August 16, 2011

Budget Cuts Part III: Pre-funding Climate Catastrophe

In December 2010, the Obama administration released a bipartisan
report from the National Commission on Fiscal Responsibility and Reform that,
among other things, recommended the administration to establish a disaster fund
to “budget
honestly for catastrophes
.” “Any
given disaster may itself be unpredictable, but the need to pay for some level
of disaster relief is not
,” the commission found. “Yet
federal budgets rarely set aside adequate resources in anticipation of such
disasters, and instead rely on emergency supplemental funding requests.

"The last-minute legislation approved by Congress last week [August 2] to raise the
debt ceiling creates a disaster fund that will carry billions of dollars
for recovery in hard-hit areas
," Evan Lehmann of ClimateWire reported last week. As the government navigates the increasingly constrained
fiscal environment, a disaster fund sounds like a practical solution. Lehmann noted that, “The
fund could reduce stress on the deficit by preventing the need for emergency
supplemental appropriations made in the wake of a crisis. Those unplanned
expenses are not included in the budget, so it amounts to new debt

The challenge, though, is that the fund may be insufficient
for providing relief to Americans reeling from climate-related disasters that
today may be consider historical, but tomorrow may be more frequent. “The
disaster fund budget authority (BA) will be limited to the rolling average of
disaster spending in the most recent 10 years, excluding the highest and lowest
,” according to the commission report. “That
rules out mega-outliers like Hurricane Katrina, which required an emergency
outlay from Congress amounting to $122 billion
,” Lehmann reported.

But these kinds of outliers could become more frequent in the
years ahead according to climate scientists. Though Hurricane Katrina may not
be attributed to climate change, scientists project that those types of occurrences
could be more common. The U.S. Global Change Research Program, for example,
notes that “The
intensity of Atlantic hurricanes is likely to increase during this century with
higher peak wind speeds, rainfall intensity, and storm surge height and
.” It is not surprising then that some federal agencies responsible
for coordinating first responder efforts are hedging against this by conducting
scenario planning that use Hurricane Katrina as their baseline in order to
understand and prepare for the scale of relief efforts that may need to be
executed under these scenarios. 

Critics of the disaster fund advocate for government
reinsurance instead. “The
federal premiums paid by homeowners in states that voluntarily establish
state-based catastrophe reinsurance programs would reduce the cost of emergency
funding on taxpayers who live in safer places
,” Lehmann reported. “The
state programs would cover smaller disasters, and federal reinsurance would pay
out during the mega-catastrophes seen once every five or 10 years
.” Such a
program could be more sensitive to taking into account quickly changing environmental
and climate trends and not negating relief for Americans reeling from more
intense and more frequent storms that would yesterday be considered historical.

There are sensitive economic concerns that policymakers need
to take stock of. How much the federal government is willing to payout for disasters
could have an effect on private insurance premiums, and it is a challenge that government
will need to grapple with. Skyrocketing insurance premiums as result of climate
change could force individuals and businesses to make hard choices about
whether they will live and operate in high risk zones. But on the flipside, they
may portend economic chilling effects, especially for industry that must
operate in high risk zones, like port, shipping and fishing businesses along vulnerable
coastal areas.

The United States needs sound fiscal policy when it comes to
disaster management. But that policy needs to be informed by accurate
environment and climate change trends and evaluate a broad range of tradeoffs. As
the debate continues, I hope we see a more robust effort to include these

This is part three of
a three-part series on what the debt crisis and looming budget cuts could mean
for U.S. natural security issues. Last week, Christine assessed the
implications for DOD
and foreign

Photo: The Mayflower and Fellow Ship lying by the side of the road. Over
4,000 commercial vessels in the area were destroyed, damaged, and or washed on
shore. Louisiana, Southeast coastal parishes. October 15, 2005. Courtesy of the
Collection of Wayne and Nancy Weikel, FEMA Fisheries Coordinators and flickr
user NOAA Photo Library.