Who pays for climate adaptation?

Climate extremes are already straining the resources of many countries, the Philippines being the latest victim. As the cycle of increasing damage and incomplete recovery accelerates the costs of disaster relief will grow. Occasionally, governments have used one off levies to help meet these demands eg Australia in 2012. Such levies have been accepted with limited complaint but future impacts are projected to be harsher, more frequent and more widespread.

In contrast, controls on green house gases have been relentlessly opposed as an impediment to economic growth and even portrayed as a threat to individual rights. Carbon markets, taxes and international agreements have been undermined and stalled. At the same time, adaptation to climate change risks has broadly been accepted, even though a key change in liability has occurred.

A home owner threatened by sea level rise faces adaptation costs but the cause is no longer just an “act of God”. Everyone who uses fossil fuels is contributing to the problem and has a portion of responsibility. Though it may be difficult to ascribe how much of a particular storm is due to climate change it is possible to calculate the rising cost of weather damage and the costs of adaptation.

So far, the costs of climate change have been reflected in soaring insurance premiums and struggling communities. Calls for government assistance and forward planning are certain to increase with the relentless march of global warming. Sooner or later the debate will turn to liability and a climate levy on fossil fuels.

Why would a national levy on fossil fuels be so different to a carbon price? A climate levy cannot be portrayed as a restriction of rights or a market impediment since it is simply a reflection of the liability from choosing to burn fossil fuels. The social engineering tag cannot be applied since the primary aim is to defend property and assets. While a carbon price has no effect on steeply rising insurance rates an adaptation levy would apply downward pressure on premiums by limiting risk, sharing damages and spreading cost.

A climate levy is not a trading scheme prone to market manipulations but a cost anchored to consequences over time. It need not be a tax since the levies could go into a statutory fund rather than directly into government revenues. The fund could be used to help upgrade vulnerable infrastructure like bridges and hospitals. Higher building standards might be subsidised to limit damage. Property might be bought out where it is not cost effective to rebuild or defend.

A climate levy could also be a wedge for fundamental change because it links a liability to consumption. Once established, the principle can be applied to not just to fossil fuels but to other industries causing harm and that is a key step in building a sustainable economy. It is also an essential prerequisite in acknowledging global responsibility.

But what about reducing greenhouse gas emissions? Since the effect of greenhouse gases is amplified by water vapour and other feedbacks then impacts are also amplified and are already growing faster than greenhouse gas levels. A polluter could only avoid rising climate levy obligations by reducing fossil fuel usage since weather is not responsive to special pleading.

Instead of pursuing a carbon price or tax prone to manipulation or repeal perhaps it is time to outflank vested interests by calling instead for a climate levy on fossil fuels. Off course there would still be opposition but the debate side steps models and emissions to offer the least painful answer to “Who pays for the damage and adaptation?”

Greg Reid