Senators Propose Adapt America Fund as Insurance Against Climate Disasters
Since 1980, the average global cost of natural disasters has increased from less than $50 billion to nearly $200 billion per year (adjusted to 2012 dollars). We are seeing the impacts of these horrifying catastrophes on our own soil and they are costing us serious dollars, with hurricanes like Katrina and Sandy incurring $152 billion and $68 billion in damages respectively. These disasters can make us feel powerless in the face of nature’s wrath. However, Senators Barbara Boxer (D-CA) and Richard Durbin (D-IL) recently proposed legislation that will allow people to invest in making America resilient again.
On April 27, Senators Boxer and Durbin proposed the Adapt America Fund, which, if passed, would enable the U.S. Treasury Department to issue $200 million in “climate bonds” each year. These bonds would fund “infrastructure resiliency and climate adaptation” projects, Durbin said.
“Local communities are facing more and more impacts from climate change and they are in desperate need of assistance,” Christina DeConcini, Director of Government Affairs with a focus on climate policy at the World Resources Institute, told Planet Experts. “Our federal government is going to have to step up to make sure that communities can not only respond to disasters, but build resiliency.”
That is precisely what the Adapt America Fund is attempting to establish. “This bill will help people fight climate change by buying bonds, which will in turn help communities prepare for and deal with the damaging effects of climate change,” said Senator Durbin in a recent press release.
Two-hundred million dollars a year sounds like a lot of money, but is it enough to prepare the United States for the risks of climate change? In 2013, New York City proposed a $19.5 billion dollar climate adaptation plan to protect it from storms like Sandy and other climate risks. In 2011, London incorporated a climate adaptation plan to address flooding, drought and heat waves. Although the costs of the entire plan were not available, the flood protection plan alone would cost over $2 billion.
“Its not going to be enough to prepare all of America for climate adaptation,” says DeConcini of the World Resources Institute, “but it is definitely a step in the right direction.” According to FEMA, every dollar spent on mitigating the risks of disasters saves four dollars that would be incurred if a catastrophe hit. So, not investing in climate adaptation projects is penny wise and pound-foolish.
Tapping Into Americans’ Civic Patriotism
Boxer’s staff told Planet Experts that the Fund is essentially a trial run to see if people are interested in investing in this type of financial product. “The climate change bonds are aimed at tapping into Americans’ patriotism and their desire to make a difference in the fight against climate change,” one staffer said. “The more committed Americans are to this effort, the more we’ll be able to invest in adaptation and climate resiliency projects nationwide.”
The Fund is modeled after the War Bonds of World War II. Back then, “everyday Americans stepped up and they invested $185 billion, two trillion in todays dollars, to protect our nation and our future,” said Boxer. “We need the same commitment today to protect our communities and future generations as we work to adapt to climate change.”
Given the local impacts of natural disasters, community level leaders are the ones that really need to take action. “Some of the best voices on this are local elected officials like mayors,” said DeConcini. “Mayors have to respond to keep their citizens safe and they can’t get bogged down in partisan bickering over climate change. The volume needs to be turned up on them so our national leaders hear that this is a desperate need.”
Climate adaptation is actually an area that historic climate deniers are beginning to acknowledge. Even South Florida Republican Congressman Carlos Curbelo is teaming up with Congressman Ted Deutch (D-FL) to promote the Climate Solutions Caucus, a bipartisan task force created to educate lawmakers about the impacts of climate change and adaptation projects that can reduce impacts.
“You don’t have to listen to me about climate change; it’s a fact,” Senator Durbin declared in a statement. “The insurance industry will tell you that, as will the American Military.”
Who Benefits From Climate Adaptation?
Who will benefit from and how to fund climate adaptation have been points of contention in recent climate policy debates (especially on the international level). In the developed world, people don’t realize that they are already paying for catastrophe risk insurance and would benefit from adaptation measures.
Timothy Maher, a catastrophe risk analyst at AON (a global reinsurance company), assesses the risks and potential damages of different disasters on the built environment then presents insurance options to cover that risk. “Insurance companies purchase catastrophe risk insurance from reinsurance companies,” Maher told Planet Experts, “and the cost of that insurance is reflected in the price of things that everyday people buy.”
“To really maximize the overall benefit (of the Adapt America Fund) to the American population, projects that the bond funds must directly correlate with solutions presented in the academic literature on risk reduction. If the adaptation measures reduce the likelihood of maximum loss for a given disaster, the projects could influence the damage curves used in catastrophe models and essentially reduce the cost of catastrophe insurance in those regions.
“Not to mention, the value of peoples homes will be maintained, their insurance will be lower and they will be able to stay there [in their homes] longer.”
Although the Adapt America Fund is not going to prepare the entire United States for the risks related to climate change, as DeConcini said, “it provides a concrete thing that individuals can do to support climate action.” Additionally, it sets an example of how we can cover the costs of climate adaptation through capital markets and lays the groundwork for a more resilient future.
*Mr. Maher’s perspective does not necessarily represent that of AON.