Insurance programs may be unsustainable, will increase deficit if Nation doesnt act to address climate change
WASHINGTON, D.C. -- Climate change will increase costs to taxpayers for the federal flood and crop insurance programs according to a report by the Government Accountability Office (GAO) requested by lawmakers in the U.S. Senate and House of Representatives. If left unchecked, climate change and related increases in the frequency and severity of extreme weather, will likely greatly increase insured and uninsured financial losses across the country.
The report was requested by Senators Michael Bennet (D-CO), Sheldon Whitehouse (D-RI), Jack Reed (D-RI), Tom Harkin (D-IA), Tom Udall (D-NM), and Representative Peter DeFazio (D-OR).
"Colorado can't wait any longer for Washington to address climate change. Unchecked carbon pollution represents a material threat to our state's economy -- from our world class ski areas to our $40 billion agricultural industry," Bennet said. "This report underscores the profound economic costs of inaction. In this case, those costs stem from dramatically higher payouts on crop and floor insurance claims when natural disasters hit. Washington's failure to act now will leave our kids and grandkids with even tougher decisions - on both climate and our debt and deficit."
"Iowans have experienced just the sort of intense wind and rain storms, severe flooding, and extreme drought that are predicted to increase with future climate change, a threat we must combat much more boldly," said Senator Harkin. "I'm pleased this report proposes USDA and FEMA adopt stronger reforms designed to reduce potentially huge future crop and property losses which would also save taxpayer dollars. I especially endorse GAO urging USDA to use crop insurance to promote resiliency through soil and water conservation practices, already supported by the Conservation Stewardship Program (CSP)."
"From rising sea levels and coastal erosion to devastating floods caused by historic storms, there is no doubt that climate change is having a tangible impact on Rhode Island communities. Today's GAO report is another glaring reminder that we must do more to address the effects of climate change, including how it is affecting the federal crop and flood insurance programs. Climate change threatens not only our environment, but our economy as well," said Senator Reed.
"New Mexicans are already seeing the impacts of climate change pollution in the form of severe droughts and floods and more frequent wildfires," Udall said. "The costs of inaction on global warming are real - causing water shortages, hurting farmers and ranchers and driving up insurance rates. I don't need further evidence to urge Congress that we need to take action to reduce the impact of global warming, but I hope this report is a stark wake-up call to others."
"Climate change is loading the dice in favor of severe weather, and that puts property and crops at risk all over the country," said Whitehouse. "In Rhode Island in 2010, we experienced historic flooding that cost the state over $200 million in damage to our homes, businesses, and infrastructure. We need to prepare for catastrophes like the 2010 floods and account for the costs severe weather could impose on important federal programs like flood and crop insurance. It's time to wake up to the effects of climate change, including the effects on our nation's finances."
The report finds that between 2007 and 2013, the risk to taxpayers through the federal flood and crop insurance programs has increased 8 percent to $1.4 trillion and is likely to increase dramatically in the future.
Climate disruptions to agriculture, including drought, flooding, and elevated temperatures, have also increased over the last 40 years and are expected to increase in frequency and severity over the next 25 years. At the U.S. Department of Agriculture, costs to taxpayers for the federal crop insurance program have increased 68 percent since 2007, and actual costs for subsidies and losses have more than doubled since 2001, reaching $7.6 billion in 2012. The expected rise in temperatures and the intensity of precipitation extremes could increase substantially the risk to taxpayers through the federal crop insurance program.
FEMA is already $24 billion in debt due to extreme weather events like Superstorm Sandy that wreaked havoc along the Eastern seaboard. Additionally, the GAO in 2006 labeled the National Flood Insurance Program as "high risk" for long-term insolvency. According to GAO, hurricane-related fiscal losses due to increased storm severity and climate change could increase up to 50 percent by 2040 and 110 percent by 2100.
While public insurers have begun to incorporate climate change adaptations into their planning, the GAO has made two recommendations for FEMA and USDA to better manage the risk to taxpayers:
• FEMA should update building standards for floodplain management, including additional flood-proofing for resilience to sea-level rise and extreme weather events.
• USDA should incorporate climate change resilient agricultural practices into their "good farming practices" guidance, such as conservation tillage, water conservation, and modified crop planting dates to sustain long-term production in a changing climate.
In addition to the guidance from the GAO to help address the sustainability of the insurance programs, the lawmakers believe Congress must act to address the underlying problem - climate change - to tackle the immediate and long-term risks to taxpayers.
Click here to download the full report.
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