Contingencies - November/December 2015

were asked to present ways to protect New York City from a Category 3 hurricane. Proposals included floodgates to be placed north of the Verrazano Narrows Bridge, a barrier on the East River, a storm surge barrier between Staten Island and New Jersey, and a causeway with a series of underwater gates between New Jersey and the Rockaways. Costs for these projects were in the billions of dollars. Other proposals include schemes to cover tunnels and waterproofing the city’s electrical system.

Despite the extreme devastation caused by Sandy, most of these proposals are still on the drawing board—mired in bureaucratic inertia, subject to environmental impact studies, and lacking sufficient funding. In the meantime, the combination of warmer sea surface temperatures and rising sea levels make events similar to Sandy more likely.

An area where experts have been sounding warning alarms but which has not (yet) experienced a catastrophic flooding event is south Florida. Here the problem is somewhat different than in New Orleans or New York. Where those cities are exposed to rapid catastrophic flooding due to their geography, south Florida’s porous limestone substructure allows water dumped on the area by hurricanes to drain relatively quickly. Unfortunately, that same limestone allows subsurface water to flow into basements and street drains, which is beginning to happen regularly in places like Miami Beach during astronomical high tides. Already parts of Miami are experiencing small-scale street flooding several times a year, a problem that will gradually worsen in coming decades.

According to a report titled “Analysis of the Vulnerability of Southeast Florida to Sea Level Rise,” in Monroe County (home to the Florida Keys) three of four hospitals, 65 percent of schools, and 71 percent of emergency shelters will be below mean sea level with just a one-foot rise. South Florida is particularly vulnerable to rising sea levels and will begin to experience significant, albeit gradual, difficulties in coming decades. Even NASA is concerned that its launch facilities in Florida are vulnerable.

These examples involve only three locations among many along the coast of the United States, where trillions of dollars of property are exposed. Large expenditures will be required in the future to protect these areas.

The Federal Budget

The NFIP and Corps examples following Katrina and Sandy above should serve as a warning about the potential liabilities that may arise for the federal government along the nation’s coasts as sea levels rise. Government agencies are taking note, but to date there has not been an explicit provision made in long-term budget analyses.

The 2015 Long Term Budget Outlook prepared by the Con-
gressional Budget Office providing projections through 2040
includes these statements:
CBO’s extended baseline does not explicitly incorporate
the effects of climate change. It implicitly includes some
small effects by reflecting historical spending on such pro-
grams as federal crop insurance, federal flood insurance,
and the Federal Emergency Management Agency’s disaster
relief program. …
CBO has not undertaken a full analysis of the budget-
ary costs stemming from climate change, but it is currently
analyzing the potential costs of future hurricanes. That
analysis suggests that the costs of future hurricane damage
will rise at a faster rate than GDP; however, the amount
of additional hurricane damage is likely to remain small
enough, on average, that the resulting federal expenditures
would not significantly affect the general budget categories
in which hurricane-related spending falls. …
In addition to uncertainty about the magnitude of disas-
ters caused by climate change, there is uncertainty about
how lawmakers would respond to them. In the future, law-
makers could increase funding above the amounts in CBO’s
projections if the effect of climate change on the frequency
and magnitude of weather-related disasters became signifi-
cantly larger. … Or lawmakers could amend existing laws
to reduce federal spending on weather-related disasters. …
But CBO’s baseline projections, which are built on current
law, cannot capture such possible changes.

The points to note here are that government budget projections do not include a significant provision for potential costs of rising sea levels, and to the extent they do, the focus is on the damage that weather events may cause, not the investment that might be required to erect defenses. Given looming issues with social programs and limited scope to raise revenue to fund adaptation projects, efforts to prepare for rising sea levels may need to focus on building codes and land use to limit the exposure in harm’s way.

Insurance Industry Exposure

Notably absent from this discussion is the exposure of the insurance industry to this problem. Globally, the insurance industry has experienced huge losses from flooding, as was seen in Thailand in 2011. Despite this trend, it is unlikely that the insurance industry, particularly in the United States, will be on the front lines of this battle.