White House Forum notes:
On Wednesday, August 3rd I was invited, along with another 100+ experts, to a forum about smart financing ideas for Disaster Resilience. You have to give the Obama Administration credit for advancing the term “resilience.” Over the past several years, the term “resilience” has come to the forefront of the discussions about climate change and its attendant potential for increased disasters.
Some interesting tidbits from the Forum:
The U.S. spends about 0.5% of our GDP (I calculate that at about $90 billion a year based upon just under $18 trillion US GDP for 2015).
Due to climate resilience needs, we probably have to start spending 2% of GDP for resilience measures alone; that would be $360 billion a year. The speaker, Jeff Hebert, Deputy Mayor & Chief Resilience Officer, City of New Orleans, said that some countries spend 5-8% of their GDP on infrastructure so we really do have to step up our spending in this area.
The good news will be that many jobs will be created, especially if we can shift fossil fuel jobs to green economy jobs. Studies have shown that green industries like wind, solar, geothermal are more labor intensive than the fossil fuel industry.
So, close the coal plants and turn the areas into wind, solar and geothermal generators of energy; do not be swayed by the fossil fuel company nonsense that we cannot quickly transition to renewable energy sources; self interest for companies that are too lazy to redeploy capital into healthier industries. Even the cigarette industry, years ago, diversified into food (e.g., Phillip Morris buying Kraft/Nabisco).
My argument has been that fossil fuel companies can be the liaison entities that transition us from oil,gas and coal to renewable sources of energy. Why fight the overall public sentiment to reduce carbon emissions? Join the new team and help all of us.
There is a new initiative by the Rockefeller Foundation called City Comprehensive and, along with ARUP, they have created a City Resilience Index that helps Cities address their social, economic and physical challenges: https://www.rockefellerfoundation.org/about-us/news-media/rockefeller-foundation-arup-debut-a-pioneering-tool-that-allows-cities-to-better-understand-their-capacity-to-address-social-physical-or-economic-challenges/
Mike Italiano, CEO and Founder of the United States Green Building Council has a new initiative he calls Market Transformation to Sustainability & Capital Markets Partnership to transfer the $70 trillion available from Wall Street now held in traditional mortgage backed securities to climate resilience stocks and bonds. The Green Bonds will be for Green Homes, Green Commercial Buildings and Green Infrastructure.
Mike gave an example of what a service provider estimated as the cost of protecting Miami Beach with horizontal and submerged sea walls (and these measures might not even prove effective): $1 TRILLION DOLLARS!
Miami Beach is currently spending $400 million per year pumping groundwater even on sunny dry days. I witnessed this process first hand back in February and I can tell you — it does not smell very nice. It looks like Miami Beach wins the poster child award for my Plan R strategy — right thinking people will start to think about relocation planning now. Here is a link to my Plan R talks that I have been giving around the world: http://bit.ly/2aBgw5Q
Mike concluded his talk with the statement that Hank Paulson tells us we need an immediate 18 Gigaton reduction in carbon emissions NOW. As most of you know, Hank Paulson is the former Treasury Secretary during the George W. Bush administration and basically engineered the solution for the 2008 Financial Crisis (we now call the “Great Recession.”). Paulson has been arguing strongly for a carbon tax to reduce emissions and he sees it as a free trade mechanism and a necessary precondition for reducing carbon emissions quickly.
There seems to be a quickly growing consensus for some form of carbon taxation and hopefully it is a carbon tax and not a cap and trade mechanism, in my opinion. The tax can be revenue neutral to the U.S. Treasury if we simplify the tax code and reduce income taxes in favor of environmental taxes. The triple bottom line in action. Call your representatives today and tell them you want a carbon tax so you can reduce your personal income taxes.
In addition to Mike Italiano, the other speakers at the Lightning Talks: Innovations in Pre-Disaster Mitigation Finance that was moderated by Jainey Bavishi, Associate Director for Climate Preparedness, White House Council on Environmental Quality (CEQ sponsored the Forum), were:
Nikhil de Victoria Lobo, Head of Global Partnerships, Americas, Swiss Re
Harriet Festing, Director, Climate Resilience & RainReady, Center for Neighborhood Technology
Margot Brandenburg, Founder, MyStrong Home, a Rockefeller Foundation alumna who is using property insurance premium reductions to finance home mitigation projects to make homes more resilient and sustainable.
MyStrong Home is operational in several southern states including Alabama, Louisiana and South Carolina. She gave the example of a an Alabama homeowner who did a $10,000 mitigation project; the insurance premium savings were $1,500 per year and this allowed the homeowner to finance $7,500 over five years based upon the premium reduction; the homeowner contributed $2,500 of upfront cash (that I guess could be placed on a credit card for a 100% financing). So, the model seems like a 75/25 debt/equity split with a simple five year year loan amortized by the insurance savings; that seems reasonable given that the home is now technically more protected, has lower insurance premiums and potentially a higher residual value. My question: is their interest on the loan?
Zack Rosenburg, CEO & Co-Founder, St. Bernard Project (SBP). With Zurich Insurance, SBP has conceived and implemented a one hour training course for Disaster Resilience. They are helping communities in New Orleans, South Carolina, New York, San Marcos, TX (oops, right near Austin where I am moving in October…). Check out their website: http://www.stbernardproject.org/
Daniel Shemie, Strategy Director, Water Funds, The Nature Conservancy. Daniel discussed a very large scale project at the Rio Grande Watershed in New Mexico with 600,000 acres. This is a $400 million project. http://www.nature.org/ourinitiatives/regions/northamerica/unitedstates/newmexico/new-mexico-rio-grande-water-fund.xml
Molly Urbina, Executive Director, Colorado Resiliency and Recovery Office. Molly informed us that the state of Colorado is offering tax credits for wildfire mitigation. Molly is part of the growing trend, started by Rockefeller Foundation, to have Chief Resilience Officers (CROs) report directly to the Mayor of a City.
The closing remarks were by Alice Hill, Special Assistant to the President & Senior Director for Resilience Policy, National Security Council. I had the pleasure of meeting with former Federal Judge Alice Hill in her offices back in November 2015. At that time, our discussion revolved around the possible creation of Corporate Resilience Departments to start with Fortune 500 Corporations and move downward. We had done a white paper on that potential future initiative: https://www.dropbox.com/s/9s8zivyg81zjc3x/Corporate%20Resiliency%20Departments.pdf?dl=0
Justice Hill informed us that historic data about climate resilience is only about 150 years old. She also mentioned that FEMA had spent $3 billion to “build back better” from Superstorm Sandy; that is a heartening statistic that I hope continues throughout the nation.
I attended a break out session about tax credits; as you probably know, we at the NRF have been advocating investment tax credits (we call them CR-ITCs) so I wanted to see what the round table produced.
It was at this breakout session that I saw how difficult it is for the Federal Government to obtain consensus because of special interests and fragmentation; this is a situation that is reality so we have to work within a system that is fundamentally broken, in my opinion.
For example, one of the participants showed that in the Southeast, there are incentives to grow long leaf pine versus slash pine trees because the former are more resilient to storm situations.
A fascinating observation by one of the participants (unfortunately, it was only fascinating to me) was that the IRS should replace the casualty loss deduction for individuals and businesses with a resilience tax credit (our CR-ITC idea).
I could not find online the revenue generated from the casualty loss deduction allowance but the participant rightly saw that this deduction is for a negative event and the CR-ITC would be for a fundamentally positive use, i.e., climate resilience preparedness for municipalities (partially funded by the Federal Government).
Another idea broached was a property tax abatement for mitigation efforts. This idea could augment the PACE Now program and would be very helpful.
The general conclusion by the group was that CR-ITCs would be most interesting and possible at the State level. This was the conclusion I had heard back in April 2014, when I visited the office of Maxine Waters at the House of Representatives: “Go back to New York and get something done in NY; there is more forward thinking in NY than here in DC.”
My conclusions: we should start planning for Plan R. http://bit.ly/2aBgw5Q