The Economics of Sea-Level Rise

December 20, 2018

 

INTERVIEW WITH RACHEL CLEETUS, LEAD ECONOMIST & POLICY DIRECTOR, CLIMATE AND ENERGY PROGRAM, UNION OF CONCERNED SCIENTISTS 

 

Q. Your report showed that as many as 311,000 homes in U.S. coastal areas worth $117.5 billion could be underwater within the next 30 years. You have also said that in contrast with previous housing market crashes, values of properties chronically inundated due to sea level rise are unlikely to recover and will only continue to go further underwater, literally and figuratively. 

 

Does this mean the coastal real estate market has reached its peak?

 

Unfortunately, with sea levels rising, in the coming decades many highly-exposed coastal real estate markets will likely experience gradual—and sometimes even abrupt—losses. The impacts of sea level rise and high-tide flooding will not be the same everywhere and our research shows that some places are more exposed to risk in the nearer term than others. Many low and middle-income homeowners could be especially hard hit unless we develop policies to help them. It is not just property but critical coastal infrastructure that is also at risk. Those realities will no doubt affect coastal real estate and indeed the coastal way of life itself.

 

That said, there are lots of reasons people value coastal property—amenities like proximity to economic or recreational opportunities, or cultural ties—so one can expect that some coastal real estate markets will continue to be attractive for a while, despite the growing risks and realities of flooding from sea level rise.

 

The failure of the market to accurately price the risk can also mask it for a while but that won’t be possible indefinitely. 

 

Q. According to a series of studies published days before the release of your report in the scientific journal Nature, the United States faces a $1 trillion price tag due to coastline damage from sea level rise. Do you agree with that projection?

 

There are many studies that broadly validate our findings. Most recently, the Fourth National Climate Assessment (NCA4) just released by the US government states that:

 

Flooding from rising sea levels and storms is likely to destroy, or make unsuitable for use, billions of dollars of property by the middle of this century, with the Atlantic and Gulf coasts facing greater-than-average risk compared to other regions of the country.

 

In addition to private property risks, coastal infrastructure, such as roads, bridges, tunnels, and pipelines, provide important lifelines between coastal and inland communities, meaning that damage to this infrastructure results in cascading costs and national impacts. (Excerpts from Chapter 8 of the NCA4)

 

The exact scale of the costs will depend on: how much sea levels rise, which in turn depends on our emissions choices and how ice sheets respond to rising temperatures; how much development continues to grow along our coastline putting more people and property in harm’s way; and how much we invest in adaptation and resilience.

 

The bottom line is that we have a lot of property and infrastructure at risk along our coastlines, bringing into sharp focus the staggering costs of climate change. 

 

Q. How can policy help? More specifically, how exactly do we re-orient policy and market incentives to better reflect the risks of sea level rise?

 

Identifying and reorienting current policies and market drivers of risky coastal development is a necessary and powerful way to move the nation toward greater resilience. In addition, we will need to invest in bold, transformative policies commensurate with the scale of the risks along our coasts.

 

For example, federal disaster aid, when not accompanied by explicit incentives to reduce residents’ and businesses’ exposure to risks, has led states and municipalities to rebuild in a business-as-usual way and underinvest in risk-reduction measures. Post-disaster investments should instead be made with a view to reducing future risks through a range of protective measures, including home buyouts and investments in flood-proofing measures as appropriate, and a requirement for adequate insurance coverage.

 

Ramping up investments in FEMA’s pre-disaster hazard mitigation grant and flood mitigation assistance programs, and HUD’s community development block grant program can help reduce risks ahead of disasters and ensure more resilient rebuilding in the wake of disasters. A recent analysis by the National Institute of Building Sciences of almost a quarter century’s worth of data found that for these types of flood risk mitigation programs, every $1 invested can save the nation $6 in future disaster costs. Increased funding for voluntary home buyout programs administered by FEMA and the HUD can also help homeowners move to safer locations.

 

The taxpayer-backed National Flood Insurance Program—while a vital program—has long been recognized as subsidizing some homeowners in flood-prone areas and inaccurately portraying flood risks because, in too many cases, insurance premiums and the flood risk maps that underlie them do not reflect true risks. Common sense reforms to the program can ensure that it more effectively communicates flood risks, protects communities, and promotes better floodplain management.

 

A robust federal flood risk management standard should be restored and mandate that all federal investments account for future flood risks to help protect vital federally funded infrastructure, ensure wise use of taxpayer dollars, and set a valuable guidepost for communities.

 

State and local building and zoning regulations should also reflect growing risks of sea level rise. Also important are coastal zone management regulations to help encourage flood resilience measures in floodplains, including the protection of wetlands and barrier islands and other natural flood-risk reduction methods.

 

Banks, insurers, real estate investors, developers, and other major financial actors in coastal areas should establish guidelines and standards to incorporate and disclose the risks of sea level rise, thus better serving the long-term economic interests of their clients.

 

Critically, the United States must also work with other nations to slow the pace and limit the magnitude of sea level rise through aggressive reductions in heat-trapping emissions, to allow as many communities and homes as possible—both at home and abroad—to avoid chronic inundation in the years ahead.

 

Q. Sea level rise scenarios are determined by our ability to meet the Paris Climate Change Goals. Can you talk us through the three sea level rise scenarios you used for analysis?

 

The future pace and magnitude of sea level rise depends on how much our emissions of heat-trapping gases rise and how much land-based ice loss there is. We used three scenarios developed for the 2014 National Climate Assessment and localized for this analysis using a US Army Corps of Engineers methodology. We refer to our projections as the high, intermediate, and low scenarios. The difference in impacts to real estate between high and low sea level rise scenarios is stark.

 

If the global community adheres to the primary goal of the Paris Agreement of capping warming below 2°C, and with limited loss of land-based ice, the United States could avoid losing residential properties that are currently valued at $780 billion, contribute $10 billion annually in property tax revenue, and house 4.1 million people.

 

The high scenario assumes rapid ice sheet loss and projects a global average sea level rise of 6.6 feet (2.0 m) above 1992 levels by the end of this century. The intermediate scenario assumes a moderate rate of ice sheet loss that increases over time for a rise of 4.0 feet (1.2 m) by the end of this century. The low scenario assumes curtailed warming and sea level rise that is driven primarily by ocean warming with very little contribution of ice loss, and projects a rise of 1.6 feet (0.5 m) by the end of this century. Because the total 21st-century warming in this scenario is in line with the Paris Agreement’s goal of holding warming to less than 3.6°F (2°C) above preindustrial temperature levels, we use this scenario as a proxy for sea level rise under the Paris Agreement.

 

We have made projections for at-risk properties under all three scenarios, but in this report, we lead with results of the high scenario. The high scenario is considered most applicable in situations with a low tolerance for risk. This makes it most suitable for estimating the scale of risk to residential properties, which typically represent a homeowner’s greatest single asset.

 

Q. If we manage to keep warming to 1.5’C, 85% of all affected residential properties could avoid chronic flooding this century. Is that right? Can we still meet the target? 

 

The reality is that currently we are falling far short of what we need to do to limit climate change in line with the goals of the Paris Agreement. The IPCC 1.5C report, the Fourth National Climate Assessment and the UNEP 2018 Emissions Gap Report all underscore that we are not on track—but critically they also underscore that we still have choices and we need to use the next decade or so to sharply reduce emissions and get us back on a trajectory that could limit some of the worst impacts.

 

Given what’s at stake in terms of grave risks to our economy and well-being—especially for future generations—we must do our utmost to meet these goals. The main impediment is political will. We have to put pressure on our policymakers to act in our best interests in light of the latest scientific information.  

 

 

 

 

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