Climate Change 1: The Growing Cost of the Old Business as Usual

by hans peter meyer

"IBC [Insurance Bureau of Canada] staff [are] concerned that unless development in areas prone to climate change is mitigated by strong adaption measures …. the cost and availability of insurance could become a problem for homeowners and businesses."

(Nicholas Heap, Hot Properties: How Global Warming
Could Transform BC's Real Estate Sector, 2007)

Most British Columbians received their $100 Climate Change cheque in June 2008 -- just in time for some strategic investments in summer brewskis and coolers. In some quarters however, the changing of the seasons is less important than the changing of climatic conditions, which are starting to drive some changes in "business as usual." Our windfall C-note is an opportunity, albeit a small one, to get ahead of the curve of change, because it's going to hit all of us. Some of us it'll hit very hard, and very soon.

For those of us with homes and/or business properties, real-timeclimate change related costs are going to be showing up in insurance, rents, maintenance, etc -- and in our equity. We buy, with expectations about equity and investment, expectations quite reasonably based on decades of relative economic stability. Underlying this are millenia of relative ecological stability. But things are changing and our "old business as usual" assumptions are starting to cost. The good news is that a "new business as usual" is emerging, one that is trying to take seriously the costs of climate change.

Changes in how local government does business are particularly important to me. Like most taxpayers and voters, I have expectations that responsible local government policies and practices will, at least indirectly, help stabilize the value of my property and my neighbourhoods. Assuming a stable climatic and ecological regime, building and development is permitted where social and economic benefits to the community arguably outweigh any costs. Generally, we -- taxpayers and the people we elect -- haven't paid too much attention to the ecological conditions that underly our socio-economic success story. We've assumed that the ecological well will never go dry. Generally, losses to ecosystem integrity haven't been reflected in policy or in equity in the land. With minor tinkering, this has been the dominant model of local government -- and household -- business: the "old business as usual."

But this business model is starting cost us. There may still be some argument about the causes of climate change; there is no argument that we are experiencing changes to ocean circulation and climactic conditions unprecedented in human history. A partial list of recent extreme weather events in BC and their human and financial costs, drawn from Hot Properties, Nicholas Heaps' 2007 analysis of climate change and its impact on real estate values, includes:

• A fatal landslide in North Vancouver causing temporary evacuation of 100 homes, permanent evacuation of eight homes, and modifications recommended for an additional 40 homes that has precipitated "at least one legal suit against the city and the real estate agents who sold these homes...";

• Storms in the winter of 2006/07 resulting in a "boil water" advisory for 1 million residents in the Lower Mainland, and another landslide affecting residential properties, this time in Mission, with local residents initiating legal proceedings against the municipality;

• A December 2006 storm with $9 million in damages to Stanley Park, and "widespread property damage and ... power outages ....leaving up to 250,000 [BC Hydro] customers without power. Total property damage from the storm was estimated at $100 million...;"

• "Coastal storm surges" damaging over 150 homes in Tsawwassen in 2006 and precipitating $3 million in disaster relief.

Outside of the Lower Mainland, climate change related events include the wildfires of 2005 in the Kamloops and Okanagan, the Pine Beetle infestation (with the consequent threat of wildfire and the reality of subsequent economic downturn in the Interior), spring flooding events, stormwater flows, and summertime water shortages.

In the short and long term, climate change is threatening the stability of community quality of life. As your real estate agent knows, a decline in quality of life signals a decline in real estate values. Which signals instability in personal investments in homes and businesses throughout the province.

Our ecological capacities underwrite our social and economic achievements. And the insurance industry underwrites -- literally -- our business practices. In the face of the kinds of costs Heaps' describes in BC (and that are mounting around the world), insurers are getting cold feet. The"old business as usual" is just getting too risky. Extreme and chaotic weather conditions are driving higher remediation and liability costs. So insurance premiums climb. Eventually, we'll see the value of properties shift. Relative to conventional "old business as usual" properties and communities, buildings, developments, and municipal plans that account for climate change and incorporate leading edge policies and practices will hold or increase their value.

A "new business as usual" approach will mitigate the situation facing communities, businesses, and homeowners. Our June Climate Change cheque may not, on its own, be much. But it should be invested with some climate change smarts. Because those of us who are ahead of the curve on this issue -- whether we're homeowners, local government officials and staff, or land use professionals -- are going to do better than those that resist or ignore change.
Lucky for us, BC already has a wealth of academic and practical knowledge about ways to build community and homeowner resilience in the face of climate change. And while the effects of climate change threaten to erode quality of life, many of these made-in-BC approaches have the collateral benefit of sustaining, often deepening quality of life in neighbourhoods and communities. The "new business as usual" isn't about austerity. It's about facing reality and making smart personal and community investment decisions.


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(c)hanspetermeyer.ca / 2008