Climate Chronicles


Climate Chronicles

By, Natalie R. Cohen, President, National Municipal Research, Inc. 

Increasing intensity, frequency and damage from major weather events, whether hurricanes, tornadoes, wildfires or river flooding have drawn attention to our changing climate. Several, large scientific reports recently warned that without immediate action, economic and social consequences are likely to be dire. Investors are concerned about credit implications and seek better information about the impact of their investments. At this time, state and local governments are at the core of finding solutions and municipal finance is an important tool for these efforts.

To better understand the issues and solutions around climate change we embarked on a series of blog posts, “Climate Chronicles” in order to offer digestible bites of analysis. Each commentary includes links to primary documents and useful sources for those who wish to go deeper. Below is an abbreviated summary of some of these topics. We thank the Rieger Report for hosting this summary and invite readers to visit for more detail and regular updates.

First, some basics:

  • Carbon: Over time, carbon emissions have created a blanket around the planet that is keeping in heat – the “greenhouse” effect — or GHG. Sources come from transportation (cars, trucks, trains, airplanes whose main fuel sources are petroleum based), electric utilities and industries that burn fossil fuels, commercial and residential buildings and agriculture.
  • A warming planet is melting polar ice caps, leading to sea-level rise and warmer waters. Warmer ocean water gives energy to hurricanes making them more intense and wetter. Warmer waters have also contributed to algae blooms on both east and west coasts. For example:
    • On Florida’s southwest coast, the “red tide” is an algae bloom that is toxic to fish and humans. The unusual size of last year’s bloom harmed the tourist industry, the fishing industry and is giving pause to potential real estate buyers and developers.
    • On the coast of California, another toxic algae bloom led the state of California to close down fisheries for weeks and months in 2015, 2016 and 2018 until the bloom subsided. At issue is a neurotoxin called “domoic acid” that can cause significant human illness. The toxin is consumed by shellfish and moves up the food chain. Most affected from the fishery shutdowns are the Dungeness crab fishermen.

Yesterday’s infrastructure is ill-equipped to deal with a warming planet:

  • While many people are focused on coastal issues, midwestern flooding this year brought the devastation to agriculture and ranching in Nebraska, Iowa, Minnesota, Wisconsin and elsewhere into sharp focus. In fact, the state of Mississippi sued the federal government in February, arguing that the federal engineering designed to control the flow of the lower Mississippi has damaged land the state set aside to support public schools.
  • Elsewhere, stormwater now routinely overwhelms sewer and wastewater treatment systems. There are nearly 860 municipalities that combine their stormwater and sewer systems in the U.S. Many are permitted to overflow when stormwater overwhelms their systems. Unfortunately, communities are exceeding their permitted levels and overflows release untreated sewage into waterways.

Government response is disorganized at the federal level but growing in volume among the financial community and non-governmental organizations (NGO’s):

  • FEMA (Federal Emergency Management Agency) is part of the Department of Homeland Security and is responsible for disaster emergency response. The agency is also responsible for maintaining maps that indicate areas of highest risk for flooding and runs the National Flood Insurance Program (NFIP).
    • As many readers know, disaster recovery funding has become a political football, which has slowed Puerto Rico’s recovery.  Coastal communities in Florida and Texas are still recovering from 2017’s storms: Maria, Harvey and Irma and 2018’s Hurricane Michael.  FEMA’s budget is subject to annual appropriation from Congress and government shutdowns plus debates over funding levels have impeded their work. Flood maps are woefully out of date and the president proposed eliminating the mapping program in his budget.
    • The NFIP was re-authorized ten times since 2017 and 17 times between 2008-2012 with four lapses.  The Congressional Research Service estimated that 1,400 home sale closings per day were postponed during the 2010 lapse. 
  • A group of 48 top economists, including four former Federal Reserve chairs, 27 Nobel Prize Laureates, two former Treasury Secretaries and 15 former chairs of the Council of Economic Advisors signed a policy statement that “global climate change is a serious problem, calling for immediate national action”. The San Francisco Federal Reserve published a paper in March arguing the relevance of climate change for the Federal Reserve’s monetary and financial policy.
  • The Financial Stability Board (FSB) established the Task force on Climate-Related Financial Disclosures to identify how the financial sector could incorporate climate risk in their decision-making.
  • More than 2,500 companies have disclosed carbon emissions and some have adopted goals to reduce carbon emissions. Countless NGO’s have expanded and formed to deal with problems arising from climate change.

States and local governments are at the forefront of solutions:

  • Many state and local governments are taking climate change seriously, devising solutions, both “green” and “grey”, forming collaborative organizations both in the U.S. and with international counterparts to tackle carbon reduction, flood mitigation and management, as well as health and safety of the citizenry. Clean energy, electric vehicles and more energy-efficient buildings are a few other examples of growing enterprises that are being encouraged by some states and local governments.
  • Grey infrastructure refers to adaptive structures to protect people and property – such as seawalls and berms, levees, dams and so on. Green infrastructure uses nature to absorb carbon, reduce heat and stem flooding – such as increasing grassy and treed areas, ponds and reservoirs to retain stormwater and grassy rooftops in urban areas.  There are many overlaps between these approaches and both are important.

For these reasons, we believe municipal bond issuance is poised to continue to increase, new financing mechanisms and structures will emerge.  The depth and accuracy of impact measurement will continue to improve and become more transparent.

Date of publication: April 11, 2019

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@copyright 2019 National Municipal Research, Inc.
National Municipal Research (NMR) is a private, independent research and consulting company and is publisher of The Public Purse blog. The company does not buy, sell or recommend securities and is not a brokerage or investment advisor. The information in this report is derived from a multitude of sources which NMR believes to be accurate and reliable but each source has not necessarily been independently verified. The information is presented “as is” and NMR makes no warranty of any kind. The report is protected by copyright and is for your personal use. The report may not be re-packaged, re-distributed or sold for commercial use. If you choose to quote from the report, please use proper attribution.