Market Forces

Fueling Research, Advocacy, and Community: Economic Internships at the Environmental Defense Fund

The climate crisis requires not only urgent action, underpinned by a robust framework of proven economic-driven solutions to effectively address its multifaceted challenges. Given the increasing urgency, we need economists at the forefront, conducting rigorous research and informing policy decisions. Recognizing this critical need, the Economics team at EDF is dedicated to nurturing economists who are eager to contribute to the climate fight. 

The Economics team at EDF hosts exceptional interns who make significant contributions to our work. Through internships, we aim to create lasting partnerships with talented individuals who will continue to make a positive impact in the field of economics.  

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Addressing Gaps in Disaster Recovery for South Carolina Households through Inclusive Insurance Models

This blog was authored by Environmental Defense Fund economists, Karina French and Carolyn Kousky. See their report here. 

South Carolina is no stranger to the devastating effects of extreme flooding, with hurricanes like Matthew and Florence leaving a trail of destruction in their wake. As the state faces escalating flood risk due to climate changes and continued building in vulnerable areas, it is crucial to address existing gaps and inequities in disaster recovery. In a new report, we provide a comprehensive review of the current resources available to households for post-disaster economic recovery in South Carolina and explore the extent to which innovative disaster insurance policy designs can fill these gaps and improve equity in recovery.  Read More »

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Understanding how communities are vulnerable to climate change is key to improving equity and justice

Hurricane Harvey dropped more than 60 inches of rain on the greater Houston region in 2017.

This blog was co-authored by Dr. Grace Tee Lewis, Senior Health Scientist, Climate and Health

Last month, Environmental Defense Fund and Texas A&M University published a new study that found all states in the U.S. are at risk from the effects of climate change, particularly neighborhoods experiencing disproportionate environmental harms and risks, health disparities and infrastructure problems. We published our research paper, Characterizing vulnerabilities to climate change across the United States, in response to a growing push to identify and address these climate injustices and inequities. This movement is exemplified by the Biden Administration’s executive order to ensure environmental and economic justice are key considerations in how the administration governs on the issue of climate change.  

With the Biden Administration’s recent legislation – including the Inflation Reduction Act, Bipartisan Infrastructure Bill and Creating Helpful Incentives to Produce Semiconductors and Science Act (IRA, BIF and CHIPS) – we have a historic opportunity to tackle decades of systemic neglect in low-income neighborhoods and communities of color. We can help level the playing field by directing resources to build resilience and adaptability in the right places across our country.

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“Nothing about us without us: The case of JREDD+ in Colombia.” The importance of including all stakeholders, especially affected communities, at the decision-making table.

This blog was authored by Environmental Defense Fund economist Luis Fernández Intriago and Universidad de Los Andes professors Jorge García López and Julián Gómez Gil.

The saying “Nothing about us without us” is widely used among Indigenous Peoples and Local Communities to emphasize the importance of involving them in policies that govern their territories and communities. The expression serves as a call to action, highlighting that those affected by specific issues should be included in making policy decisions around them.

However, policymakers and researchers consistently decide on policy design and construct models without consulting and considering the opinion of the affected communities and key stakeholders. Efforts to stop deforestation are a clear example of this: new policies go into place without any input from communities that rely on forests for their livelihoods, cultures, or basic survival. These local and Indigenous communities are an untapped source of wisdom, leadership, and capacity to support efforts to conserve rainforests.

To remediate this, Environmental Defense Fund, Universidad de Los Andes, and the Centro de Estudios Manuel Ramírez, right since the beginning of the project, started an engagement process in Colombia to demonstrate how engaging key local and Indigenous stakeholders could lead to better policy design to protect forests in the country.

Why Colombia?

Colombia faces enormous challenges with deforestation: 184,000 hectares per year of natural forests were destroyed between 2017 and 2021. Deforestation accounts for 33% of the country’s total climate-warming greenhouse gas emissions. Thus, halting deforestation is critical for achieving the country’s Paris Agreement commitments (called “Nationally Determined Contribution” or NDC).

As in many other countries, the AFOLU (Agriculture, Forestry, and Other Land-use) sector is not subject to regulations in Colombia. However, this presents an excellent opportunity for the Colombian government to leverage private finance from national sources—such as through the upcoming Colombian Emissions Trading System[1] , which must be implemented by 2030—and international sources —such as the LEAF Coalition— using jurisdictional REDD+ (JREDD+) crediting. JREDD+ programs extend the REDD+ framework for sustainable forest management and conservation by addressing deforestation at the regional or ‘jurisdictional’ level—protecting forests across wide regions instead of plot-by-plot and even resources.

Climate mitigation is now a top priority for many individuals, governments, and corporations, creating strong demand for ways to stop deforestation in tropical forest countries in high-integrity ways rapidly. Our research finds that government funding required to reduce deforestation levels consistent with Colombia’s NDC could drop from $900 to $75 million when national and international private finance is harnessed.

The Study

Our study aimed to identify inclusive, equitable ways to include JREDD+ in Colombia’s climate mitigation policies. We established three parallel and interconnected pillars: first, we focused on engagement with primary stakeholders. Second, we constructed a model to illustrate how JREDD+ may help Colombia meet its NDC target cost-effectively while benefiting local communities. Third, we prepared a policy design that government can use as a guideline to integrate these approaches.


At the beginning of the project, we knew we had to start by engaging with stakeholders to explain JREDD+. Our ultimate goal was to include the feedback and reflect relevant stakeholders’ needs—including the national government and public institutions, Indigenous groups, smallholder’s associations, NGOs, and educational institutions—in our results. We knew that communication between our research group and people who could be interested or potentially affected by the research project was crucial if we were to produce and share credible and legitimate knowledge. The knowledge acquired through these interactions can set the stage for an effective and equitable JREDD+ program in Colombia.

Source: Photos by Julián Gómez Gil.

In 2022, we hosted four engagement sessions in Tena (April 23 & 24, Cundinamarca), Florencia (May 5 & 6, Caquetá), Bogotá (October 14), and Mocoa (October 26 & 27, Putumayo). These sessions focused on the participation of representatives of the Amazon Indigenous peoples (OPIAC, OZIP, ACILAPP, etc.[2]),  other local communities and land users (farmers, cattle ranchers, and smallholders associations), NGOs (Amazon Conservation Team, WWF, Natura Foundation, Fondo Patrimonio Natural, etc.), private organizations (Emergent, Amazon Global, Permin Global, ALLCOT, Asocarbono, etc.) and national and subnational government institutions (Ministry of Environment and Sustainable Development, Sinchi Institute, Corpoamazonía, etc.). During these community meetings, we worked hard to improve participation but also set realistic expectations, and engaged in open-ended discussions where training was provided to the attendees regarding the formulation of projects of conservation, carbon markets, REDD+ projects, JREDD+ programs, guidelines of the ART-TREES standard and the operation of the LEAF call for proposals, through technical presentations and educational activities, and promoting the constant participation of the actors to create scenarios for debate and resolution of doubts.

In the same way, these spaces were used to formulate questions to the different actors, which were resolved both through open debate dynamics and through collaborative work activities, taking advantage of a closer and more direct dialogue with each one of them and a greater availability of time to delve into topics of interest. This form of participation was very well received by the Indigenous Peoples, who invited the work team to implement similar activities more frequently and in the most remote territories so that capacity building can be held and the local context is better perceived.

Given the scale of a JREDD+ program, the interaction and negotiation between local actors, institutions, intermediaries, and current individual REDD+ projects are essential. According to the discussion with stakeholders, a common problem associated with the participation of key actors and interested parties in individual REDD+ projects is that these actors tend to be treated as beneficiaries rather than partners. As a result, local communities and interested parties perceive that the design of incentives, local capacity, delivery mechanisms, transparency provisions, and distribution are only partially fair. This led us to consider fairness, representation, and transparency as critical components of policy design.


We modeled a mechanism to integrate the potential funds generated with a JREDD+ and a national emissions trading system (ETS) to accelerate the reduction of emissions from deforestation. Mainly, we considered a scenario under which Colombia applies the LEAF coalition model on a national scale of a JREDD+ at the national level. At the same time, to ensure representativeness, bargaining power, effective resource administration, and a fair distribution of benefits, we proposed an internal administrative division of Colombia into five jurisdictions: 1. Caribbean region; 2. Andean region; 3. Pacific region; 4, Orinoquía region; and 5. Amazon region.

Our modeling revealed that integrating a JREDD+ program with a National ETS could be a cost-efficient mechanism to reduce the externality costs and disincentivize the overall GHG emissions of Colombia following the country’s regulatory framework, the emissions trajectory, and the mitigation objectives. These mechanisms could be used to generate and allocate economic resources to ensure efficient emissions mitigation, the incorporation of safeguards (such as environmental education), and the minimization and/or compensation of adverse socio-environmental interventions. In addition, the modeling results imply the generation of co-benefits (economic, social, and environmental) that contribute to the development of ethnic communities, local communities, and other private land users.

Policy Design (Results)

After receiving input from stakeholders and results from our model, we prepared a policy design that the government can use as a guideline to integrate JREDD+ inclusively and equitably. Here are our results:

  • Inclusive negotiating for benefits-sharing: To build a JREDD+ in Colombia, stakeholders demand a significant role in negotiating the benefit-sharing system. In this regard, national and subnational agreements should be established to achieve at least the following three main objectives: 1) provide effective monetary and non-monetary incentives; 2) contribute towards building legitimacy through a fair and equitable distribution of resources, responsibilities, and bargaining power; 3) include local actors in the decision-making process and recognize them as partners rather than beneficiaries.
  • Use vertical and horizontal benefit-sharing to equitably distribute benefits and negotiating power: A vertical benefit-sharing approach uses national voluntary and regulated market funds (ETS) to distribute benefits among national and subnational governments, non-governmental actors, intermediaries, NGOs, and facilitators. These transactions are carried out to ensure the operability of the program. On the other hand, horizontal benefit-sharing seeks to distribute the remaining benefits as incentive payments among and within communities, households, and local stakeholders. A fair design of benefit sharing must be vertical and horizontal to guarantee the bargaining power of the actors involved in deforestation and conservation activities.
  • Centralize decision-making, but include regional representation: Our main policy proposal is to centralize the decision-making with a single National Board of Directors. This board would be responsible for making central decisions and directly managing the resource flow. On the other hand, a Jurisdictional Board of Directors composed of representatives from each of the six jurisdictions must be created to guarantee the representativity and bargaining power of the different actors. This board will function as a participatory body overseeing operational decisions that a respective Jurisdictional Operating Unit should execute. With this management structure, it is possible to use the three sources of funding (JREDD+ results-based payments, the ETS, and the carbon tax) and to effectively distribute the benefits among implementing partners (NGOs, private sector, etc.) and land users (Indigenous Peoples, local communities, farmers & ranchers, etc.)
  • Leverage allowances from emissions trading system to support efforts to conserve forests: In our study, we assumed that much-needed finance for forest protection may come from two different sources: a nationally managed fund constructed using resources from the international voluntary market and from a locally regulated market (a national ETS), where regional and local public and private institutions intermediate implementation with local communities; and a project-based fund where national or international funding goes directly to projects, with resources from both the national general budget and payment by results or other international cooperation (JREDD+). To integrate both mechanisms and be consistent with Colombia’s climate law, we propose that 20% of the cap established by the ETS can be offset with forestry emissions reductions using a jurisdictional approach. In that way, the allowances allocated by the ETS to the forestry sector will generate an additional source of income to reduce deforestation.

You can read more about our study and policy design here. In general, our recommendations in this project were derived and enriched from the participatory processes we carried out. The participants’ comments helped us to refine, redefine, and validate these recommendations.

As Colombia works toward implementing its Emissions Trading System by 2030, we encourage them to consider these recommendations to inclusively and equitably incorporate JREDD+. We encourage them to consult with stakeholders such as Indigenous and locally affected communities to develop climate policy.


[1] The Colombian Emissions Trading System is scheduled to be implemented by 2030 according to the Law 1931 of 2018 and Law 2126 of 2021.

[2] OPIAC- National Organization of the Indigenous People of the Colombian Amazon, OZIP- Organization of Indigenous People of Putumayo Department, ACILAPP- Association of Traditional Authorities of the Indigenous Peoples of Leguizamo Municipality and Upper Predio Putumayo Territories




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A New Pilot Launches to Support Equitable Flood Recovery in NYC

This blog was authored by Environmental Defense Fund economist, Carolyn Kousky.

Facing $150 billion annually in direct costs from climate-related disasters, the current system of disaster recovery in the U.S. is failing many families and communities.

Most households struggle with timely access to sufficient financial support for the wide-ranging expenses disasters impose. And without adequate financial resources for recovery, natural disasters can become tipping points that set back hard-earned financial gains — especially for low-income households.

A new pilot program that just launched in New York City could help address gaps in assistance and increase equity in recovery. Supported by a National Science Foundation Civic Innovation Challenge award, the effort focuses on the delays low- and moderate-income households can face in accessing funds for immediate post-disaster needs, which can range from buying a generator to mold remediation to temporary housing.

The small pilot aims to get funds to people very quickly after a flood.

One in six adults in the U.S. in 2021 experienced financial hardship from a natural disaster and people with low incomes and people of color are disproportionally harmed by these events. Many households do not have enough savings to repair, rebuild, and recover, and low- and moderate-income households are often denied post-disaster loans. Federal disaster assistance is insufficient, can miss those who need it the most, and can be slow to disburse. Disaster insurance can provide funds for property repairs and reconstruction, but can be too expensive or unavailable, or may not meet the needs of certain populations.

A team that crosses sectors and expertise— including Environmental Defense Fund, the Center for NYC Neighborhoods, the New York City Mayor’s Office of Climate & Environmental Justice, SBP, Guy Carpenter, Swiss Re, and ICEYE — has been reimagining how to help low-income households with the growing risk of flooding from extreme rainfall. As heavy precipitation events increase, it imposes serious costs on households that are often unaware of the risk and lack needed financial resources.

Fast and flexible support after a disaster

Not receiving needed funding for weeks or months — as is the case with other sources of assistance — can be problematic for households without financial buffers or safety nets. To cover emergency expenses, for example, they may be forced to reduce spending on important things, such as medical care, or may fall behind on bills.

To increase the speed of assistance, the Center for NYC Neighborhoods, a nonprofit that promotes and protects affordable home ownership, is piloting a program that would make small emergency grants available immediately after a flood hits. This requires disaster financing that isn’t slow, cumbersome, or restricted. We turned to a special insurance-like tool to meet this need: parametric risk transfer.

Parametric risk transfer is an innovation that can provide fast and flexible dollars after a disaster. With a parametric product, a measurable event, such as wind speed at a certain location, automatically triggers a payout. This means funds become available incredibly quickly.

Our team worked to develop a parametric product that will pay the Center for NYC Neighborhoods when certain pilot neighborhoods flood following extreme rainfall. Rainfall flooding was fairly new to parametric markets, so we had to work with partners to determine the specific measurement that would trigger a payment. In the end, we settled on measurement of the footprint of the flood, determined by combining information from on-the-ground flood sensors, satellite data, and social media pictures and videos taken during the flood.

Here’s how the program will work: Once a severe flood happens in a pilot neighborhood, payment will quickly be sent to the Center for NYC Neighborhoods from a reinsurance company (for this pilot, Swiss Re). The center will use those funds to activate an assistance program of emergency cash grants to cover immediate post-flood needs while households wait for other forms of assistance that take longer.

An urgent need for new models of disaster recovery

Going forward, maintaining such a program will require a fundamental shift in disaster financing.

Many institutions, for example, are happy to donate relief funds following a disaster. If some donors would instead donate smaller amounts before a disaster to cover the costs of the premium on the risk transfer product, this could generate much greater payouts when a disaster occurs and reduce the amount of time it takes for nonprofits working on disaster recovery to receive funds.

We are testing one small pilot, but there are other innovative models that could also improve climate resilience and equity in recovery: microinsurance policies for households; coupling insurance to loans made by Community Development Financial Institutions; community-based models of disaster insurance; forecast-based financing; and others.

Now is the time to test these models, in partnership with researchers, in order to evaluate their effectiveness, and then refine their design to optimize their ability to meet social goals.

These new models are urgently needed. In our pilot, we have learned that designing a new approach takes committed partnerships, conversation, and dialogue. It takes collaboration between nonprofits, community groups, insurers and brokers, local governments, researchers, and data providers. It takes an ability to listen, a willingness to try something new, and a commitment to learn by doing.

The most important thing we’ve learned? We achieve more when we work together.

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Economic Resilience to Climate Impacts Requires Making Disaster Insurance More Inclusive in the US 

This blog was authored by Environmental Defense Fund economists Karina French and Carolyn Kousky. See their report: Inclusive Insurance for Climate-Related Disasters: A U.S. Roadmap.  

Over the past year, the U.S. has seen yet again how climate-driven disasters threaten lives and livelihoods, from the devastating hurricanes, Ian and Fiona, in Florida and Puerto Rico to catastrophic rainfall flooding in California. These types of severe climate shocks cause disproportionate harm to people with low income and people of color, driven by inequitable housing and planning policies, underinvestment in resilient infrastructure and buildings, and barriers to accessing disaster recovery dollars. 

Insurance is one key tool for financial protection from the economic shocks resulting from disasters. However, despite a relatively robust insurance market in the US, many of the people most in need of financial resources to recover face a disaster insurance system that is inaccessible, unaffordable, and/or not designed for their needs.  

In a new report published this week in partnership with Ceres, we offer a roadmap for how local, state, and federal policymakers can improve the disaster insurance system to make it more inclusive.  

The Economic Burden of Climate-Driven Disasters 

Natural disasters create unexpected and widespread economic costs for households. In the short term, people face the immediate costs of evacuation, temporary housing, generators and fuel to deal with power outages, and direct damage to homes, personal items, and vehicles. In the long term, disasters can have a significant effect on economic well being, causing a loss of income or loss of a job when industry is disrupted, persistent increases in housing costs as housing stock suddenly declines, and permanent displacement and relocation. Without financial safety nets, the financial shocks of disasters can be tipping points into poverty and cause an increase in wealth inequality within a community.  

Millions of Americans face these costs each year. The Federal Reserve estimates that in 2021, one in six adults were directly affected by a natural disaster, and this will only increase as climate change makes extreme rainfall, wildfire, and hurricanes more frequent and severe. Studies consistently find that more than one in four American households could not pay for an unexpected expense of $2,000; this economic precarity is even more acute for Black and Hispanic households, where 35 – 40% of households report facing difficulties paying bills if faced with a small emergency expense.  

Households generally have four main sources of financial resources for disaster recovery: savings, loans, federal aid, and insurance. While the U.S. has more wealth to help in recovery compared to other countries, low-income households and people of color still face barriers to accessing all of these. On average, low-income, Black, and Hispanic households have lower cash savings and liquid assets to rely on for emergency expenses. Some households can make use of debt to finance recovery, such as federal Small Business Administration disaster loans, but research has shown that lower-income households face higher loan denials due to credit and debt-to-income requirements. Federal disaster aid, distributed through The Federal Emergency Management Agency (FEMA)’s Individual Assistance program, is not guaranteed, slow to distribute, and limited in quantity: from 2010 to 2022, FEMA provided grants to households in only 43% of major disaster declarations, and the average payment to impacted households was just $2,860 (Inclusive Insurance for Climate-Related Disasters: A U.S. Roadmap).  

Insurance can be a financial resilience tool that fills some of these gaps. Insurance payment distribution is faster, as it does not rely on lengthy bureaucratic processes. Research shows that households with insurance recover better and faster after a disaster. But disaster insurance remains unaffordable and inaccessible to many low-income households.  

The Challenge of the Disaster Insurance for Low-income Households 

Why are so many households locked out of the disaster insurance market? Our research identified three main drivers of exclusion: unaffordability, direct and indirect discrimination, and lack of coverage for unprofitable market segments.  

Natural disasters are inherently more challenging and expensive to insure. When a major storm or wildfire strikes, the losses across a community and group of policyholders are correlated, making it difficult for insurers to pool risk and cover costs over time. To do so, insurers must tap into large resources of capital (reinsurance, reserves, etc.), which makes disaster insurance expensive and less readily available. Advocates for frontline communities emphasize how low-income households simply cannot afford to purchase disaster insurance over other immediate costs, such as housing or auto payments.   

Some households face systematically higher insurance costs or lower payouts. Insurers base underwriting and pricing decisions on how likely it is they will need to make payments back to policyholders; while insurers are banned from using factors like race and income to set rates in most states, there are many aspects of the insurance contract that can indirectly lead to differential impact along race, class, and gender lines, such as the use of proxy variables and procedural barriers to negotiating claims. A handful of qualitative and quantitative studies have shown discriminatory outcomes in insurance prices, payment times, and payment amounts. 

On the supply side, it can be difficult for insurers to profitably offer products that are more widely affordable or that meet the needs of smaller market segments. There are also limited insurance products that address the many non-property losses that households incur. Insurers cite low profit margins and challenging regulatory environments for the lack of innovative or appropriate products that might address some of the needs low-income households and renters face. Because of this, there may be gaps in insurance that the private market cannot fill; providing affordable insurance to some households may require philanthropic support or public-private partnerships. 


Policies for Regulatory Reform and Market Innovation 

Given the increasing economic burden of climate-related disasters, systemic change is needed to ensure vulnerable households have tools for financial resilience. In our Inclusive Insurance report, we outline a suite of actions across sectors and scales that can be taken to create a disaster insurance system that is more affordable, accessible, transparent, people-centered, and just.  

With legislation and new programs, federal and state policymakers can take action to:  

  • Target financial resilience funding to households and communities who need it the most by subsidizing disaster insurance for low-income households to provide lower-cost coverage, or mandating that insurers provide fair underwriting and insurance offerings to disinvested communities through a Community Reinvestment Act for the insurance sector. Policymakers could also provide funding to communities in the form of community grants for insurance innovation, enabling them to design and test their own programs.   
  • Increase transparency and monitor the market by mandating data disclosures from insurers about the demographics they serve, such as in the Home Mortgage Disclosure Act (HMDA). This would enable researchers to better assess any disproportionate impacts in disaster insurance markets. 

Through regulatory reform, state insurance regulators can: 

  • Enable innovation in the insurance sector to meet the needs of underserved populations, by preemptively establishing regulatory frameworks for new insurance products like parametric or community insurance, or creating new regulatory sandboxes to enable insurers and regulators to test new products before scaling up.  
  • Provide more consumer protections and transparency to prevent differential treatment by reforming the claims contestation procedure to be more equitable and accessible and establishing complexity limits and coverage standards that give consumers the tools to better understand and compare insurance products. Regulators can also support research on the extent of direct and indirect discrimination in insurance markets, and the effectiveness of policies meant to address it.   

Through innovative programs, local government leaders can: 

  • Provide community-scale insurance support tailored to each context, such as insurance consultations for households to help individuals navigate the procedural barriers and find cost savings, and community-based insurance models where the local government serves as the aggregator for insurance purchase and distribution.  

Insurers and private sector leaders can:   

  • Expand product offerings to include innovative insurance products, such as parametric and microinsurance, that can be more affordable and serve households previously left out of the insurance market.  
  • Provide households tools for cost savings by increasing the transparency around the pricing of risk factors and offering opportunities for cost saving through risk mitigation that households can take advantage of, such as fortified roofs.  

Promising First Steps 

Already, local and federal leaders are taking action to better understand and fill the disaster insurance gap.  

Learn more about what state and local leaders can do to create a more inclusive insurance system in our report, Inclusive Insurance for Climate-Related Disasters: A U.S. Roadmap.  

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