Common Tragedies

Thoughts on Environmental Economics

Moment of clarity

Posted by Danny Morris on June 11, 2009

Something was made very clear to me last night, courtesy of Coors Light (it was not the kind of moment of clarity referred to at 4:09 in this video). As part Coors’ bludegeoning advertising campaign surrounding  cans that turn blue when cold, the announcer in at least one tv commercial claims the cans offer an ‘insurance policy for cold beer.’ Sounds pretty awesome, right? Not so fast. At that exact moment, fine print appears at the bottom of the screen to inform viewers:

There is no insurance policy for cold beer.

My first thought was ‘That’s a huge bummer.’ Then my inner nerd kicked in and brought about my moment of clarity. My corresponding thought was ‘There’s no real insurance policy for climate change either.’

The environmental news gods are smiling on today because the first article I saw on ClimateWire was a rundown on a new study (sub req’d) being conducted by FEMA on the effects of climate change on the National Flood Insurance Program. In my past ravings about insurance and climate change, I haven’t made much mention of the flood insurance program, but it is a massive piece of the puzzle to figure out how the nation can adapt well to climate change.

The NFIP was designed to protect people from being totally exposed to losses from major floodsthat tend to hit the southeast and midwest every year or so. Unfortunately, because people no longer had to worry about losing everything (i.e. they could not fully internalize their risk), they moved into floodplains and coastal areas that before were too dangerous to live in. Now, you have trillions of dollars in sunk capital all over the nation in areas where the risk is changing rapidly and in a way that we don’t fully understand.

The new FEMA study is trying to identify how climate change will affect inland floodplains, coastal areas, and how sea level rise will affect the program. The outcomes of the study could lead to redrawing of 100-yr floodplain boundaries, resulting in higher premiums. The study will not be complete for another year or so, but things do not look good already. According to one of the authors:

“There may be no solid projections. We’re not even coming up with squishy assumptions.”

Imagine, if you will, the political catfight that could surround this study when it’s completed. Here you have FEMA (not the most popular or trusted agency in the land) potentially coming out and saying we need to redraw our flood maps, but they don’t even have squishy assumptions. Perhaps as the study progresses, they will develop slightly more solid assumptions (think jello vs. pudding), but this may be one of the big climate change issues we have to grapple with domestically in the future and it is going to be messy. At least, that’s clear to me.

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