Climate Compass Blog
It’s not surprising that homeowners in flood-prone areas are asking their representatives in Congress to protect them from higher flood insurance bills.
Here’s the question. Who is going to protect them from higher floods?
Congress in 2012 did the right thing in fixing a broken flood insurance system that has fallen $24 billion in debt, largely because the price of flood insurance hasn’t for many years matched the risk of a flood. Now, both the House and Senate have passed bills that would undo many of these reforms.
Congress should find a way to address both the immediate and long-term concerns of their constituents, and the rest of the nation. We can’t ignore the plight of families facing hefty insurance increases, and we must ensure that the process of making flood insurance reflect flood risk is fair and transparent. But we also can’t ignore the increasing costs and risks associated with growing coastal development in an era of rising seas and heavier precipitation.
Among the problems with the National Flood Insurance Program (NFIP) that we outlined in a C2ES brief:
- Subsidies and loopholes have allowed low premiums that don’t cover actual risk.
- The program has relied on flood maps that in some cases haven’t been updated in more than 30 years.
- The gap between revenue and risk is likely to grow as development continues in flood-prone areas — and as climate change leads to sea-level rise and more extreme precipitation.
In 2012, Congress voted to reform the program and require the Federal Emergency Management Agency (FEMA) to adjust premium rates to more accurately reflect flood risk. According to FEMA, about 20 percent of NFIP policies pay subsidized rates. It raised premiums, up to 25 percent a year, for a small percentage of policies for non-primary residences, businesses, and properties with severe, repeated flood losses. Subsidies also were no longer available for newly purchased properties.
What happened next is that some coastal homeowners were suddenly confronted with steep premium increases, and were concerned they’d be unable to sell their properties as a result.
This January, the Senate voted to delay the reforms, and any rate increases, four years. A bill the House passed this week would limit rate increases to no more than 18 percent a year. It also says FEMA “must strive to” limit the cost of a flood insurance policy to 1 percent of a home's total coverage, for example, $1,000 a year for a $100,000 policy. The bill also would repeal the requirement that new policies and policies from recently sold properties reflect full risk rates. This means that for older buildings, subsidized policies can now be passed on from one homeowner to the next and new subsidized NFIP policies can be purchased.
In addition, the bill would reinstate grandfathering, where structures subject to increasing flood risk and mapped into a higher flood risk zone would continue to pay the previous, lower premium rate. To pay for reinstating these subsidies, and maintain a neutral Congressional Budget Office score, the House bill would assess a yearly fee of $25 to primary residences with an NFIP policy and $250 to businesses and second homes.
Lowering the limit of annual rate increases to 18 percent makes sense to help gradually get subsidized premiums to rates that accurately reflect flood risk. But arbitrarily capping premiums, reinstating grandfathering, and removing mechanisms to bring properties to full risk rates would undermine the long-term effort to get the deeply indebted flood Insurance program on the right track.
By paying for these reinstated subsidies with a flat fee on all homes regardless of flood risk, Congress is further distorting the flood insurance market. This clause blunts market incentives for homeowners to increase flood resilience and overcharges those who have taken action to reduce flood risk. It also masks the true risks homeowners face. As rising sea levels, increased heavy precipitation and other changes continue to push homes and businesses into higher risk zones, the costs of subsidized flood insurance will continue to rise, setting the table for another crisis.
Our brief, The National Flood Insurance Program: Risks and Potential Reforms, lays out a fuller set of reforms to reduce both flooding risk and financial risk by not only ending what are effectively subsidies for building in flood-prone areas, but also by encouraging flood preparedness.
Hurricane Sandy's estimated $65 billion in damages — much of it from flood damages — make it the second costliest hurricane in U.S. history, surpassed only by Hurricane Katrina. Building resilience to the impacts of major coastal storms like Sandy — and to other types of extreme weather — will require a commitment to better protect infrastructure and implement policies to encourage people to get out of harm’s way.
In areas where climate change enhances flood risk, we can avoid significant costs and damages if we act now, rather than kicking the can down the road.
Charting a path to reduce greenhouse gas emissions can be a challenge. Changing the perceptions and habits of employees, customers, and stockholders isn’t easy. But if done effectively, it can bring award-winning results.
Fifteen organizations and two individuals received Climate Leadership Awards for driving climate action and reducing greenhouse gas emissions. The awards are given by the U.S. Environmental Protection Agency’s Center for Corporate Climate Leadership with the Center for Climate and Energy Solutions (C2ES), the Association of Climate Change Officers and The Climate Registry.
Awardees came from a wide array of sectors, including finance, manufacturing, retail, technology, higher education and local government. They included C2ES Business Environmental Leadership Council members IBM and Johnson Controls, who were honored for achieving aggressive corporate greenhouse gas reduction goals.
At the Climate Leadership Conference in San Diego, three award winners shared key strategies that could help others take action.
1. Get buy-in from top management.
“The key to success is leadership,” said Eugene Agee, vice president for procurement, real estate, and environmental health and safety at Sprint. “It starts with the CEO.”
Sprint CEO Daniel Hesse insisted that greenhouse gas management be a formal part of corporate strategy. Amy Hargroves, director of corporate responsibility, created a sustainability council, a group of vice presidents regularly reporting to her on the company’s efforts. Those executives surrounded themselves with experts to explain the specifics of energy and greenhouse gas management.
“Get it to its simplest component. That’s what drives success,” Agee said. “What’s coming up that I need to take a role in?”
Sprint, which was honored for both organizational and supply chain leadership, focused on its major source of emissions: operation of its wireless network. Its efforts included placing more than 500 hydrogen fuel cells at network cell sites; conducting energy audits; and automating heating, cooling and lighting systems.
Sprint is also working with its suppliers to improve their environmental sustainability and has pressed suppliers to take steps that include measuring, reporting, and setting a reduction target for greenhouse gas emissions.
The company beat its original goal of cutting greenhouse gas emissions 11 percent from 2007 levels by 2018. Through 2012, Sprint had cut its carbon footprint 18 percent and set a new target of 20 percent. Sprint also set a goal to secure 10 percent of its electricity from renewable sources by 2017.
2. Keep the issue at the forefront.
In Chula Vista, Calif., which was honored for organizational leadership, Councilwoman Pamela Bensoussan said constant, widespread attention was crucial in building support for the city’s climate action plan.
The city of 250,000 has set a goal to reduce its greenhouse gas emissions 20 percent from 1990 levels by 2020. The city set energy efficiency requirements for buildings 15-20 percent higher than state code. It worked with private-sector partners to install electric vehicle charging stations at municipal buildings and recreation centers. And it’s working to minimize climate-related risks to energy and water supplies, coastal resources, and public health.
City Manager Jim Sandoval set up a cross-disciplinary team from all city departments to work with citizen groups and regularly report back to the mayor and council. As the city put elements of its plan into place, it got people involved at every level.
“We had contests for naming components and programs, designing logos and other initiatives,” Bensoussan said. “People want to help, and they want to help even more if they can have a direct effect on the bottom line.”
3. Make sustainability a business strategy.
“If a company wants to be an environmental leader, there’s going to be a lot of push-and-pull pressure on everything, especially if the company is privately held,” said Gwen Migita, vice president for sustainability and community affairs at Caesars Entertainment. “We had to have a lot of people in different areas understand how sustainability drives business strategy. How does it improve earnings?”
Caesars, which operates casinos, hotels, golf courses, and racing venues, was honored for achieving its greenhouse gas management goals. It has focused on improving energy efficiency without diminishing guests’ experience. Despite company growth that increased its physical footprint by 18 percent, Caesars cut its absolute emissions more than 11 percent between 2007 and 2011, beating its goal.
Steps Caesars took included replacing inefficient lighting, installing programmable room thermostats with occupancy sensors, and installing low-flow aerators and shower heads to cut water use and the energy needed to heat water.
Every company or organization seeking to be a climate leader will face unique challenges. By making sure key players are involved from the start, keeping the issue on the front burner, and making sure everyone understands how environmental responsibility aligns with the bottom line, leaders can lay the groundwork for cutting emissions and becoming more sustainable.
Talk about a win-win. The U.S. Environmental Protection Agency (EPA) and government-backed mortgage provider Freddie Mac recently agreed on a plan that will cut carbon emissions and at the same time make rental housing more affordable.
The plan will make it easier and cheaper for property owners to get loans for energy efficiency upgrades. This is a big deal because studies estimate that increasing the efficiency of U.S. multifamily rental properties could deliver as much as $9 billion in energy savings by 2020. It could also reduce greenhouse gas emissions by 35 million metric tons – the equivalent of taking 7.2 million cars off the road or shutting down 10 coal-fired power plants.
With studies showing that rental properties are generally less efficient per square foot than owner-occupied homes, helping renters and their landlords save energy (and money) is a key step toward reducing overall U.S. energy use.
The EPA-Freddie Mac initiative, part of the president’s Climate Action Plan, also will make available more data on energy and water use in multifamily properties. Tenants will better understand the energy costs of living in a particular home, letting them make more informed decisions. And owners will have a new incentive to make their properties more efficient, and therefore more appealing to potential renters. Additionally, property owners and tenants alike will be able to see how efficient their properties are compared to others.
EPA and Freddie Mac aren’t the only ones working to address this challenge. C2ES, through the Make an Impact program, has launched a web-based effort to reach out to renters with customized energy efficiency information. (Read about it in this blog.)
Most people at some point develop a “Plan B” – in case their first choice of college doesn’t accept them, or it rains on the day of their planned outdoor party, or the deal for the house they wanted falls apart. The same principle applies for more dire situations, such as a city having plans in hand for an orderly evacuation in case of a large-scale disaster. We hope such an event will never happen, but the mayor had better be prepared in case it does.
In a commentary today in the scientific journal Nature Climate Change, three colleagues and I discuss the need for a “Plan B” for climate change: How will we cope with increasingly severe climate impacts if we are unsuccessful in limiting global warming to a chosen target?
In the 2009 Copenhagen climate accord, countries set a goal of limiting global warming to below 2 °C (3.6 °F) above the average global temperature of pre-industrial times. However, given that the planet has already warmed by 0.8 °C, additional warming is already locked into the system, and global greenhouse gas emissions continue to rise, this “Plan A” has become increasingly difficult and may become impossible to achieve if widespread emissions reductions do not begin within this decade. A maximum warming target is a necessary goal of climate policy, but what if our efforts fall short?
Some voices in the environmental community will feel that asking this question is ceding failure, but I disagree. Instead, it means admitting that we can’t perfectly foresee the future and that we need to be prepared for surprises. This is called risk management and everyone from parents, to mayors, to companies, to the U.S. military uses risk management every day to cope with uncertainty.
A recent Senate hearing highlighted some of the progress U.S. communities are making, and the major challenges they face, in better coping with costly extreme weather events — including those, such as heat waves and coastal flooding, whose risks are heightened by climate change.
Sen. Tom Carper, chairman of the Homeland Security and Governmental Affairs Committee, noted that the “frequency and intensity of these extreme weather events are costing our country a lot - not just in lives impacted – but in economic costs, as well.” Nearly 130 weather-related events in 2013 caused more than $20 billion in losses in the United States.
Extreme weather is costly, not only to federal, state, and local governments, but also to businesses and individuals.
Much of the Senate testimony echoed key findings in our report, “Weathering the Storm, Building Business Resilience to Climate Change.” Three key points made at the hearing were: