ON THE AGENDA | FEBRUARY 27TH, 2013 | Scott Bittle

Can Accountants Succeed on Climate Where Others Have Failed?

The Government Accountability Office, the federal government's independent auditor and watchdog agency, added climate change to its list of "high risk" threats to the nation's fiscal health.

Reprinted from The Energy Collective - February 21, 2013

The Government Accountability Office, the federal government’s independent auditor and watchdog agency, added climate change to its list of “high-risk” threats to the nation’s fiscal health.

“Climate change creates significant financial risks for the federal government,” the GAO report said. “The federal government is not well positioned to address the fiscal exposure presented by climate change, and needs a government wide strategic approach with strong leadership to manage related risks.”

And for anyone concerned about getting the government to act on climate change, that raises a tantalizing question: Can accountants succeed where scientists and the environmental movement haven’t?

Fiscally speaking, the GAO said there are three major areas where the government is vulnerable:

  • The government is a huge property owner. The government owns thousands of buildings, from post offices to the Pentagon, and many are at risk of being damaged or destroyed by severe weather and other climate changes. Indeed, the GAO said there were at least 30 military bases already at risk from rising sea levels. And that’s not counting the impact on the 650 million acres of federally managed lands.
  • The government is on the hook as an insurance provider. The National Flood Insurance Program and the Federal Crop Insurance Corporation are already more exposed to weather-related costs than in the past, and could both face significant claims in the future if droughts, floods and severe weather develop as expected.
  • Disaster relief costs could rise. Disaster declarations have increased in recent years, with 98 declarations in 2011 compared to 65 in 2004. In 2004-11, the GAO said FEMA obligated about $80 billion in disaster aid. Superstorm Sandy alone required $60 billion in federal aid.

Right now, there isn’t any coordinated federal effort to adapt to the impact of climate change, much less provide state and local governments with the information they need, the GAO said. The agency called for better planning, information management, and reforms to insurance and disaster relief programs. In addition, the government should develop and share research that will allow local governments to make better decisions in planning, zoning and infrastructure. “The increasing fiscal exposure for the federal government calls for more comprehensive and systematic strategic planning,” the report said.

One new and worrisome entry on the GAO high-risk report is the danger of a gap in weather satellite coverage starting in 2014, as aging satellites fail before new ones come on line. Less accurate satellite information could mean more damage from severe weather — in fact, the GAO says forecasters might have failed to project Superstorm Sandy’s path.

The GAO has been doing annual “high-risk” reports for decades, and the results are mixed. A lot of the problems the auditors identify actually get fixed. This year, for example, the GAO said problems in interagency contracting and IRS management systems had improved enough so that they could be dropped from the list. On the other hand, the Pentagon’s troubled weapons-acquisition process has been on the GAO’s hit list for a depressing 20 years.

But there are two reasons why this GAO report may make a difference. One is that the respected, independent auditing agency is drawing a direct line between climate change and the nation’s fiscal health. As we’ve pointed out before, there are some troubling parallels between the federal budget debate and energy policy. Both the federal budget and our energy policy are unsustainable over the long term. And our inability to deal with both of these challenges stems from our national inability to make difficult tradeoffs to avoid a slow-developing but inevitable challenge.

The second point is that the GAO isn’t calling for actual changes in energy policy, or examining the reality of climate change. The agency is calling for controlling the government’s fiscal exposure by being smarter about managing the risks from climate change. When you’re talking about threats to the federal budget, climate change isn’t nearly in the same category as rising health care costs and an aging population, which are driving our long-term problem with deficits and debt. But climate will have a fiscal impact. In essence, the auditors are saying: “Climate change is real. It will cost us money. Deal with it.”

That message is sobering, and absolutely correct. We can and should limit carbon emissions. We can and should develop a sustainable energy policy. But the environmental changes already under way are going to cost us money. It’s just a question of how much – and how smart we are in dealing with it.


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