Hurricane Ida shows the importance of climate resilient infrastructure
Good morning. This issue of Green, Inc. was published Wednesday but, due to a technical issue, is being sent out today. In the intervening hours, Hurricane Ida’s dissipating storms continued to wreak havoc in the U.S., causing flash floods in New York and inundating the city’s subway lines. Below is yesterday’s unedited issue.
Hurricane Ida slammed into New Orleans, La., on Sunday with winds roaring across the city at speeds up to 150 miles per hour, tearing up roads, ripping down trees and blowing homes to pieces.
The storm, which ploughed across west Cuba on Friday, gained energy as it swirled north across the Gulf of Mexico, and made landfall in Louisiana on the 16th anniversary of Hurricane Katrina.
Fortunately, in the decade and a half since Katrina, federal and state governments invested $14.5 billion in building a fortified flood-protection system—constructing levees, flood walls, canals and specialized drainage chutes that channel floodwater back to sea.
“Ida came onshore with everything that was advertised: the surge, the rain, the wind,” Louisiana Governor John Bel Edwards said Monday. “The good news, first, is all of our levee systems…performed magnificently.”
When Katrina hit in 2005, storm surges burst through levees surrounding New Orleans in 50 different spots, quickly submerging 80% of the city. This year, the new levees—some built four times higher than they stood in 2005—held firm.
Building “climate resilience” will be a vital task in the years ahead for most cities, particularly coastal ones. The latest IPCC report, released in August, shows some effects of climate change are already locked in for the rest of the century. Storms and flooding will intensify. Up to 300 million people living in some 100 coastal cities across the world will be inundated with annual floods by 2050, the IPCC says.
Avoiding the effects of climate change completely is impossible but the U.S., at least, has the luxuries of money and space—resources that can be used to build communities in areas less-exposed to extreme weather. Yet the Federal Emergency Management Agency (FEMA) currently subsidizes homeowners living in flood-risk zones by providing low cost insurance through its National Flood Insurance Program (NFIP). The NFIP, which was created in 1968, provides $1.3 trillion in coverage and sits on $20.5 billion in debt, because its premiums are too low to cover pay-outs.
Starting October 1, the NFIP will account for climate change when performing residential risk assessments for the first time, using future modelling to predict long-term risk from flooding. The reform could result in homeowners paying higher premiums for living in risky areas. The higher costs could, in turn, discourage developers from building on unmanaged flood plains—or lobby governments to invest in more resilient infrastructure.
Investing in flood prevention does reduce long-term costs. In the wake of Ida, insurers are predicting up to $30 billion in claims, less than the $87 billion claimed after Katrina. But, of course, New Orleans couldn’t mitigate the costs of Hurricane Ida entirely.
Downed powerlines have knocked out power for over a million residents and businesses. Grid operators warn it could take weeks to repair the network completely. In the meantime, hospitals are reliant on back-up generators to keep patients on life-support, while households are forced to swelter in the 80-degree heat.
The clean-up from Ida won’t be quick, and thousands of people who evacuated ahead of the storm have little choice but to wait outside the city borders. On Tuesday the governor of Louisiana told evacuees not to return; at the moment there’s no electricity, no clean water, likely no work and possibly no home waiting for them if they do.
For now, the evacuees have joined the growing ranks of Americans displaced by climate change.
ESG on the rocks
The debate on the validity of ESG investing hasn’t let up since former BlackRock sustainability CIO Tariq Fancy called the whole industry “a giant societal placebo” last week. Since then, a new report from think tank InfluenceMap says that many “climate themed” funds hold investments that are counter to the goals of the Paris agreement, or even counter to their own promises. Meanwhile, regulators in Europe and the U.S. are investigating allegations that Deutsche Bank’s DWS Group has made misleading claims about its ESG offerings. Greater regulatory scrutiny could at least help clear up one flaw in ESG portfolios: the lack of common accounting standards for measuring ESG performance. FT
Kerry in Asia
U.S. climate envoy John Kerry travelled to Japan and China this week to build consensus on fighting climate change. In Japan, the world’s fifth largest polluter, Reuters reports Kerry discussed ways to downsize coal usage. One action plan would see the Asian Development Bank purchase coal-fired power plants and close them down early. Discussions in China might be terse. As the world’s leading polluters, joint-action from the U.S. and China will be vital for mitigating climate change, but years of strained relations has jeopardized those efforts. Reuters
Carbon without borders
The EU plans to introduce a carbon border tax, the first of its kind, which will impose a levy on imports from countries with less strict policies on reducing carbon emissions. Exporters, like China, have complained the tax will distort the free market and make their goods less competitive (which is, admittedly, the point.) But new research suggests the cost of the carbon tax will be quite low, amounting to a tax of 2% on $6 billion worth of iron and steel imports—which is a cost corporations will likely pass on to consumers. Bloomberg
In March, Saudi Arabia Crown Prince Mohammed bin Salman announced a Green Saudi initiative, to set the oil rich country on the path towards a more sustainable future. The promises—50% of domestic energy to be supplied by renewables by 2030, billions of trees planted in the desert—were modest, considering the Kingdom’s reliance on oil exports. But Riyadh is struggling to even get these initiatives underway. A project to create the world’s largest solar energy plant has gone dark and investors aren’t convinced the Kingdom can follow through on the Prince’s pledge. FT
IN CASE YOU MISSED IT
The Business Roundtable’s fuzzy math on worker pay by Rick Wartzman
Athens just named a chief heat officer. Should your city do the same? by Stelios Bouras
Businesses shouldn’t do good for the sole purpose of doing well by Azish Filabi
It’s time for ESG to incorporate health by Nigel Wilson
The population of New Orleans never fully recovered from Hurricane Katrina. Before the storm hit in 2005, the vibrant city had a population of 485,000. According to National Geographic, the population plummeted to just 230,000 the year after. Before Ida struck this year, the population had climbed back to just 384,000, but with a different demographic makeup. The Black population fell from 66% of the total to 54%. The Latino population doubled to 30,000.
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