Taxpayers Get $96 Billion Bill For 2012 Extreme Weather = One-Sixth of Non-Defense Discretionary Spending

By Dan Lashof Via NRDC Switchboard

With all the debate on the federal budget in Congress, climate change rarely gets mentioned as a deficit driver. Yet dealing with climate disruption was one of the largest non-defense discretionary budget items in 2012. Indeed, as NRDC shows in Who Pays for Climate Change?, when all federal spending on last year’s droughts, storms, floods, and forest fires are added up, the U.S. Climate Disruption Budget was nearly $100 billion, equivalent to 16% of total non-defense discretionary spending in the federal budget—larger than any official spending category.

2012 U.S. Federal Non-Defense Discretionary Budget 

(in Billions)

Source CRS, BEA, OMB (Table 8.7), NRDC estimates
Education, training, employment and social services $95
Transportation $91
Housing assistance and other income security $65
Health $60
Veterans benefits and services $57
Administration of Justice $54
International Affairs $50
Natural Resources and Environment $40
Science, Space and Technology $29
Energy $13
Other Non-Defense Discretionary $61
Total FY2012 Non-Defense Discretionary Spending $616
Federal Climate Disruption Costs, CY2012 Impacts $96

That means that federal spending to deal with extreme weather made worse by climate change far exceeded total spending aimed at solving the problem. In fact, it was eight times EPA’s total budget and eight times total spending on energy.

Overall the insurance industry estimates that 2012 was the second costliest year in U.S. history for climate-related disasters, with over $139 billion in damages. But private insurers themselves only covered about 25% of these costs ($33 billion), leaving the federal government and its public insurance enterprises to pay for the majority of the remaining claims. As a result, the U.S. government paid more than three times as much as private insurers did for climate-related disasters in 2012.

That reflects a major shift in liabilities with respect to climate change away from private insurers to public alternatives that began in earnest following the $72 billion hit the industry took in 2005 from hurricane Katrina.

Federal spending related to climate disruption falls into two major categories: Storms and droughts.

Spending related to storms includes appropriated funds for the Federal Emergency Management Agency (FEMA) as well as emergency supplemental appropriations following major disasters, such as Superstorm Sandy. It also includes the National Flood Insurance Program, which is supposed to be self-supporting, but is increasingly under water.

Drought-related spending includes the federal crop insurance program as well as the government’s share of higher food costs (see this post for more details).

The figure below shows how the federal climate disruption budget breaks down.

While some of these federal programs—such as forest fire prevention, crop insurance, flood coverage, and disaster preparedness—offer wider benefits to the country, it should be noted that these liabilities have largely been assumed by the public sector due to a lack of private sector alternatives. The true scorekeepers of climate risk—the insurance industry—realizes it can’t win when the dice are increasingly loaded with carbon pollution, so it’s walking away from the table, leaving taxpayers holding the bag. Last year that cost amounted to over $1100 per taxpayer, and we can expect to see even higher costs in future as CO2 concentrations continue to soar past 400 parts per million.

Even as the budget to clean up climate disruptions hit a record high in 2012 and is expected to continue to grow, the budget for programs to fight climate disruption—such as environmental enforcement, energy efficiency, clean energy vehicle research, and ARPA-E—suffered cuts of more than $100 million the “sequester” that went into effect in March and remain under continued pressure from the budget-cutting process.

Our climate plan is, in effect, to cut critical investments now for the sake of small short-term deficit reductions and send our children the tax bills to clean up the mess.

That’s colossally short-sighted, even by Washington standards.

— Dan Lashof is director of NRDC’s climate and clean air program. Reprinted with permission from NRDC Switchboard.

6 Responses to Taxpayers Get $96 Billion Bill For 2012 Extreme Weather = One-Sixth of Non-Defense Discretionary Spending

  1. Merrelyn Emery says:

    Good old private industry, take the profits and walk away from the losses. The insurance industry has always been one of the worst, ME

  2. Solar Jim says:

    I guess that’s why they call it FIRE (finance, insurance and real estate). Well, since we have just engineered a prehistoric (Pliocene) atmosphere (400 ppm CO2), soon we’ll be burning down the house and flooding the shores with abandon. (Abandoned, adj. shameless; immoral) The phrase “privatized profit and socialized cost” comes to mind.

    Nice article Dan, thanks.

  3. Vine says:

    In Australia we’re about to go to an election and the opposition is trying to stop action on climate change and rolling back the carbon price because they believe the public are hurting from high costs.

    Yet in the same breath, we’re dealing with extreme weather and climate disasters and nobody has declared how much Australian taxpayers are paying to repair infrastructure, upgrade insurance premiums etc.

    When you look at the real figures it is surreal.

  4. Mulga Mumblebrain says:

    Tony ‘Climate Change is Crap’ Abbott, and his Cabinet of denialist horrors are going to attack climate science and renewable industry because they are Rightwing ideological fanatics. That is the same reason Cameron’s ‘Greenest Ever Government’ in the UK has, in three years of reality, rather than a sound-bite of pure mendacity, proven itself the mostly insanely and determinedly anti-environmental regime in UK history. Abbott doesn’t give a stuff about the cost of living or the living standards of the serfs, as we will see when he cuts, slashes and burns, like the true class vengeful austerian that he is, always has been and is having such difficulty disguising.

  5. Jim Baird says:

    A recent study determined the cost of all US wars was $7 trillion. The insurance company Allianz suggests 4 times this amount is at risk by 2050 due to sea level rise combined with storm surge. The wars were engaged in to preserve a way of life climate change will decimate in the absence of a commensurate effort.

  6. Solar Jim says:

    Thanks for this. Please note that these coming losses are not production alone, such as GDP, but assets at risk. Further, it is well documented (Global Zero, NRDC, etc.) that the cost of the Cold War in the USA was approximately $7 trillion. World governments now spend about $1.6 trillion per year on military expenditures (Stockholm Institute).

Dan Lashof is director of NRDC's climate and clean air program.