Responding to Natural Disasters—False Security or Damage Reduction?
Fire, floods, coastal storms, drought—the list of natural disasters that invoke billions in damage to communities and their economies is long and persistent. The tally of costs from Hurricane Sandy in the Northeast continues to mount, mirroring the multi-billion dollar price tags for other hurricane disasters. Yet, year after year, the US Army Corps of Engineers spends millions of dollars to replenish beaches, supporting the continued presence and expansion of coastal communities. And federal agencies spend between $1 billion and $2 billion annually on fire suppression and efforts to remove dangerous underbrush and trees from overly dense forests. Billions more are spent on flood protection. Should federal taxpayers continue to foot the bill for measures to protect communities in areas at high risks from natural disasters?
A recent National Public Radio story resurrects this long-standing debate, focusing on federal taxpayer costs to replenish beaches—year after year—as bulwarks against storm damage. Proponents of this spending point to the significant protections beach replenishment provides, and hundreds of millions of dollars in avoided storm damage. Critics say such spending just keeps people living in dangerous places, luring them into a sense of security and shielding them from the costs of their decisions. Similar arguments are made against the billions of dollars spent on fighting forest fires.
But this set of for-and-against choices overly simplifies the challenges—whether along coasts or in areas adjacent to forests and grasslands subject to wildland fire. Efforts such as beach replenishment and wildland fire suppression may contribute to perverse incentives to locate or remain in high-risk areas. Yet such measures can be cost-effective ways to reduce risks. This latter point is especially important, since many communities are already in these high-risk areas, and costs of relocation could be extremely high.
Thus, the nation and these communities often face the choice of doing nothing–and experiencing extremely high costs of damage, or actually taking actions to mitigate risks–such as, for example, beach nourishment, and, in areas near forests, thinning forests to reduce risks and engaging in fire suppression where communities are threatened. Some research suggests damages are much lower in communities that have protected coastal dunes or supported beach replenishment. For wildland fires, early fire suppression responses when fires erupt can significantly reduce the subsequent extent and consequences of fire.
But other considerations are also in play. Take wildland fire. For communities near forests, risks of catastrophic wildland fires are, themselves, partly a product of former federal decisions to put out every fire. These decisions failed to recognize that many of these areas require fire to sustain forest health. As a result, forests have become unnaturally dense with brush and closely spaced trees, causing dramatic changes in fire behavior and significantly increasing risks to adjacent communities. This context complicates the “who pays for what” question with respect to forest and fire management.
These sorts of complicating details accompany most cases where communities face risks of natural hazards. What is the extent of the risk? Has it changed over time? Why? What are the relative costs of doing nothing, mitigating risks (and using which measures), or relocating whole communities? Who pays the bill? Before rejecting ideas like beach replenishment or forest and fire management, these devilish details deserve careful consideration.
RFF Feature: Valuing Climate Amenities in the United States
The value of climate amenities to households may have significant implications for estimates of the costs of climate change. A new RFF discussion paper examines the possibilities in the United States.
To read the feature in its entirety, click here.
RFF Feature: Evaluating Approaches for Financing State Parks
In new research, RFF’s Margaret Walls finds that financially struggling state park systems are in need of a fresh approach—but that there is no “one size fits all.”
To read the full feature, click here.
The Second Term of the Obama Administration
This post originally appeared on Robert Stavins’s blog, An Economic View of the Environment.
In his inaugural address on January 21st, President Obama surprised many people – including me – by the intensity and the length of his comments on global climate change. Since then, there has been a great deal of discussion in the press and in the blogosphere about what climate policy initiatives will be forthcoming from the administration in its second term.
Given all the excitement, let’s first take a look at the transcript of what the President actually said on this topic:
We will respond to the threat of climate change, knowing that the failure to do so would betray our children and future generations. Some may still deny the overwhelming judgment of science, but none can avoid the devastating impact of raging fires, and crippling drought, and more powerful storms. The path towards sustainable energy sources will be long and sometimes difficult. But American cannot resist this transition. We must lead it. We cannot cede to other nations the technology that will power new jobs and new industries. We must claim its promise. That’s how we will maintain our economic vitality and our national treasure, our forests and waterways, our crop lands and snow capped peaks. That is how we will preserve our planet, commanded to our care by God.
Strong and plentiful words. Although I was certainly surprised by the strength and length of what the President said in his address, I confess that it did not change my thinking about what we should expect from the second term. Indeed, I will stand by an interview that was published by the Harvard Kennedy School on its website five days before the inauguration (plus something I wrote in a previous essay at this blog in December, 2012). Here it is, with a bit of editing to clarify things, and some hyperlinks inserted to help readers.
RFF on the Issues
Climate Change in Obama’s Second Term
In President Obama’s inaugural address, he stated that the United States will “respond to the threat of climate change” by leading efforts such as developing sustainable energy sources.
However, RFF’s Clayton Munnings and Nathan Richardson noted that, “However much climate hawks enjoyed the president’s speech . . . there was nothing concrete to reassure them climate is not once again a low priority relative to other issues. Words are welcome, but political action is what matters.” In a new post on Common Resources, they ask, “Will the president prioritize bold, smart action from EPA, or real support for legislation creating a carbon price? Maybe.”
New RFF Publications
A regular listing of the newest RFF discussion papers, issue briefs, and reports.
- Bridging the Energy Efficiency Gap: Insights for Policy from Economic Theory and Empirical Analysis | Kenneth Gillingham and Karen Palmer | RFF Discussion Paper 13-02
- The Value of Climate Amenities: Evidence from US Migration Decisions | Paramita Sinha and Maureen L. Cropper | RFF Discussion Paper 13-01
- How Should Benefits and Costs Be Discounted in an Intergenerational Context? The Views of an Expert Panel | Kenneth J. Arrow, Maureen L. Cropper, Christian Gollier, Ben Groom, Geoffrey Heal, Richard G. Newell, William Nordhaus, Robert S. Pindyck, William A. Pizer, Paul R. Portney, Thomas Sterner, Richard S.J. Tol, Martin L. Weitzman | RFF Discussion Paper 12-53
Climate in the Second Inaugural: Signal and Substance
In President Obama’s second inaugural address he singled out climate change as a policy priority, which would be an unusual step in any inaugural address. Over the last decade presidents have mentioned wounded travelers, deepest beliefs and lofty goals; but not specific policy priorities. For instance, the extent of President Obama’s statement about health care in his first address was a pledge to “to raise health care’s quality and lower its cost.” This makes the explicit and extended mention of climate change a somewhat historic precedent. Pending decisions are the most significant that any administration has had to face about climate policy, and the inaugural address gives a signal about the possible outcome.
In a recent post on this blog our colleagues dismissed the president’s statements, arguing that “nothing has really changed” since the first term when Congress failed to pass comprehensive climate legislation. In a sense this is true, because one cannot expect Congress to overcome partisan division and lead on this issue in the current session. The path forward is likely to center on the development of regulations under the Clean Air Act, and this indeed will be historic. Read More
The Limits of a Gasoline Tax
In a recent New York Times Sunday magazine “It’s Your Money” column, journalist Adam Davidson bemoaned his gridlocked commute from New York City to New Jersey, writing that he would have “happily paid whatever it cost to persuade some other drivers that it wasn’t worth it for them to be on the road.” Mr. Davidson referenced work by our former RFF colleague Ian Parry (now at the International Monetary Fund), who in a 2007 paper in the Journal of Economic Literature, coauthored by Winston Harrington and myself, concluded that the various externalities associated with gasoline consumption warranted a $1.25 per gallon gasoline tax. Forty percent of this tax, we estimated, was attributable to congestion.
There’s no doubt that congestion externalities are substantial. Individual drivers fail to account for the marginal external cost they impose on other drivers during peak travel periods in busy urban areas leading to excessive amounts of congestion. These delay costs and extra fuel consumption from sitting in traffic add up to a significant sum – more than $100 billion in 2011, according to the Texas Transportation Institute’s annual estimate. But I think we were wrong to attach these congestion costs to gallons of gasoline consumption. The appropriate Pigovian tax for internalizing congestion costs is not a per gallon gasoline tax but rather a fee per mile that varies with the degree of congestion. On congested highways in urban areas during peak commuting periods, the fee might be substantial but on rural roads and in urban areas during off-peak travel periods, the fee should be zero. A gasoline tax is a blunt instrument for addressing congestion. Worse, it probably would do nothing to solve the serious problems that exist in many cities. Read More
Climate in the Second Inaugural: Don’t Get Too Excited
During Monday’s inauguration, President Obama once again acknowledged the threat of climate change and linked the transition to sustainable energy with economic opportunity. The front page of the New York Times claims the President’s aides plan to “build public support and head off political opposition,” with regulations from the Environmental Protection Agency for emissions from coal-burning power plants as their centerpiece policy. There is much excitement that the President is doubling down on climate action.
Yet nothing has really changed. Sure, it’s nice to hear the President publicly mention the issue, but his approach seems unchanged from his first term. Over that time U.S. emissions fell and commitments were made. But the reductions were largely due to secular trends in energy and the economy, and the Copenhagen commitments remain unfulfilled. EPA rules for power plants are important and can bend the emissions curve, but they’ve long been promised. So, what is there to be excited about?
RFF Feature: The Past, Present, and Future of Carbon Markets
New research explores lessons learned to date from carbon markets around the world and presents new issues to be examined in the future, such as the linking of existing markets.
Click here to read the feature in its entirety.
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