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Businesses Are Managing Their Climate Change Risks—the Federal Government Should Too

Two men watch as water gushes from the Oroville Dam's main spillway Wednesday, February 15, 2017, in Oroville, California.

Chaos and uncertainty have engulfed Washington since President Donald Trump took office, yet some facts remain indisputable: The world is getting hotter and extreme weather more frequent. These facts have potentially catastrophic consequences for communities across the country. For example, nearly 200,000 Northern Californians were ordered to evacuate this week after successive weeks of heavy rain overran the Oroville Dam, causing water to gush through a spillway breach and threatening to send floods tearing through communities. This event is the latest climate alarm in the Golden State’s violent swing from drought to deluge over the past few weeks.

Ample evidence demonstrates the clear link between what NASA and the National Oceanic and Atmospheric Administration, or NOAA, describe as a “Sustained Long-Term Climate Warming Trend.” People around the globe face the troubling new reality of more punishing storms, longer and more intense droughts, hotter heat waves, and heavier downpours. This rise in the frequency and severity of extreme weather events has consequences for public health, water supplies, and the safety of homes and infrastructure in both cities and rural areas. Among the most vulnerable to these consequences are communities near coasts and low-income neighborhoods and communities of color. Perhaps most important to President Trump, who has proclaimed to be a successful businessman, climate change affects also threaten companies and the country’s economy.

If President Trump does not take steps to reduce the risks and costs of more extreme weather and upgrade the nation’s crumbling infrastructure, demands for disaster assistance and infrastructure maintenance spending could drain federal, state, and local government budgets; increase household financial instability; and burden businesses’ bottom lines. By investing in infrastructure that can withstand more extreme weather and helping communities prepare for a changing climate, the Trump administration can enhance real estate market values; reduce insurance costs; minimize extreme weather damage to communities; lower federal disaster assistance costs; protect public health and safety; and drive long-term economic growth.

Risk management and disaster preparedness save money

The private sector is already applying the lessons learned from devastating and costly climate disasters. Large corporations, including Exxon Mobil, ConocoPhillips, Total S.A., Statoil, and Royal Dutch Shell, are protecting billion-dollar infrastructure assets from rising sea levels, more severe storms and hotter temperatures, even as they publicly downplay the certainty of climate change science and the need to curb carbon emissions. As reported by the Los Angeles Times, Exxon Mobil spokesman Alan Jeffers stated that “During planning and construction of major engineering and infrastructure projects, it is standard practice to take into account many types of risks both short-term and long-term … some of which could be associated with climate change.” Even President Trump has taken steps to protect his own business ventures from climate change threats.

Like many risk management strategies, investing in efforts to prepare for and build resilience to climate change pay big dividends. According to a report by the Multihazard Mitigation Council, every $1 invested in disaster risk reduction and community resilience saves $4 in future disaster costs. The insurance company FM Global estimates that clients who took steps to minimize water and wind damage and service disruptions during extreme storms sustained roughly eight times less economic loss during Hurricane Katrina than those who were unprepared.

The federal government must also manage risks to its operations and assets in order to make fiscally responsible decisions about how to invest taxpayer dollars today in ways that reduce costly liabilities in the future. A November report by the Obama administration’s White House Office of Management and Budget identified climate change as a serious fiscal risk to the federal government. The report calculated that sea level rise and more extreme weather will drive up annual federal disaster recovery costs in coastal areas by $19 billion by 2050 and by $50 billion by 2075. Climate change will also jack up the cost of providing federally subsidized crop insurance to American farmers and federal health care and fire suppression expenses by billions of dollars annually by late-century. Adding to the crushing cost of unchecked climate change, hundreds of billions of dollars in federal assets are located in floodplains or in coastal areas that are threatened by more flooding from rising seas and heavy downpours.

Recognizing that smart investments today can avoid high costs down the road, President Barack Obama took important steps to manage climate change risks to the federal government. For example, the former president directed agencies to modernize federal programs to reduce extreme weather risks and costs. As recommended by state, local, and tribal leaders, President Obama also established a new federal flood risk standard to ensure that federal agencies are investing taxpayer dollars in storm-ready infrastructure and buildings, including resilient drinking and wastewater facilities, roads, public transit, affordable housing, and power generation. In an endorsement of the flood risk standard, executive director of the Association of State Floodplain Managers Chad Berginnis stated that, “To ignore the rising trends in flood damages—now exceeding $10 billion per year—and stay with the status quo is to accept that it is better to repeatedly waste taxpayer money repairing flood-damaged facilities that are not resilient to future flood risks.”

President Trump should continue to implement these fiscally responsible risk management strategies, and pursue new avenues to both ensure that the federal government supports infrastructure that is build to last and to keep disaster risks and costs in check. For example, the Trump administration should work with Congress to support a robust infrastructure and jobs plan that creates jobs and builds the resilient infrastructure and clean energy systems that the United States needs to prosper well into the future. In addition, the Trump administration should pursue the Federal Emergency Management Agency’s, or FEMA’s, proposed disaster deductible, which states would need to meet to before receiving FEMA disaster assistance to repair public infrastructure and facilities. States could reduce their deductible by investing in disaster planning and risk reduction, stronger building codes, among other actions to reduce the need for federal disaster assistance. 

The United States is hardly the first country to understand the economic benefits of climate change risk management. World leaders have embraced the Paris Agreement to curb global carbon emissions and support resilient economic development. Intelligence and defense experts also recognize climate change as a threat that must be managed by shoring up military bases vulnerable to sea level rise, and considering climate change risks when crafting national security plans and policies.

The Trump administration has a responsibility to the American people to take steps to safeguard U.S. communities, infrastructure and federal assets that are vulnerable to more extreme weather and sea level rise. In fact, many of President Trump’s supporters expect him to do just that. According to a December Glover Park and Morning Consult poll, a majority of Trump voters support maintaining or increasing funding for infrastructure, upholding or expanding current climate change policies, supporting requirements for companies to reduce their carbon pollution, and continuing or expanding regulations to cut air pollution and protect drinking water. By following basic business principals of smart risk management, President Trump can meet the demands of his supporters while saving lives and money for taxpayers, businesses, and households in the face of more extreme weather and climate change.

Cathleen Kelly is a Senior Fellow with the Energy and Environment team at the Center for American Progress. 

The author would like to thank Christy Goldfuss, Danielle Baussan, Miranda Peterson, and Emily Haynes for their contributions to this column.