Climate Change as Financial Policy: A Costly Fashion?
By Staff News & Analysis - March 28, 2013

Mr. Cuomo, a Democrat, continues to urge that public officials come to grips with the frequency of extreme weather … A spokesman for Mr. Cuomo said he believed New York was the first state to caution investors about climate change. The caution, which cites Hurricane Sandy and Tropical Storms Irene and Lee, is included alongside warnings about other risks like potential cuts in federal spending, unresolved labor negotiations and litigation against the state. – New York Times

Dominant Social Theme: Climate change is not only provable, it is financially dangerous.

Free-Market Analysis: While there is considerable controversy over climate change – global warming – that hasn't stopped New York state from incorporating it into financial policy.

Like many globalist dominant social themes, this one is gradually graduating from hypothesis to law. Even without credible evidence, legislators are moving ahead in the US and the EU to incorporate it into various scenarios that will have considerable financial impacts over time.

Here's more from the article above:

"The state determined that observed effects of climate change, such as rising sea levels, and potential effects of climate change, such as the frequency and intensity of storms, presented economic and financial risks to the state," the spokesman, Richard Azzopardi, said on Tuesday.

Mr. Azzopardi added, "The extreme weather events of the last two years highlighted real and potential costs from extreme weather events, including the need to harden the state's infrastructure and improve disaster preparedness, both of which have been a priority of the governor."

Last fall, Mr. Cuomo was quick to draw a connection between climate change and the severity of Hurricane Sandy, complaining that he seemed to spend much of his time as governor responding to extreme weather events. He has frequently spoken about climate change since then, saying in his State of the State address in January that New York needed "to learn to accept the fact — and I believe it is a fact — that climate change is real."

"There is a 100-year flood every two years now," Mr. Cuomo said at the time. "It's inarguable that the sea is warmer and that there is a changing weather pattern, and the time to act is now."

Experts in public finance said they had not heard of any other state that included an explicit warning about climate change in bond offerings.

The opinion of the governor of New York is not shared by various quasi-private facilities. David Hitchcock, a senior director in the public finance practice at Standard & Poor's, is quoted by the article as saying that climate change was not an issue when evaluating state finances.

Emily Raimes, a vice president at Moody's Investors Service, was quoted as saying that even generalized storm damage was not a huge factor in evaluating ratings. "She noted that Moody's had downgraded only a small number of local governments that were in areas hit hard by Hurricane Sandy, and that those governments had financial problems even before the storm hit.""

Cuomo makes a different case, however. His budget proposal notes that recent storms "have demonstrated vulnerabilities in the state's infrastructure, including mass transit systems, power transmission and distribution systems, and other critical lifelines."

And the budget warns that there are significant long term planning and investment policies that must be adjusted to take climate change into account.

While all this sounds hypothetical, it is not. Cuomo is going to start a program offering home buyouts to those in flood-prone areas. No doubt other costly programs are in the works including early warning programs for floods and storms.

While many costly expenditures may be necessary – perhaps they are not. Despite Cuomo's definitive statements, there is no evidence that climate change will deluge the Northeast with serial disasters.

The only way to determine the outcome of these arguments is to let the private sector adjust prices based on REAL results. Insurance companies can provide us with a good barometer of what is accurate and what is not when it comes to hypotheses such as those that Cuomo is imposing.

After Thoughts

The problem is that once powerful states begin to enshrine policies that are based on opinion rather than market realities, costs and inefficiencies can expand rapidly. Investors and residents alike might do well to take care when confronted by such evolutions, as they can add considerable expenses without providing commensurate benefits.

Share via
Copy link
Powered by Social Snap