Managing Municipal Risk In The Face Of Climate Change

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The 2014 NLC Congress of Cities in Austin, TX was a fantastic opportunity to learn and share information related to sustainability, but not all NLC members and partners were able to attend. Through the end of the year, the Sustainable Cities Institute will highlight the tools and resources that were presented at some of the key sessions related to sustainability and resilience. More information is available through the SCI Website.

PowerPlantFlorida-EPAThe National League of Cities recognizes that local governments are on the front line in efforts to mitigate  and adapt to climate change. Nearly all available science indicates that the urgency to take action is greater than ever, and earlier this year the National Climate Assessment summarized its findings by stating that “climate change, once considered an issue for a distant future, has moved firmly into the present.”

As climate change progresses, it will alter likelihood of various extreme weather events and change the risk profiles for many local governments and their citizens. At the Congress of Cities, attendees explored the potential implications in a session on Climate Change & the Future of Municipal Risk Management (slides available here). The session was designed to explore the perspectives of private insurers and ratings agencies who are taking a long-range view of the issue.

The key takeaway from all speakers was that data and projections relating to climate impacts have become remarkably localized. We know more than ever about the climate challenges that are already facing cities and this information can be used to guide decisions on issues ranging from land use, to infrastructure development, to the kinds of insurance policies a city might carry.

The session opened with Alex Kaplan from SwissRE, who began by noting that global losses to natural catastrophes has been increasing, but the proportion of losses that are uninsured are rising more quickly than losses that are insured, creating a widening protection gap. The key finding from recent work was that climate change, if unmitigated, could result in losses totaling 20% of global GDP by the end of the century.

SwissRE Climate Losses Chart

The research conducted by SwissRE is also regional in nature. By analyzing 77 counties on the Gulf Coast, they were able to create a current risk profile for over $2.2 trillion in regional assets and project how growth and development would affect the profile moving forward. For instance, even without changes to climate, a storm of Hurricane Katrina’s strength occurring in 2030 would result in estimated damages near $200 billion as a result of greater economic development alone. Factoring in climate change, such a storm would be 2.5x more likely.

The projection sounds dire, but the same report estimates 33% of this loss can be averted through cost-effective measures. Levees around critical infrastructure such as refineries or petrochemical plants, increased roof and wall standards for new construction, or regional beach nourishment all would be expected to result in net savings over time. This type of cost-benefit analysis can greatly help local officials as they evaluate long term development proposals or updates to building or energy codes.

Sascha Peterson, affiliated with both the Institute for Sustainable Communities as well as the American Society of Adaptation Professionals, reinforced this point by noting that some communities are creating climate thresholds for less dramatic impacts. Austin, TX for example, recognizes that heat above 105 is a tipping point that can strain the electric grid and cause rolling blackouts, reduce water availability, and increase incidents of heat stroke. In other areas the specific thresholds for heat, cold, or precipitation would be different, but by understanding their thresholds and projecting number of days per year that are likely to exceed them, the community can accurately design infrastructure or budget for emergency service delivery.

Geoffrey Buswick from Standard & Poor’s added to the broader picture, explaining that climate change was one of two key macro-trends, along with global aging, that ratings agencies believe will shape access to credit throughout the economy. Although their research publications presently indicate that it is extremely unlikely that a rating would be altered in anticipation of climate impacts, he recognized that capacity to respond and recover from climate event events has already affected ratings, and that these events themselves were more likely to occur.

Following Hurricane Sandy, for instance, Long Island Power Authority was unable to serve millions of customers for days or weeks, which limited its liquidity. The downtime, coupled with the agency’s financial and political response to the storm, ultimately caused the credit outlook to be changed to negative. Conversely, the Metropolitan Transit Agency, which was completely flooded in many neighborhoods, was only down for a handful of days before a majority of service was back on line. Instead of simply restoring service, in many instances the system was upgraded to be more robust and redundant to prevent future damage, and capital controls were put in place. The agency’s successful response actually had the effect of reassuring long-term investors and will keep future borrowing costs down.

The panel concluded with an emphasis on positive trends in local adaptation as Sascha Peterson presented two trends that are enabling local governments to take action and better prepare for climate change: the understanding of extreme weather thresholds, covered above, and greater regional collaboration.

Initiatives such as the Western Adaptation Alliance or the Southeast Florida Climate Compact are enabling local government to tackle similar climate challenges. In the case of the Southeast Florida Climate Compact, 4 counties and 109 municipalities joined together to create a regional action plan with over 100 activities that have been jointly vetted and approved. Peterson noted that the collective planning and action has enabled these communities to avoid redundant engagement processes and pool resources to pursue the action items at greater scale. The climate challenges themselves tend to be regional, and it is encouraging to see governments willing to meet them with regional solutions.

Overall, the speakers summarized a broad array of the information, data, and tools that are now available to local governments, as well we innovative ways to integrate these tools into officials’ decision making process.

Headshot1-CMartinAbout the Author: Cooper Martin is the Program Director for the Sustainable Cities Institute at the NLC. Follow the program on twitter @sustcitiesinst.