Sharing the costs of climate change – Twin Cities


Ed Lotterman

Florida and the southern Atlantic coast are still reeling from Hurricane Ian. The Twin Cities had their driest September on record.

Farmers in southwest Nebraska are going bankrupt as land that has been farmed for more than a century must return to marginal pasture. Arizona fields, green from new irrigation projects 50 years ago, are desert again. And it doesn’t get any easier, folks!

The climate is changing. This will require adjustments in many things, both for private sector households and businesses, but also for governments. Patches consume resources. Some changes required in the coming decades will have enormous costs. The questions of who will have to bear these costs and how will be constantly present in all economic sectors. They will appear in all geographic locations, but will be significantly higher in some than others.

Adjustments could come in the size of culverts in rural Minnesota needed to keep roads from washing out and whether to rebuild destroyed beach houses on Florida’s Sanibel Island. On a broader level, changes can be foreseen in the coming years in the way we drive, how we eat, how we heat and cool our homes and offices, how we live. And these adjustments will not be a choice. They will be forced upon us by increased changes in the resources we take for granted. All this raises the question of who should pay how much for what.

This arises in a political sense: How much shared responsibility should we all take for climate impacts on others? Should people in the upper Midwest pay taxes to help rebuild multi-million dollar but vulnerable developments along the Atlantic and Gulf coasts? How about a slum in Ponce, Puerto Rico? Should someone who drives a forklift in Eau Claire or changes diapers for the elderly in Long Island pay higher taxes?

Where to spend raises other questions of fairness. If there will be FEMA grants for the owners of a destroyed restaurant in the Persian Gulf, how about helping farmers in the western Dakotas, Nebraska and Kansas whose crops have gotten weaker over the years? What about a mid-sized lumber company in Montana, as warmer temperatures create ideal habitat for an insect that is killing tens of square miles of trees long managed sustainably? All these countries and more are economic victims of climate change; all face losing the results of decades of work. We subsidize flood insurance and give FEMA grants to those affected by water and wind, but not to those bankrupted by drought or heat. Should

There are also international and moral issues. A changing global climate is manifesting itself in floods in vast areas of Pakistan, home to much of its population of 220 million. Over the past three centuries, South Asia has contributed relatively little to the increase in global greenhouse gases. Yet its people may bear some of the greatest costs, even though they are among the poorest in the world, with the fewest means of adapting to change.

Should those who caused the problem bear some of those costs? Britain hit the coal-burning industrial revolution first and per capita contributes the most carbon dioxide to the atmosphere from fuels. Should the UK pay reparations to Pakistan, as some have recently demanded? But then should it also get credit for the steel, textiles and other products it exported to the rest of the world for two centuries?

These questions of guilt and justice go on and on. There will be almost no consensus on any of the answers. But it is good to keep longer-term issues in mind as we face shorter-term problems.

Right now we are faced with the immediate issue of cleaning up property destroyed by a hurricane while sheltering and feeding those who have lost the most. It’s no different than when a tornado ravages Comfrey or Chandler, Minn., or Joplin, Mo. Nor is it much different than when there is a flood along a river. When the effects of a global, obscure problem become immediate, visible, and acute, we Americans inherently take on some responsibility to care for one another.

My mom got help from FEMA when her little house in Chandler was blown away by an F5 tornado in 1992. I can’t be against helping people in southwest Florida or in Puerto Rico.

However, compassionate care now does not mean avoiding the larger issue of recovery prudence. If there is a blind collective commitment to finance reconstruction, with the key decisions about what and how being made by local residents and governments, there will be what economists call an “externality”. Resources will be wasted and we will be setting ourselves up for more and unnecessary destruction in the future.

In less abstract terms, homeowners insurance across Florida is now nearly $5,000 even with federal subsidies. As the likelihood of damage from future storms increases, if we give bigger insurance subsidies and more FEMA grants, are we just throwing money around fighting inevitable change? If we don’t, what loss of wealth will millions of households and businesses experience over the next decade or two?

Insurers understand that the distribution of risks is very uneven. Flood risk is highly dependent on topography and hydrology. The floodplains of major rivers are at much greater risk than the high plains of west Texas or the Buffalo Ridge of Minnesota. Even if precipitation increases, it is relatively easy to predict what the risks will be for any particular location. Paying to relocate people from these riskier areas is feasible.

Severe wind damage from tornadoes and straight-line winds can occur over much larger areas than severe flooding. And while there are areas that are much more prone to tornadoes than others, exactly where they strike in any given year is almost random. And the damage from a tornado is much more sharply focused than that from a hurricane spiral several hundred miles across. Total losses may increase with the changing climate, but it will still be possible to get private wind insurance almost anywhere in the central United States. The same cannot be said for flood insurance in Wabasha, Minn.; Omaha, Nebraska, Kansas City or countless other river towns.

Hurricanes are more complicated because damage is concentrated in coastal areas as storms quickly lose strength traveling over land. But the frequency with which any particular stretch of coast is struck varies widely. Sanibel Island has been hit hard now, but what are its prospects going forward? And how will all these storm probabilities interact with rising sea levels in determining future damage?

There are many questions and few concrete answers. But it is good to understand the full range of risks as we consider and discuss proactive public policy responses that will soon arise.

St. Paul economist and writer Edward Lotterman can be found at stpaul@edlotterman.com.

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