ongoing debates over the future costs of Medicare and Social Security, unfunded public liabilities are of growing concern. The National Flood Insurance Program (NFIP) is one such liability that is often overlooked. The NFIP is already significantly in debt due to premiums that have not reflected the true risk of flood damages. Looking forward, the risk of further losses only increases, as demographic trends place more infrastructure in harm’s way, watersheds are developed and climate change increases flood risk over time.
This paper explores the structural issues underlying the growing gap between flood insurance premiums and actual flood risk. It also examines reforms that can put the program on a more sound financial footing and the incentives needed to reduce the potential costs of future flooding. A report by the American Enterprise Institute found that insurers have “a huge opportunity today to develop creative loss-prevention solutions.”  Using both adaptive and financial tools to manage the rising risks posed by climate change will be critical to preventing losses and maintaining the insurability (and therefore property values) of trillions of dollars in at-risk property assets.
Between 1980 and 2005, U.S. insurers paid out a total of $320 billion in weather-related insurance claims. While not all weather-related claims are flood claims, losses from weather events are increasing. Today, the NFIP covers over $1.2 trillion in assets, representing more than a fourfold increase since 1980. If providing this coverage is to remain affordable, Congress must provide FEMA with the tools to accurately price and manage risk.
2. Kunreuther and Michel-Kerjan, (2009, January 15). Market and Government Failure in Insuring and Mitigating Natural Catastrophes: How Long-Term Contracts Can Help. Washington D.C., USA: American Enterprise Institute Conference on Private markets and Public Insurance Programs
With headlines like “Warmest spring heats up economy,” readers weary of bad economic news might be forgiven for thinking that a little global warming is not such a bad thing. But the warming we’ve experienced globally over the past 30 years is more than “a little.” And in the U.S., it’s likely contributing to drought and wildfires in the West and more extreme weather nationwide.
This past May came in as the second warmest on record globally, trailing only May of 2010. For land area only, it was the warmest on record, at 2.18 degrees F above average. It was also the 36th consecutive May, going back to 1976, with global temperatures above the 20th-century average.