What’s This Costing Us ($)?

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Martin Wahl

Well, Earth, we did it! Scientists have determined that 2024 likely exceeded the 1.5-degree Celsius (2.7 degree Fahrenheit) limit set for global warming above the average temperature between 1880 and 1900 at the 2015 Paris Agreement. While this breach is a landmark, it doesn’t technically violate the agreement which specifies that “average” global temperature over time must not exceed the 1.5 degree mark, although the trend is not encouraging.

After 150 years of relentlessly increasing the addition of greenhouse gases, primarily carbon dioxide from fossil fuel sources, to our atmosphere, “normal” variations in global temperatures have been turbocharged to new levels. This is undoing millions of years of carbon sequestration provided by plants since their appearance on earth 500 million years ago. Their process, photosynthesis, also releases oxygen into the air we breathe. Thank you to our green friends!

Very interesting. What does the data say?

The data have been saying since 1886 that increases in CO2 levels in the atmosphere lead to global warming, and that increases since 1900 are due overwhelmingly to human’s use of fossil fuels. Among others, Chevron was predicting this in 1954 and the American Petroleum Institute said the same in the 1960’s. Exxon’s senior scientist James Black reported to senior management in 1977 that fossil fuel combustion was causing global warming; nevertheless, in 1989 the company adopted a strategy of climate change denial, helping to prevent, among other things, the ratification of the Kyoto Protocol in 1997.

Recently, analysis of the atomic structure of the CO2 that has been added since the beginning of the industrial age confirms that, given its mix of carbon isotopes, most of it was generated by carbon from fossil sources and not from the oft-mentioned fossil fuel-deniers’ whipping boys: volcanoes and the ocean.

By extracting the carbon in the form of coal, methane (aka “natural” gas) and oil from underground and burning it with atmospheric oxygen as fast as we can, we have been driving concentration in the atmosphere from 280 parts per million (ppm) at the start of the industrial era to more than 420 ppm today, the highest in the last 800,000 years.

Today the analysis techniques are getting faster and more targeted – known as attribution science – that aim to more sharply focus on causes for specific events, most obviously, heat waves. The goal is to provide attribution investigation results about climate events within a short time frame (e.g., two weeks) to be in synch with news cycles. The analyses include assessments of the effects of phenomena other than climate warming that contribute to these weather events, and they are getting better at it.

What are the costs?

According to the International Chamber of Commerce’s November 11, 2024 report prepared by Oxera Consulting, the 83% increase of extreme weather events worldwide from 1980–1999 to 2000–2019 is largely due to climate change. The cost to the world of the 4,000 events that occurred between 2014 and 2023 is pegged at $2 trillion, in 2023 dollars. The study concerned acute, short-term event risks, and does not include chronic, longer-term risks such as sea level rise.

Climate-change-caused events are estimated to cost the U.S. economy $150B per year, or $453 per person. Determining the impact on specific states is complicated: some states get hit harder than others, and population density varies dramatically. Additionally, FEMA as a federal, taxpayer-funded emergency response resource spreads the costs around to everyone.

Because things get murky in a hurry when trying to analyze costs at a county or even state level, it makes sense to look at climate risks geographically. Figure 1 is FEMA’s National Risk Index map showing risk at the country level. The coasts are the most vulnerable, shown in shades of red and yellow. Coastal climate change deniers are in for a drubbing!

A close look at the Green Energy Times readership area shows we are relatively lucky ;even the coastal areas get away with a “Relatively Moderate” warning (see Figure 2). Check out the map at https://hazards.fema.gov/nri/map – You can even drill down to the census tract level.

The recent Vermont floods are an exception, attributed primarily to climate change. Increasingly hotter air holds more water that gets dumped on steep geography draining to river valleys where towns were built.

Insurers must be paying attention?

Yes, and premium price increases prove it.

Homeowner insurance premiums for 2024 over 2023 rose in most states. The largest increases generally conform to states experiencing the highest climate-related event risk.

In our readership area, Vermont, Maine and New Hampshire rank among the ten states with the lowest annual home insurance rate this year. New York ranks 31st, still below the national average, and probably reflecting its more extensive coastal exposure. Check out bankrate.com and insurify.com to see what is happening.

The Midwest appears to be an anomaly: some of the states with lower predicted event risk have some of the highest premiums: Nebraska, Kansas, Oklahoma, and Arkansas have average annual rates $1,000 above the national average for comparable coverage. This may be due to the severity of weather events, fears of drought, tornadoes and smaller populations to share the risk. Additionally, the increased costs of repairs due to supply chain interruptions and tight labor markets. Florida, Louisiana and Texas, of course, are among the most expensive, while headline-grabbing California checks in at $537 below the national average, perhaps reflecting its larger population for risk sharing, but also perhaps a ticking time bomb: insurers must get approval from the Department of Insurance prior to raising rates – re-insurers, who insure the insurance companies, are not regulated and have caused primary insurers to abandon problematic geographies.

The Guardian recently reported on a study by the National Bureau of Economic Research that analyzed 47 million observations of mortgage servicers’ insurance escrow data between 2014 and 2023 showing that insurance premiums for properties in areas at risk for climate change-related events rose higher than the average increase. The maps provided in the article align with the maps shown above. The study controlled for the influences of home price increases and changes in regulations; and identified as the chief driver rising re-insurance rates to insurance companies.

Insurance Conflict of Interest?

In addition to providing coverage to those exposed to weather related event risks, insurers provide both insurance and investment to companies. Currently, insurance providers are split on how to deal with climate change and fossil fuel companies. Some, like Chubb, are restricting their investments in fossil fuels. However, the group Insure Our Future reports that 80% of insurers and 53% of reinsurers have no such policies and continue to invest in polluters, using insurance premium revenue to do so. As attribution assessments become more robust and rapidly available, insurers will have to deal with this apparent hypocrisy, as they continue to raise rates or deny coverage outright for the disaster occurrence risks their investments contribute to, including drought, extreme rainfall, heatwaves, storms, and wildfire.