California Bucks Global Trend with another Year of GHG Reductions

This post was co-authored by Maureen Lackner and originally appeared on the EDF Talks Global Climate blog.

The California Air Resources Board’s November 6 release of 2016 greenhouse gas (GHG) emissions data from the state’s largest electricity generators and importers, fuel suppliers, and industrial facilities shows that emissions have decreased even more than anticipated. California’s emissions trends are showing what is possible with strong climate policies in place and provide hope even as new analysis projects that global emissions will increase by 2% in 2017 after a three-year plateau.

California’s emissions kept falling in 2016

The 2016 emissions report, an annual requirement under California’s regulation for the Mandatory Reporting of Greenhouse Gas Emissions (MRR), shows that emissions covered by the state’s cap-and-trade program are shrinking, and doing so at a faster pace than in prior years. Covered emissions have dropped each year that cap and trade has been in place, amounting to 31 million metric tons of carbon dioxide-equivalent (MMt CO2e) over the whole period, or 8.8% reduction relative to 2012. The drop between 2015 and 2016 accounts for over half of these cumulative reductions (16 MMt CO2e; 4.8% reduction relative to 2015). The electricity sector is responsible for the bulk of this drop: electricity importers reduced emissions about 10 MMt CO2e while in-state electricity generation facilities reduced emissions by about 7 MMt CO2e.

Some sectors’ emissions grew in 2016. Just as with global transportation emissions, California’s transportation emissions have steadily crept up in recent years, and the MRR report suggests this trend is continuing. Transportation fuel suppliers, which account for the largest share of total emissions, reported a 1.8 MMt CO2e increase in emissions covered by cap and trade since 2015. Cement plants and hydrogen plants also experienced small increases in covered emissions. One of the benefits of cap and trade, however, is that if the clean transition is occurring more slowly in one sector, other sectors will be required to reduce further to keep emissions below the cap while the whole economy catches up.

Emissions that are not covered by the cap-and-trade program dropped, from 92 MMt CO2e in 2015 to 87 MMt CO2e in 2016. While small, this represents the largest reduction in non-covered emissions since 2012 and is mostly driven by suppliers of natural gas/NGL/LPG and electricity importers. Net non-covered and covered emissions reductions resulted in a 20.5 MMt CO2e drop in total emissions from these sectors.

These results are a welcome reminder that the cap-and-trade program is working in concert with other policies to accomplish the primary objective of reducing emissions.

The California climate policies are accomplishing their emissions reductions goals

The 2016 MRR data indicate impactful reductions in GHG emissions and progress toward reaching the state’s target emissions reductions by 2020. The 2016 emissions drop is a consequence of several factors: a CARB analysis of the year’s electricity generation points to increased renewable capacity, decreased imports of electricity from coal-fired power plants, and increased in-state hydroelectric power production. To put it in perspective, the 20.5 MMt CO2e emissions reductions is equivalent to offsetting the energy use of about 2.2 million homes, or 16% of California’s households.

Emissions below the cap are a climate win, not a concern

Total covered emissions in 2016 were about 324 MMt CO2e, well below California’s 2016 cap of roughly 382 MMt. Some observers of the cap-and-trade program worry that an “oversupply” of credits will result in reduced revenue for the state and lesser profits for traders on the secondary market. This concern was especially pronounced when secondary market prices dipped below the price floor in 2016 and 2017.

Importantly, oversupply of allowances is not a bad thing for the climate. As Frank Wolak, an energy economist at Stanford, points out, oversupply may be a sign of an innovative economy in which pollution reductions are easier to achieve than anticipated. Furthermore, having emissions below the cap represents earlier than anticipated reductions which is a win for the atmosphere. Warming is caused by the cumulative emissions that are present in the atmosphere so earlier reductions mean gases are not present in the atmosphere for at least the period over which emissions are delayed.

While market stability is a valid concern, the design of the program has built-in features to prevent market disruptions. Furthermore, the California legislature’s recent two-thirds majority vote to extend the cap-and-trade program through 2030 provides long-term regulatory certainty. Both the May and August auctions were completely sold out suggesting that the extension has succeeded in stabilizing demand.

These results are a welcome reminder that the cap-and-trade program is working in concert with other policies to accomplish the primary objective of reducing emissions, and that we’re doing it cheaply is an added bonus. Early reductions at a low cost can lead to sustained or even improved ambition as California implements its world-leading climate targets.

As California closes its fifth year of cap and trade, it should be with a sense of accomplishment and optimism for the future of the state’s emissions.

Posted in California, Cap and Trade, Cap and Trade Watch, Economics| Leave a comment

Why climate policy is good economic policy

More than 200 world leaders met over the last few days at the United Nations’ Annual Climate Change Conference in Bonn to discuss how to fill in the details of individual countries’ pledges of the Paris agreement. And while the United States has clearly ceded its leadership role to China, Germany, France, Canada and others, there are clear signs that adopting an ambitious climate policy is smart for long-term economic prosperity.

Economists across the political spectrum agree that the market alone will not solve climate change, because carbon pollution is still largely unpriced. From an ideal point of view, the optimal climate policy would be a global carbon price. If an appropriate and sufficiently robust global carbon price existed, with clear declining limits on pollution, no other climate policy would be needed.

Unfortunately, such a carbon policy does not currently exist. So, in the absence of such a global pricing regime, what kind of climate policy is cost-effective?   Each individual climate policy can be judged on its merits, and most typically show large economic gains, as the benefits of avoiding climate change far outweigh the costs.

Ambitious climate policy passes a benefit-cost test by using the Social Cost of Carbon

To understand the benefit of climate policy, we first need a sense on the magnitude of the climate damages that can be avoided. The current economic consensus view quantifies the social cost of carbon – that is the damage from emitting one ton of CO2 – at $42 per metric ton of CO2 emissions in 2007 U.S. Dollars based on work by the U.S. Government’s Interagency Working Group on Social Cost of Greenhouse Gases.

And while estimating the full range of climate damages is a daunting task, new research indicates economists are getting much better at it. Recent empirical studies have started to expand and strengthen the quantification of climate damages based on improved statistical techniques. A recent study in Nature, for example, finds that a lack of climate policy would reduce average income by 23% by 2100. These empirical estimates indicate that the true social cost of carbon is a multiple of the estimates based on the integrated climate-economy models that the Interagency Working Group still relies on. Which is what leading researchers suspected all along.

But what about the cost of climate policy? For many, the potential cost of enacting ambitious climate policy has become a powerful argument against taking any sort of action. So how can we tell if enacting climate policy is cost-effective? A first pass is to subject individual climate policy proposals to benefit-cost analyses that weigh the cost of the specific policy against the avoided climate damages using the social cost of carbon. For example, if the climate mitigation component of a renewable energy proposal costs less than the social cost of carbon, then the policy is good economics.

On the flip side, failing to pass a benefit-cost test does not necessarily imply that a policy is not cost-effective. The social cost of carbon still only captures some of the damages, and future revisions will in all likelihood correct it upwards. Additionally, a policy might lead to important co-benefits beyond climate policy such as reductions in criteria pollutants that have negative effects on human health and the environment.

The Clean Power Plan can serve as a good example to illustrate the argument.  Using benefit-cost analysis based on the social cost of carbon, the EPA determined that the Clean Power Plan is a worthwhile investment, with net gains totaling billions of dollars. This is the case even when ignoring any non-climate co-benefits, and when using the lower consensus estimate for the social cost of carbon. Relying instead on the newly available climate impact estimates adds several billion dollars to the net benefits.

Climate policy can go hand in hand with economic prosperity

Moreover, the evidence suggests that – contrary to what some claim – we can implement climate policy while growing the economy. While there can be small adjustment costs, climate policy also leads to lead to new opportunities and innovation. Patenting in clean technologies, for instance, is as vibrant as in biotech, translating into additional growth benefits for the economy as a whole.

Uncertainty makes acting now even more compelling

While there is uncertainty as to just how much CO2 levels in the atmosphere will rise, we know it will be more than ever before encountered by modern humans. And, we already know the economic impacts will be bad. The devastation from hurricanes Harvey, Irma and Maria—made worse by the impacts of a warming climate—will cost communities, taxpayers and insurance companies billions.

But things could turn out much worse. Theoretically, catastrophic climate damages could be so high as to dominate any benefit-cost analysis. This as of yet unpriced uncertainty is a compelling reason to act, not to wait. How to quantify uncertainty with precision is still at the frontier of climate economics. A recent working paper at the NBER calibrates a climate-economy model to financial risk attitudes. The authors find that taking the uncertainty in climate impacts seriously will increase the social cost of carbon even more.

Uncertainty taken seriously means ambitious climate policy today. At least that's what unites groups on both ends of the political spectrum, from progressive environmentalists to Nobel-prize winning Chicago economists.

 The economic case for ambitious climate action is clear. With the right policies, the benefits of avoiding climate change far outweigh the costs. And in the absence of a price on carbon, the only question is: what are the right climate policy instruments? As EDF has long argued, political debates in climate policy must not be over the if, but the how.

Posted in Clean Power Plan, Economics, International, Politics, Social Cost of Carbon| Leave a comment

How and why farmers in the Catskills protect New York City’s drinking water

At a recent EDF board meeting, Geoffrey Heal talked about the economic values that ecosystem services provide for our economic well-being. His presentation included a number of case studies, including the New York City Department of Environmental Protection's financial support for farmers in the Catskills to farm in ways that protect the city’s water quality. The key to the business model: farmers benefit by getting financial support from the City of New York, and the city avoids having to go through a costly filtration system to physically remove impurities or contaminants in a series of filters. The city water supply does undergo UV decontamination.

Last week, the staff of EDF’s Office of the Chief Economist decided to see for ourselves how this works in practice. We visited with Gibson Durnford, the East of the Hudson Agricultural Coordinator of the Watershed Agricultural Council, based in Yorktown Heights, New York. A non-profit organization led by local farmers, it started in 1993 to lead and administer the program.

Incentives for farmers and the City are aligned

Gibson explained that customers in New York City consume 1 billion gallons of water a day, which is supplied from the West and East Hudson systems. There is one and a half years of water in storage (550 billion gallons).

If farmers did not protect the Delaware and Catskill water sheds, the City would have to make a an estimated capital investment of $8-10 billion in water filtration plants and spend an additional $100 million annually to operate them. Phosphate is a particular problem, and the city would also have to deal with sediment running off the farms into the water supply system.

For farmers, payments for eco-services compensate and empower private landowners to be surface-water stewards of New York City’s drinking water. Whole farm management plans are agreed with farmers, incorporating best management practices that both support sustainable farming and protect water quality; concentrated manure sources like slurry pits or storage piles are a greater concern than waste in the fields. If fields are well-vegetated with grass, the plants will take up nutrients; the vegetation slows water flow and also makes the soil more porous and increases absorption.

Farmers are provided with investment funds for purposes which include drainage, roading, manure pads, and sward management; conservation easements are purchased (a percentage of market value) which simultaneously lets the farmer retain ownership of the land, releases capital for the owner while ensuring that the land remains available for farming and forestry; the forest program helps farmers with erosion control, sustainable harvesting, and planting on the banks of tributaries.

Conservation in action at an Alpaca farm
We visited Leda Bloomberg and Steve Cole’s Faraway Farm, where they raise Alpaca sheep for their wool. The Watershed Agricultural Council supported the installation of a manure pad, and of a rocky channel along the roadway had drains it to collect the water running off the field and divert it away for infiltration into the soil. Leda and Steve indicated that they had benefited greatly from the advice and support of the Watershed Council. The council is "on the side of the farmers" and is proactive in finding new and better ways to conserve and better their well-being.

The economist Ronald Coase won the Nobel Prize, in part for theorizing (without evidence) that those who pollute could negotiate a solution with those who would benefit from pollution reduction. We were honored and delighted to see his theory being acted upon to such great positive effect for both farmers upstate and the water consumers in New York City. As we left, we had only one question: Doesn’t such a great idea deserve to be replicated?

Posted in Economics| Leave a comment

Trump Administration misleads Americans about the cost of climate pollution

This blog post originally appeared on Climate 411.

The Trump Administration is attempting to justify the rollback of crucial environmental and health protections by vastly undervaluing the costs of climate change.

The latest safeguards under attack are the Clean Power Plan, the nation’s first-ever limits on carbon pollution from existing power plants, and the Bureau of Land Management’s vital standards to reduce wasted natural gas from oil and gas facilities on public and tribal lands. They would have health, environmental, and economic benefits worth an estimated billions of dollars annually. But you wouldn’t know it from reading the Administration’s recently revised documents – because of a series of deceptive accounting tricks, including efforts aimed at obscuring the benefits of reducing carbon pollution.

The Trump Administration has used discredited methods to eviscerate the social cost of carbon — an estimate of the costs that carbon pollution inflicts on the public, represented as the dollar value of the total damages from emitting one ton of carbon dioxide into the earth’s atmosphere.

The social cost of carbon is a tool that helps ensure that policymakers consider the health, environmental and economic benefits of avoiding extreme weather, rising temperatures and intensifying smog when they make decisions that affect climate pollution.

Climate change harms businesses, families, governments and taxpayers through rising health care costs, destruction of property, increased food prices and more — so it’s common sense that we should properly account for the value of avoiding these harmful outcomes. But the Trump Administration has systematically undermined and attacked the well-established science of climate change – including the social cost of carbon, which has had a target on its back for a while now.

The most up-to-date estimates of the social costs of carbon were developed by an Interagency Working Group (IWG) of experts from a dozen federal agencies. They were developed through a transparent and rigorous process based on the latest peer-reviewed science and economics, and with input from the public and the National Academy of Sciences.

But in March, President Trump cast aside the results of this thorough and consultative process. He issued an executive order aimed at discrediting the IWG estimates, withdrawing them as government policy, and directing federal agencies to pick their own metric.

The executive order leaves federal agencies to fend for themselves without specific guidance, opens the door to extensive legal challenges, and effectively sets up agencies to cook the books to serve the Administration’s goals.

That’s exactly what EPA Administrator Scott Pruitt and Department of the Interior Secretary Ryan Zinke just did – releasing benefit-cost analyses that massively undervalue the costs of carbon pollution, radically reducing the estimates by up to 97 percent.

The Trump Administration would have us believe that the costs of carbon pollution are near zero. The Administration’s new estimates are only a couple dollars per ton of carbon dioxide – about as much as a cup of coffee or a bus ticket.

Sadly, communities around the country are already seeing just how wrong that is. From longer wildfire seasons to more intense hurricanes, the American public is already bearing the enormous costs of climate change.

Even the IWG estimates – roughly $50 per ton of carbon dioxide based on year 2020 emissions – are almost certainly a conservative lower bound since they do not yet reflect many different types of climate impacts.

A closer look at the Administration’s deceptive math 

There are two major flaws in the Administration’s drastically reduced estimates, both of which fly in the face of established science and economic principles in service of obscuring the very real benefits of climate action.

First, the reduced estimates ignore that carbon emissions are a global pollutant, so they omit important categories of climate change impacts on the United States.

Second, they shortchange the harm to our children and future generations from climate change.

The so-called “domestic-only” estimate

Since the impacts of carbon pollution are felt globally regardless of where the emissions come from, leading researchers and the IWG have appropriately focused on accounting for that full global impact.

In contrast, the Administration’s revised estimates claim to consider “domestic-only” impacts to the United States. But that title is a misnomer – the Administration’s flawed approach ignores important categories of impacts that affect the American public. Climate impacts beyond our borders have costly repercussions for U.S. citizens in the form of changing global migration patterns, economic and political destabilization, and other “spillover” effects.

The National Academy of Sciences specifically rejected the approach the Administration is taking in a report released earlier this year, concluding that:

[C]limate damages to the United States cannot be accurately characterized without accounting for consequences outside U.S. borders.

Economist Richard Newell – president of the think tank Resources for the Future, which is leading an effort to implement the Nation Academy of Sciences’ recommendations to update the social cost of carbon estimates – has criticized the Administration’s approach, saying that considering only direct domestic impacts is:

[U]nnecessarily constrained and unwise for addressing inherently global pollutants like greenhouse gases.

The use of a “domestic-only” number also harms Americans because it undervalues the cost of climate pollution and encourages other countries to similarly undervalue – and over-emit – this pollution.

More than half a dozen leading experts argue:

[The] United States benefits tremendously if other countries set policy based on global rather than local effects.

They also point out that the use of a global estimate can encourage reciprocal climate action elsewhere. For instance, the Canadian government incorporated the U.S. IWG value in its own policy analysis.

Undervaluing the impacts on children and future generations

The Administration’s estimates also use a sharply lower value for the benefits that today’s carbon reductions provide to children and future generations. Again, this is in direct conflict with the weight of expert opinion that supports valuing these impacts even more than we did before the Trump Administration.

The Administration’s estimates “discount” future impacts at 7 percent – a rate significantly higher than the 3 percent central rate of the IWG, and one that is wholly unsupported by the economics literature when it comes to the long-lived intergenerational effects of carbon pollution.

A growing consensus among leading economists supports lower or declining discount rates, as does the Council of Economic Advisors.

As Richard Newell of Resources for the Future points out:

Practically speaking, the use of such a high discount rate means that the effects of our actions on future generations are largely unaccounted for in the new analysis.

In other words, the Administration’s estimates reveal just how little they value protecting American children and generations to come.

The social cost of carbon has profound influence on our policy process and embodies the very real costs of climate change that communities around the country are already feeling.

The Administration’s distortion of these values is illustrative of a frequent strategy of theirs – twisting the facts to validate their desired outcome, and in the process sowing doubt around the overwhelming scientific consensus on climate change.

Unfortunately, while the math the Administration is using is warped, the costs of climate change are still very real – and the American public is footing the bill.

Posted in Clean Power Plan, Economics, Social Cost of Carbon| Leave a comment

Dysfunctional gas market cost New England electric customers $3.6 billion

This blog post was co-authored with Levi Marks, Charles Mason and Matthew Zaragoza-Watkins

New England natural gas and electricity prices have undergone dramatic spikes in recent years, spurring talk about the need for a costly new pipeline to meet the region’s needs as demand for gas seemed ready to overtake suppliers’ available capacity to deliver it. For example, during the polar vortex of 2013-14, the gas price at New England’s main gas trading hub regularly exceeded $20/MMBtu (million British Thermal Units, the measure commonly used in the gas industry) and reached a record high of $78/MMBtu on January 22, 2014, compared to the annual average of $5.50/MMBtu.

In an efficient market, we would indeed expect prices to be high during events like the polar vortex. We would also expect pipelines delivering gas to regions like the Boston area – in this case the Algonquin Gas Transmission (AGT) pipeline – to be fully utilized. But this is not what we observed when we analyzed the scheduling patterns on the AGT pipeline from 2013 to 2016.

What 8 million data points told us about artificial shortages

Our research group spent 18 months looking at eight million data points covering the three-year period from mid-2013 to mid-2016. We discovered that during this period, a handful of New England gas utilities owned by two large energy companies routinely scheduled large deliveries, then cancelled orders at the last minute. These scheduling practices created an artificial shortage when in fact there was far more pipeline capacity on the system than it appeared.

As a result, we estimate that New England electricity customers paid $3.6 billion more over this period than they would have if the unused pipeline capacity had been available to deliver gas for electricity generation (for more information on how we calculated this number, visit our methodology page). As for the need for a new pipeline, our analysis shows that energy prices over this period were inflated, which means they should not be used to assess how much, if any, additional pipeline capacity is needed. Both conclusions illustrate why it’s so important (and how valuable it could be) to fix the interface between the gas and electric markets.

Why unused pipeline capacity impacts electricity prices

Although it was natural gas that was supposedly in short supply over this period, electricity prices also experienced large price spikes. That’s due to the way electricity prices are set, and the fact that much of the electricity in New England, as in much of the country, is increasingly generated using natural gas.

About half of the electricity traded in New England’s wholesale electricity market, ISO New England (ISO-NE), comes from gas-fired generators. For any given hour, the wholesale electricity price for all generators in this market is determined by the last (highest) bid needed to meet customer demand (or “clear the market”). This market clearing price is typically (75 percent of the time) set by a natural gas plant, which means their cost for gas and pipeline transportation tends to drive the price of electricity. That cost is largely determined by the spot price of natural gas at Algonquin Citygate, New England’s main gas trading hub, served by the Algonquin Pipeline.

Policy paper: Aligning natural gas and electricity markets »

The figure below shows a stylized generation supply curve for ISO-NE. The lower cost resources to the left (typically solar, wind and hydro) are generally used before the higher cost plants to the right (coal, gas, petroleum). The plants situated where demand meets the supply curve set the overall market price in any given hour (bids are submitted a day ahead of time in the day ahead market). This is typically one of the natural gas plants represented by the red dots on the middle part of the curve. A higher spot price for natural gas increases the marginal cost of gas-fired generators, shifting the generation supply curve up as seen in the second panel. This translates into a higher marginal cost of meeting a given level of electricity demand and thus a higher wholesale electricity price P*.

 

Stylized generation supply curve for ISO-NE.

What price do electric generators pay for gas? The secondary market for natural gas

In New England, as in many other markets, gas-fired electricity generators generally procure gas from a secondary market, where sellers are usually natural gas utilities that purchase long-term contracts at regulated prices directly from the pipeline company. The secondary market exists because these long-term contracts allow contract holders to sell any unused capacity at unregulated prices to gas-fired generators or others.

Generators buying in the secondary market for gas do so because they have decided it is more cost-effective to procure natural gas transportation that way than to grapple with rigid, long-term contracts for pipeline capacity that don’t fit their highly variable needs.

While the amount of pipeline capacity available to deliver natural gas to New England is fixed, demand for gas fluctuates significantly with external factors such as temperature, as seen by the price spikes experienced during the polar vortex

On days like these, holders of long-term contracts can pocket the difference between the price that buyers in the secondary market are willing to pay for gas deliveries, as indicated by the Algonquin Citygate spot price, and the regulated price they themselves pay the pipeline for that same capacity. In the case of utilities, revenues from such sales are typically to a large extent refunded back to the ratepayers that paid for those long-term contracts in the first place.

How could pipeline capacity go unused during the polar vortex?

We see four local gas utilities (two owned by Eversource, two by Avangrid) that scheduled far more pipeline capacity the day before gas delivery than they ended up using the next day. Repeatedly, these companies downscheduled their orders only at the end of the gas delivery day–too late for that unused capacity to be made available to the secondary market.

The threshold at which last-minute down-scheduling of gas orders impacts gas and electric prices varies depending on daily demand. As a proxy, we looked at how far the scheduling patterns at delivery “nodes” on the pipeline operated by Eversource and Avangrid-owned utilities deviated from the overall system average.

  • On 434 days during the study period, at least one Eversource node made downward scheduling changes more than two standard deviations larger than the average scheduling change made by all firms on the pipeline.
  • On 351 days, at least one Eversource location had a schedule change more than three standard deviations larger than the average.

The Eversource utilities primarily made large downscheduling changes on cold days, while Avangrid made large scheduling cuts far more often.

  • On 1043 days, at least one Avangrid location made downward scheduling change more than two standard deviations larger than the average.
  • On 1031 days, at least one Avangrid location made a downward change more than three standard deviations larger than the average.

Total unused capacity exceeded 100,000 MMBtu on 37 days in the three-year period we looked at, which is roughly 7% of the pipeline’s total daily capacity and 28% of the typical total daily supply to gas-fired generators. That these large amounts of downscheduled pipeline capacity were not made available to New England’s gas-fired generators raised both the gas price for generators as well as the price of electricity for New England’s electricity customers. We estimate that unused pipeline capacity increased average gas and electricity prices by 38% and 20%, respectively, over the three-year period we study.

While this behavior may have been within the companies’ contractual rights, the significant impacts in both the gas and electricity markets show the need to consider improvements to market design and regulation. The gas transportation market must become more transparent and flexible to better ensure that existing pipeline capacity is optimally utilized and that unbiased price signals in both the gas and electricity markets lead to cost-efficient investment in energy infrastructure.

 

Posted in Energy efficiency, Markets 101| Leave a comment

Why rolling back common-sense rules puts taxpayers on the hook for future disasters

This post was co-authored with Beia Spiller

Since 2000, major flood and hurricane disasters have cost the nation $499.5 billion – that’s more than double what floods cost us from 1980 to 1999 – and doesn’t even reflect damages from Hurricanes Harvey, Irma, or Maria. You’d think that at a time when our nation faces greater threats from extreme weather, reducing the economic and social costs of flood disasters would be a top priority.

Instead, President Trump rescinded a requirement that federal agencies take future flood risks into greater consideration for federal projects in or affecting floodplains, setting us up for future fiscal disaster. Given the number and size of this year’s hurricanes, and the devastation they have wrought to millions of Americans, it’s clear that we aren’t doing enough to reduce the costs of these disasters. Yet, President Trump’s action, if uncorrected, will increase the costs to our country. Instead of rolling back common-sense rules meant to protect taxpayers, Congress and the administration should be ensuring that our federal investments can better withstand the impacts of flooding.

Where and how we build helps us better cope with disasters and saves money

The two best ways to minimize flood damage losses are: building outside of floodplains and building structures capable of coping with flooding. Federal agencies should be held accountable for implementing these proven best practices.

According to the Department of Homeland Security (DHS), benefits of implementing stronger building codes for natural hazards include savings from lowered insurance rates, increased property values, and reduced losses during floods. When building codes offer enhanced protection against the threats of flood-related disasters, communities recover faster and reduce the fiscal pressure on governments responding to damages.

Furthermore, designing for resiliency can be cost-effective. According to one study evaluating the effectiveness of flood building codes, constructing new buildings to withstand floods by increasing their elevation usually costs less than 1% of the total building cost for each foot they are raised. And, given the risks of flooding over time, these investments were found to pay for themselves in as little as one or two years for those areas with the highest risk of flooding. It’s noteworthy that buildings constructed after Andrew, following the more rigorous codes, withstood Irma.

In light of this, it is ironic that the most hurricane-prone state in the country could retreat from its renowned building code system given that Florida Governor Rick Scott signed into law changes to state’s system that had been adopted after Hurricane Andrew. The changes include reducing inspections and the frequency of code updates, and allowing for fewer votes from the state’s Building Commission to make further code revisions. The latter is seen by many as an opportunity for the Commission, which is dominated by contractors and construction firms, to further weaken the codes that have been seen as some of the best in the country.

From 1978-2016, FEMA paid out more than $59 trillion (in 2016 dollars) for losses associated with significant floods, with 76% of those payments occurring after 2004. Importantly, the average paid loss increased by almost 2.5 times since 1978 (even after accounting for inflation). These moves toward lowered building codes and standards will only ensure more and more costly FEMA payouts, with taxpayers footing the bill. In the long run, these actions are ultimately at odds with administrations preaching fiscal conservatism.

Investing now to save in the future

Instead of taking such unnecessary risks, cities and states should adopt more stringent risk-informed building codes and zoning, so we can start building now for a more reliable, sustainable and resilient infrastructure. Similarly, the administration should enhance flood resilience standards for federal investments, including those made as part of disaster recovery, to reduce the costs of flooding today and in the future. Doing so will improve long-term protection of human health and welfare. If we build smarter now, communities, taxpayers and nature will reap rewards in the future.

Posted in Uncategorized| Leave a comment
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