Monday, May 9, 2016

Climate resilience isn't always fair

The New York Times had a great feature last week about climate refugees in coastal Louisiana, specifically a $48 million federal HUD grant to help resettle a community at risk from flooding:
The Isle de Jean Charles resettlement plan is one of the first programs of its kind in the world, a test of how to respond to climate change in the most dramatic circumstances without tearing communities apart. Under the terms of the federal grant, the island’s residents are to be resettled to drier land and a community that as of now does not exist. All funds have to be spent by 2022.
The clear takeaway is that climate change adaptation is incredibly expensive, and has terrible non-economic costs. The next insight to draw is that money sure helps with that. Being able to spend ~$800,000 per refugee is great privilege, although it should terrify future governments, taxpayers, insurers, and bondholders.

Whether a proactive resettlement program like this is fiscally and ethically sensible compared to future, more reactionary adaptations is unclear. Providing enough time for communities and public authorities to "get it right" seems wise. However, the moral hazard created by public adaptation programs may reduce the overall resilience of our economy to climate change shocks.

Similar to federal disaster assistance and insurance subsidies for natural events, proactive adaptation programs incentivize housing construction in risky locations, by having the government assume downside risk instead of individual landowners and insurers. Whatever you think about the federal government's ability to provide good adaptation assistance, it's clear that market prices will play a vastly larger role in coordinating migration behavior in reaction to climate change impacts. Striking a balance between helping people in need and maintaining a resilient system that leverages local knowledge and decisionmaking to reduce the costs of adaptation presents a new cleavage in politics, one likely to be especially racially-charged.

Up until now our democratic institutions have quietly made tradeoffs and implicitly accepted some degree of moral hazard in order to preserve community and historic value. As the real and expected costs of climate change grow in magnitude and salience, conflicts between winners and losers of various policy paths with erupt with greater frequency.

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