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Climate-Related Weather Disasters Cost U.S. Taxpayers $100B in 2012

Extreme weather events cost the United States $100 billion in 2012, most of which went towards federal crop, flood, wildfire and disaster relief, according to a new report by Ceres called Inaction on Climate Change: The Cost to Taxpayers.

By Mike Hower | Published 11 years ago | About a 4 minute read

Some skeptics still insist weather events such as last year’s devastating Hurricane Sandy are not caused by climate change, and claim investing in technologies, initiatives and processes aimed at countering it is just another drain on already troubled U.S. taxpayers. But most scientists agree that climate change exacerbates extreme weather events and believe the intensity and frequency of these events will only increase as the planet warms up.

The report says only 50 percent of the damages in the U.S. caused by extreme weather events are privately insured, which leaves the federal and state governments to pick up the remaining tab — i.e., taxpayers.

Extreme weather costs

“Taxpayers should be outraged that their tax dollars are incentivizing high-risk behavior that increases federal disaster costs,” said Steve Ellis, vice president of Taxpayers for Common Sense. “Especially in light of increased risks in the future, policymakers need to reorient federal policies to encourage mitigation and pre-respond to the disasters we know we face. Every dime spent on disaster responses should help ensure we don’t have to spend that dime in the future.”

Recommendations from the report include:

Improving transparency and accounting of the costs of extreme weather events to disaster relief and recovery programs;- Boosting research to understand how climate change will impact these programs;

Requiring recipients of federal relief and recovery assistance to adopt more stringent building codes and prohibit development in vulnerable areas;
Finding ways to increase the level of private insurance market participation to reduce pressure on government relief and recovery programs.

The report also makes specific recommendations for the National Flood Insurance Program (NFIP), Federal Crop Insurance Program (FCIP), disaster assistance and wildfire protection programs. These include:

NFIP: Implement the Biggert-Waters Act reforms, including phasing in higher insurance premium rates that better reflect risks and incorporating climate change risks into flood plain maps, loss models and insurance premium rate setting.
FCIP: Offer lower insurance premiums to farmers who adopt more sustainable farming practices that increase resiliency to drought and other weather extremes.
Disaster Assistance: Budget for reasonable foreseeable annual costs of natural disaster assistance and reduce reliance on ad hoc funding; require that states use a percentage of federal assistance to make public infrastructure more resistant to extreme weather events.
Wildfire Protection: Allocate substantially more federal and state resources to wildfire prevention measures and adopt and enforce state and local regulations that require wildfire risk reduction actions, such as broader use of setback requirements.

The report also explores the loss exposure of state-run insurance plans, especially in hurricane-prone states such as Texas and Florida — and steps that are needed to reform those programs, such as charging insurance premium rates that truly reflect risks and incorporating climate change risks into insurance premium rate-setting. In the past 20 years, the total loss exposure of these state-run insurance plans has risen by 1,550 percent, from about $40 billion in 1990 to over $600 billion in 2010.

The UN reported in May that economic losses caused by natural disasters have been underestimated by at least 50 percent and are “out of control,” according to Secretary-General Ban Ki-Moon during the launch of a UN report that reviewed reported losses from disasters in 56 countries. While according to the study, small- and medium-sized businesses suffer most from disasters and large corporations can bounce back because of insurance and diversified assets, more and more multinational brands — including Ben & Jerry's, Eileen Fisher, Unilever, Levi Strauss and L'Oréal — are calling for President Obama to follow through on climate change preparedness efforts outlined in his Climate Action Plan.

In September, the Intergovernmental Panel on Climate Change (IPCC), a coalition of leading scientists from around the world, announced it is now 95 percent confident that human influence is the dominant cause of global warming.

Mike Hower

Founder & Principal Consultant, Hower Impact

Mike Hower is the founder of Hower Impact — a boutique consultancy delivering best-in-class strategic communication advisory and support for corporate sustainability, ESG and climate tech.

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