TerraPass blog

Rewarding dumb growth

Adam Stein | June 10, 2008

Federal insurance plan would encourage development in the path of hurricanes.

 

Remember how the gas tax holiday was a bad idea? This is kind of like that:

As hurricane season begins, Democrats in Congress want to nationalize a chunk of the insurance business that covers major storm-damage claims…

Big winners would be coastal states, particularly Florida, where more than half of the nation’s hurricane risk is centered. Currently, property-insurance rates in Florida are among the highest in the nation. Florida also has a struggling state reinsurance fund that would be helped by a federal program.

It is unknown whether global warming is making hurricanes more severe, although the evidence is highly suggestive. What is clear, as outlined in Chris Mooney’s interesting Storm World, is that we’re horribly unprepared for the threat even as it now stands.

The WSJ frames the insurance plan as a federal money grab that rewards a handful of coastal states and punishes everyone else, but it seems to me actually worse than that: Florida really isn’t well-served by schemes that encourage irresponsible coastal development. (Likewise, it’s nice for New Orleans that the federal government just forgave $17 billion in debt, but what would have been really awesome is not being destroyed.) No one really wins in this scenario, other than — wait for it — insurance companies.

Adaptation to global warming doesn’t get a lot of policy love, but it’s something we need to start taking a lot more seriously. Like weaning ourselves from fossil fuel, adaptation is a long-term project requiring the application of the right policies and incentives. And one free lunch on the adaptation front would be to stop subsidizing housing in our most disaster-prone areas.

(Hat tip: Environmental Economics)

Image by Flickr user GISUser.

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Comments


  • 1.

    This is not unlike the person who builds a home near a national forest or remote wooded area. And when fire breaks out, instead of letting natural burn occur, the government spends millions (and risks the life of firefighters) protecting these homes. Of course their insurance is high, and it should be.


    Reply
  • 2.

    Thing is, New Orleans very seldom sees hurricanes -- and the last big ones pre-Katrina all hit when there was still that huge wetlands buffer that extended nearly a hundred miles out from the Delta, acting as a stretch of speed bumps that moderated the force of storms. Put back the wetlands and New Orleans is fine.


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  • 3.

    I live in a 100 year old house in New Orleans. When it was built, there were hurricanes and floods, so my house was built on raised pilings, 3 feet above the ground. I am trying to rebuild smarter, adding hurricane proof windows and shutters. It is unrealistic to expect residents of New Orleans, one of the largest ports in the country, not to rebuild our homes.


    Reply
  • 4.

    I am glad that people are finally starting to talk about this issue....which should have been talked about long ago, but it is too politically sensitive!


    Reply
  • 5.

    It is also unrealistic (or it ought to be, if only people were not so good at denying reality) for you to expect the rest of us to pay you for rebuilding your homes in harm's way. The ports of New Orleans and South Louisiana will have to be abandoned sooner or later. Never mind sea level rise associated with global warming: the subsidence caused by the lower Mississippi and Atchafalaya waterways is enough to do the job.


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  • 6.

    One thing I should note -- my abbreviated comment about New Orleans wasn't meant to suggest that the city doesn't deserve aid. Rather, the whole tragedy could have been avoided with a much smaller investment in adaptation. Katrina wasn't actually that big a storm, and the flooding could have been prevented.

    The rebuilding question is, I acknowledge, really complicated. It's true that we don't want to set up the bowling pins in the exact same way they were last time, but I don't really know enough about this to say what should change...


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  • 7.

    Do you really think we will abandon this city (New Orleans), because of one storm? Thank you for all of your help in rebuilding my home, which, as I said in a previous post, is being rebuilt in a smarter way. I, along with the million plus people who live here, don't think it is dumb to rebuild. Here's what the Port of New Orleans says about our city.
    Port of New Orleans Overview
    With the Mississippi River moving about 500 million tons of cargo each year – including chemicals, coal, timber, iron, steel and more than half of the nation’s grain exports, the Port of New Orleans is America’s gateway to the global market.
    New Orleans has been a center for international trade since 1718 when it was founded by the French. Today, the Port of New Orleans is at the center of the world’s busiest port complex — Louisiana’s Lower Mississippi River. Its proximity to the American Midwest via a 14,500-mile inland waterway system makes New Orleans the port of choice for the movement of cargoes.

    The Port of New Orleans is the only deepwater port in the United States served by six class one railroads. This gives port users direct and economical rail service to or from anywhere in the country.

    New Orleans is one of America’s leading general cargo ports. A productive and efficient private maritime industry has helped produce impressive results, including the USA’s top market share for import steel, natural rubber, plywood and coffee.

    In the past 10 years, the Port of New Orleans has invested more than $400 million in new state-of-the-art facilities. Improved breakbulk and container terminals feature new multipurpose cranes, expanded marshalling yards and a new roadway to handle truck traffic. The Board of Commissioners of the Port of New Orleans is committed to building a port that will serve the needs of the global marketplace well into the new century.


    Reply
  • 8.

    sorry to be hogging this post, but there was a report on the news the other night that State Farm Co. will no longer insure any homes within 1000 feet of the beach. Existing policies will not be renewed and new policies will not be written. My homeowners insurance has increased 700% since Katrina and the state guaranteed policies are the most expensive ones that anyone can find, the policy of last resort. It looks like the marketplace will address your concerns about returning to flood prone areas.
    Patrice, RE: views from below sea level.


    Reply
  • 9.

    The political realities of this situation overwhelm any rational decision making. The coastal areas have to many votes, electoral and otherwise for the Federal government to come up with rational decisions. After the Mississippi river flooding in 1993, an interagency task force suggested major changes. Many of these were a complex of local, state and federal policies that encouraged cost effective behaviors in land use practices and government spending. Some progress was made, including whole towns relocating to a higher ground with federal help. but it was a local decision. Intelligent coordinated goverment policy with strong central leadership is a requirement for these types of things to happen. The only way we will see that is if the people recognize that the anti-government minority is counter productive to an improved politic and vote the fools out. This seems unlikely.


    Reply

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