Key Issues > High Risk > Limiting the Federal Government's Fiscal Exposure by Better Managing Climate Change Risks
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Limiting the Federal Government's Fiscal Exposure by Better Managing Climate Change Risks

To reduce its fiscal exposure, the federal government needs a cohesive strategic approach with strong leadership and the authority to manage risks across the entire range of related federal activities.

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Numerous studies have concluded that climate change poses risks to many environmental and economic systems and creates a significant fiscal risk to the federal government. For example, according to the November 2018 National Climate Assessment report,  the continued increase in the frequency and extent of high-tide flooding due to sea level rise threatens America’s trillion-dollar coastal property market and public infrastructure, with cascading impacts to the larger economy. We added this area to the High-Risk List in 2013.

There are five areas where government-wide action is needed to reduce federal fiscal exposure, including, but not limited to, the federal government’s role as (1) the insurer of property and crops; (2) the provider of disaster aid; (3) the owner or operator of infrastructure; (4) the leader of a strategic plan that coordinates federal efforts and informs state, local, and private-sector action; and (5) the provider of data and technical assistance to decision makers.

We have made 62 recommendations related to this high-risk area, 12 of which were made since the February 2017 high-risk update. As of December 2018, 25 remain open.

Limiting the Federal Government's Fiscal Exposure by Better Managing Climate Change Risks

The rising number of natural disasters and increasing reliance on federal assistance is a key source of federal fiscal exposure. Since 2005, federal funding for disaster assistance is approaching half a trillion dollars (about $430 billion), most recently for catastrophic hurricanes, flooding, wildfires, and other losses in 2017 and 2018. Disaster costs are projected to increase as extreme weather events become more frequent and intense due to climate change—as observed and projected by the U.S. Global Change Research Program and the National Academies of Sciences, Engineering, and Medicine. 

One way to reduce federal fiscal exposure is to enhance resilience by reducing or eliminating long-term risk to people and property from natural hazards. For example, we reported that elevating homes and strengthened building codes in Texas and Florida prevented greater damages during the 2017 hurricane season. Additionally, in October 2018, the Disaster Recovery Reform Act of 2018 was enacted, which, among other things, allows the President to set aside, with respect to each major disaster, a percentage of certain grants to use for pre-disaster hazard mitigation. However, for some Native American tribes and communities, such as Alaska Native villages, climate change impacts are an immediate threat, and we and others have reported on institutional barriers that limit proactive responses. We have ongoing work examining how to identify and prioritize resilience projects.

According to the November 2018 Fourth National Climate Assessment, neither global efforts to reduce emissions nor regional resilience efforts approach the scales needed to avoid substantial damages over the coming decades. However, beginning in 2017, the administration revoked policies that had identified addressing climate change as a priority and demonstrated top leadership support for executive branch action. Although leadership commitment remains partially met due to congressional action since our 2017 High-Risk Report, the federal government has not made measurable progress to reduce its fiscal exposure to climate change. As a result, ratings for four criteria remain unchanged and monitoring has regressed to not met.


Federal Insurance Programs

Limiting the Federal Government's Fiscal Exposure by Better Managing Climate Change Risks

Federal flood and crop insurance programs were not designed to generate sufficient funds to fully cover all losses and expenses. The flood insurance program, for example, was about $21 billion in debt to the Treasury as of September, 2018. Further, the Congressional Budget Office estimated in January 2017 that federal crop insurance would cost the federal government an average of about $8 billion annually from 2017 through 2026. Implementing our prior recommendations to improve the long-term resiliency of insured structures and crops and address structural weaknesses may decrease federal fiscal exposure to climate change.

The ratings for this segment remain unchanged at partially met or not met.

Leadership commitment: partially met. Leadership commitment remains partially met to reflect action by Congress, such as passage of the Biggert-Waters Flood Insurance Reform Act of 2012. Specifically, the Biggert-Waters Act created the Technical Mapping Advisory Council (TMAC) and directed it to produce a “Future Conditions Risk Assessment and Modeling Report” with recommendations on how to ensure that (1) rate maps incorporate the best available climate science; and (2) the Federal Emergency Management Agency (FEMA) uses the best available methodology to consider the impact of rising sea levels and future development on flood risk. In its 2015 report, TMAC made several recommendations to FEMA for how to incorporate climate science into FEMA’s maps and tools on an advisory basis, which FEMA has plans to implement.

However, our rating for top leadership support within the executive branch has regressed because related executive orders have been rescinded. For example, the March 2017 E.O. 13783 Promoting Energy Independence and Economic Growth revoked E.O. 13653, which we previously found had partially met this criterion. Specifically, we had found that E.O. 13653 demonstrated top leadership support for federal agencies, such as FEMA and the United States Department of Agriculture (USDA), to incorporate adapting to climate change risks into their planning efforts.

Capacity: partially met. FEMA and USDA continue to take actions to improve stakeholder capacity to increase their resilience to climate change. For instance, FEMA reported progress at developing information on future conditions for flood maps in June 2017. Additionally, USDA’s Climate Hubs continue to deliver relevant science-based knowledge that may improve producers’ capacity to manage climate change impacts for crop insurance.

Action plan: partially met. FEMA and USDA have previously identified actions to address aspects of climate change in their programs on an advisory basis, in FEMA’s 2015 TMAC Future Conditions report and USDA’s 2016 Building Blocks for Climate Smart Agriculture and Forestry initiative. In its 2017 annual report, TMAC identified additional actions FEMA could take to advance its development of future conditions products and services, such as assessing stakeholders’ highest-priority needs.

Monitoring: not met. FEMA has yet to publish metrics and milestones to assess its progress incorporating future conditions into flood map products. USDA established milestones for certain actions to improve resilience from 2016 through 2018, but it no longer monitors its progress.

Demonstrated progress: not met. The federal government has not implemented our recommendations to improve the resilience of federally-insured property or address structural weaknesses in each program, as described in the following section.


Disaster Aid and Resilience

Limiting the Federal Government's Fiscal Exposure by Better Managing Climate Change Risks

In September 2018, we reported that the four near-sequential hurricane and wildfire disasters in 2017 created an unprecedented demand for federal disaster resources and that hurricanes Harvey, Irma, and Maria ranked among the top five costliest hurricanes on record. Subsequently, fall of 2018 brought additional catastrophic disasters such as Hurricanes Florence and Michael and devastating California wildfires, with further needs for federal disaster assistance. We have also reported that disaster costs are a key source of federal fiscal exposure and will likely continue to rise. Implementing our prior recommendations to improve state and local resilience and adopting adequate budgeting procedures to account for the costs of disasters could help decision makers better manage federal fiscal exposure to climate change.

In October 2018, the Disaster Recovery Reform Act (DRRA) of 2018 was enacted. DRRA, among other things, allows the President to set aside, with respect to each major disaster, a percentage of the estimated aggregate amount of certain grants to use for pre-disaster hazard mitigation and makes federal assistance available to state and local governments for building code administration and enforcement. It is too early to tell what impact the implementation of the act will have on state and local resilience and this high-risk rating. Additionally, we have ongoing work examining managed retreat from vulnerable areas as an option to reduce communities’ exposure to climate change impacts.

The ratings for this segment remain unchanged at partially met or not met. 

Leadership commitment: partially met. Leadership commitment remains partially met to reflect action by Congress, such as passage of DRRA in October 2018. Additionally, according to FEMA’s 2018–2022 Strategic Plan, the agency will work with Congress and others to incentivize investments that reduce risk, including pre-disaster mitigation, and increase the number of properties covered by flood insurance.
However, top leadership support within the executive branch has regressed, as related executive orders have been rescinded. For example, the August 2017 E.O. 13807 Establishing Discipline and Accountability in the Environmental Review and Permitting Process for Infrastructure Projects revoked E.O. 13690, which we previously found had partially met this criterion. E.O. 13690 had established a government-wide federal flood risk management standard to improve the resilience of communities and federal assets against the impacts of flooding.

Capacity: partially met. FEMA has continued to improve federal capacity by implementing our July 2015 recommendation to improve its Public Assistance delivery model. Additionally, as noted previously, DRRA allows the president to set aside certain funding for pre-disaster hazard mitigation efforts and requires FEMA to issue guidance on the acquisition of property for open space as a mitigation measure, which may improve state and local capacity for resilience.

Action plan: not met. The federal government has yet to implement our July 2015 priority recommendation to establish a comprehensive investment strategy to identify, prioritize, and implement federal disaster resilience investments.  FEMA and its partners have developed a draft National Mitigation Investment Strategy (NMIS) that may address this recommendation, but it is too early to assess its responsiveness because it has not been finalized, although FEMA plans to do so in February 2019. Additionally, FEMA’s 2018–2022 strategic plan—issued in March 2018— established the performance targets of doubling the number of properties covered by flood insurance and quadrupling the amount of pre-disaster mitigation by 2022. However, without a comprehensive strategy in place to identify and prioritize FEMA’s resilience investments, it is unclear whether these efforts will reduce federal fiscal exposure.

Monitoring: not met. The federal government has not established a mechanism to track the effectiveness of federal investments in disaster resilience government-wide.

Demonstrated progress: not met. The federal government has not developed the information necessary to account for its fiscal exposure to climate change nor a strategy to reduce this exposure, as described below.


Federal Government as Property Owner

Limiting the Federal Government's Fiscal Exposure by Better Managing Climate Change Risks

The federal government owns and operates hundreds of thousands of facilities and manages millions of acres of land that could be affected by a changing climate and represent a significant federal fiscal exposure. For example, the Department of Defense (DOD) owns and operates domestic and overseas infrastructure with an estimated replacement value of about $1 trillion. In September 2018, Hurricane Florence damaged Camp Lejeune and other Marine Corps facilities in North Carolina, with a preliminary Marine Corps repair estimate of $3.6 billion. One month later, Hurricane Michael devastated Tyndall Air Force Base in Florida, with a preliminary Air Force repair estimate of $3 billion and upwards of five years to complete the work. Implementing our prior recommendations to improve the resilience of federally-owned and operated property by accounting for climate change impacts in planning processes and decisions could reduce federal fiscal exposure to climate change.

Two ratings for this segment regressed to not met and three others remain unchanged at partially met and not met.

Leadership commitment: partially met. Leadership commitment remains partially met to reflect action by Congress, such as passage of the National Defense Authorization Act for Fiscal Year 2018, which requires DOD to report on climate change impacts to its installations and to provide an overview of mitigation actions to address them.

However, top leadership support within the executive branch has regressed, as executive orders and agencies revoked policies indicating leadership support. The August 2017 E.O. 13807 revoked E.O. 13690, which we previously found had established a standard for reducing the flood risk of federally-funded projects in flood plains. This action potentially increases the federal government’s fiscal exposure to climate change, as taxpayer-funded projects may not last as long as intended because they are not required to account for future climate-related changes in risk.

Capacity: not met. The May 2018 E.O.13834 Regarding Efficient Federal Operations revoked E.O. 13693, which we previously found had partially met this criterion because it directed federal agencies to incorporate resilient design elements into their facilities as part of federal sustainability goals.

Additionally, in April 2017, the Council on Environmental Quality (CEQ) rescinded its guidance directing agencies to consider climate change in their National Environmental Policy Act of 1969 (NEPA) reviews for certain types of federal projects. We had previously found that this guidance helped partially meet this criterion. Without such guidance, agencies no longer have White House direction to consider climate change impacts, such as sea level rise, when planning federally-funded infrastructure.

Action plan: partially met. DOD has made some progress implementing our May 2014 recommendations to consider climate change impacts for its domestic installations. In November 2017, we made six recommendations to DOD to also consider climate change impacts for its overseas installations. DOD partially concurred with four of these recommendations and non-concurred with two. All six recommendations remain open as of this report. Further, as mentioned above, the National Defense Authorization Act for Fiscal Year 2018 requires DOD to provide an overview of mitigation actions to address climate change impacts.

Monitoring: not met. E.O. 13834 revoked E.O. 13693, which we previously found had partially met this criterion because it established a mechanism for OMB to monitor agencies’ progress toward sustainability goals. These goals included federal facilities’ resilience to climate change impacts.

Demonstrated progress: not met. The federal government has not implemented our recommendations to improve resilience government-wide, as described in the following section.


Federal Government as Leader of National Climate Strategic Plan

Limiting the Federal Government's Fiscal Exposure by Better Managing Climate Change Risks

As noted previously, as of December 2018, federal obligations and appropriations for disaster assistance are approaching half a trillion dollars since 2005. However, the federal government is currently not well organized to address the fiscal exposure presented by climate change, partly because of the inherently complicated crosscutting nature of the issue. Implementing our prior recommendations, such as developing a strategic approach to guide federal adaptation efforts and providing information on related fiscal exposures to Congress, could improve the nation’s ability to prepare for and adapt by reducing the government’s fiscal exposure. Additionally, we have ongoing work on how the federal government could identify and prioritize adaptation projects of national significance.

Four ratings regressed to not met and one remains unchanged at not met since our 2017 update.

Leadership commitment: not met. The March 2017 Executive Order E.O. 13783 revoked policies, including the Climate Action Plan and E.O. 13653 that we previously found had demonstrated leadership support for reducing aspects of fiscal exposure to climate change.

Capacity: not met. The May 2018 E.O.13834 revoked E.O. 13693, which we had previously found partially met this criterion. Specifically, E.O. 13693 had directed the Office of Personnel Management to include resilience in federal training and also directed the creation of interagency workgroups to address, among other things, resilience planning in coordination with states and other stakeholders.

Action plan: not met. Executive orders 13783 and 13834 withdrew previous direction to develop adaptation plans and strategic sustainability performance plans that identified agency actions to prepare for climate change impacts and improve resilience. As previously mentioned, FEMA and its partners have developed a draft National Mitigation Investment Strategy (NMIS) that may partially meet this criterion, if the final version includes a strategy to identify, prioritize, and implement federal disaster resilience investments. However, it is too early to assess the NMIS because it has not been finalized, although FEMA plans to do so in February 2019.

Monitoring: not met. Executive orders 13783 and 13834 also eliminated monitoring mechanisms that we previously found had partially met this criterion. Specifically, E.O. 13783 revoked E.O. 13653, which had directed agencies to submit adaptation plans to CEQ and OMB for review and E.O. 13834 revoked E.O. 13693, which had directed OMB to evaluate agencies’ strategic sustainability performance.

Demonstrating progress: not met. The federal government has not implemented key recommendations in this area, as described in the following section.


Technical Assistance to Federal, State, Local, and Private-Sector Decision Makers

Limiting the Federal Government's Fiscal Exposure by Better Managing Climate Change Risks

Decision makers at all levels of government can affect federal fiscal exposure to climate change. Specifically, state, local, and private-sector decision makers can drive federal fiscal exposures because they are responsible for planning, constructing, and maintaining certain types of vulnerable infrastructure paid for with federal funds, insured by federal programs, or eligible for federal disaster assistance. For example, the federal government annually invests billions of dollars in infrastructure that state and local governments plan and build. To reduce fiscal exposure, the federal government has a role to play in providing information to decision makers at all levels so they can make more informed choices about how to manage climate change risks.

Two ratings for this segment regressed to not met and three others remain unchanged at not met.

Leadership commitment: not met. The March 2017 E.O. 13783 revoked the Climate Action Plan and E.O. 13653 that we previously found had partially met this criterion because they demonstrated top leadership support for federal technical assistance.

Capacity: not met. Under the Global Change Research Act of 1990, the administration released the Fourth National Climate Assessment in November 2018, which summarizes the impacts of climate change on the U.S. and provides some web-based tools to help people understand and manage their climate-related risk. However, this criterion remains not met because the resources and government-wide structure for providing technical assistance to decision makers—with clear roles, responsibilities, and working relationships among federal, state, local, and private-sector entities—remain undefined. We have made multiple recommendations to the EOP to address these issues; however, the EOP has yet to make progress implementing them. Additionally, E.O. 13783 revoked E.O. 13653, which had directed federal agencies to develop and provide authoritative and accessible climate information to support federal and nonfederal decision makers.

Action plan: not met. We had previously found that E.O. 13653 and the Climate Action Plan had partially met this criterion because they outlined some steps for federal agencies to provide information to support resilience. However, these policies were revoked by E.O. 13783.

Monitoring: not met. There are still no programs or mechanisms to monitor government-wide progress in addressing the challenges we have identified related to the federal government’s role in providing climate-related technical assistance. These challenges include clarifying the roles, responsibilities, and working relationships among federal, state, local, and private-sector entities; identifying the necessary resources and establishing the government-wide structure necessary to implement plans; and addressing the fragmentation of federal climate information across individual agencies that use the information in different ways to meet their missions.

Demonstrated progress: not met.  The federal government has not implemented our recommendations to improve its technical assistance to decision makers, as described in the following section.

Federal Insurance Programs

The federal government needs to incentivize climate resilience by incorporating it into the requirements for federal insurance programs. Specifically, we made the following recommendations in October 2014:

  • FEMA should consider amending the floodplain management minimum standards to incorporate forward-looking requirements, similar to the minimum flood risk reduction standard adopted by the Hurricane Sandy Rebuilding Task Force. FEMA agreed with this recommendation and plans to start implementing it in 2020.
  • USDA should consider working with agricultural experts to incorporate long-term resilience into the good farming practices that are required for claim payments. USDA neither agreed nor disagreed with this recommendation; as of this report, USDA has not implemented it.

Congressional Actions Needed

Reducing federal fiscal exposure to climate change risks will also require congressional action to address other structural challenges in these insurance programs that send inaccurate price signals to policyholders about their risk of loss or increase the cost of these programs to taxpayers. For example,

  • In April 2017, we reported that Congress should consider comprehensive reform to the flood insurance program to improve its solvency and enhance the nation’s resilience to floods, including funding for flood mitigation and flood mapping.
  • In July 2017, we reported that Congress should consider repealing certain provisions in the Agricultural Act of 2014 that hinder the crop insurance program’s ability to adjust participating private insurers’ rate of return and share of premiums as changing conditions warrant.

Disaster Aid and Resilience

The federal government needs to develop the information needed to manage disaster assistance programs’ long-term exposure to climate change and fully implement measures that promote resilience from our prior recommendations and the recently enacted DRRA.  Specifically, the federal government should:

  • implement our April 2018 recommendation to provide, concurrent with any future climate change funding reports to Congress, funding information for federal programs with fiscal exposure to climate change, including costs for disaster assistance programs. OMB disagreed with this recommendation and has not implemented it as of this report;
  • implement our July 2015 priority recommendation to develop a comprehensive strategy for identifying, prioritizing, and implementing investments for disaster resilience by incorporating these elements into the draft NMIS and finalizing it, which FEMA plans to do in February 2019.
  • implement our September 2012 priority recommendation to update the methodology for assessing jurisdictions’ capability to respond and recover from a disaster without federal assistance. In 2017, FEMA had proposed establishing a disaster deductible but abandoned this effort in August 2018 in response to public comments. FEMA is currently exploring alternative options to update its methodology, but it has not provided a timetable for their implementation.
  • implement our March 2011 recommendation to complete a national preparedness assessment of capability gaps at each jurisdiction’s level based on tiered, capability-specific performance objectives to enable better prioritization of FEMA grant funding to states and localities. FEMA reported that it plans on implementing a new methodology to assess core capabilities by December 2019 and will be able to provide complete assessment results in 2020.
  • implement our 2003 recommendation to adopt adequate budgeting and forecasting procedures to account for fiscal exposures, such as major disaster costs, as part of the federal budget process. These procedures should provide a comprehensive view of overall funding and the trade-offs between spending with long-term benefits, such as resilience investments and short-term benefits, such as post-disaster repairs and recovery. OMB neither agreed nor disagreed with this  recommendation and has not taken any action to implement it as of this report;
  • consistent with our criteria for removal from the High-Risk List, implement its efforts to manage disaster assistance programs’ long-term exposure by (1) defining the responsibilities of federal and other partners, (2) identifying the resources necessary to sustain its efforts, and (3) tracking its results.

Federal Government as Property Owner

The federal government needs a comprehensive approach to improve the resilience of the facilities it owns and operates, and land it manages. This involves incorporating climate change resilience into agencies’ infrastructure and facility planning processes, such as DOD’s efforts to implement our prior recommendations. It also involves accounting for climate change in NEPA analyses and working with relevant professional associations to incorporate climate change information into structural design standards. We made the following recommendations:

  • In April 2013, we recommended that CEQ should finalize guidance on how federal agencies can consider climate change in their evaluations of proposed federal actions under NEPA. CEQ neither agreed nor disagreed with this recommendation but in August 2016, CEQ implemented it by issuing final guidance. However, in April 2017, CEQ rescinded this guidance.
  • In November 2016, we recommended that the Department of Commerce should convene federal agencies to provide the best available forward-looking climate information to standards-developing organizations. Commerce neither agreed nor disagreed with this recommendation and as of May 2018, Commerce had not implemented it.

Additionally, in our 2017 High-Risk Report, we reported that implementing the January 2015 federal flood risk management standard—which required all future federal investments in, and affecting, floodplains to meet a certain elevation level—would have enhanced federal flood resilience by ensuring agencies addressed current and future flood risk. The August 2017 E.O. 13807 rescinded this standard.

Further, once the federal government provides leadership support to improve the resilience of federal property, it should identify the resources necessary to implement its plans, sustain its efforts over time and track its results.


Federal Government as Leader of National Climate Strategic Plan

The federal government could better reduce its fiscal exposure if federal efforts were coordinated and directed toward common goals such as improving climate resilience. For example, entities within the Executive Office of the President (EOP), including OMB should:

  • implement our May 2011 recommendation to develop a strategic plan to guide the nation’s efforts to adapt to climate change, which includes clear priorities that reflect the full range of climate-related federal activities, as well as establishes clear roles, responsibilities, and working relationships among federal, state, and local governments;
  • implement our September 2017 recommendation to use information on potential economic effects from climate change to help identify significant climate risks and craft appropriate federal responses; and
  • implement our April 2018 recommendation to provide information on fiscal exposures related to climate change to Congress in conjunction with future reports on climate change funding.

EOP neither agreed nor disagreed with our 2011 recommendation to develop a strategic plan to guide adaptation efforts and our 2017 recommendation to use information on potential economic effects from climate change to identify significant risks and responses. OMB disagreed with our 2018 recommendation to provide information on fiscal exposures related to climate change to Congress in conjunction with any future climate change funding reports. As of this high-risk update, EOP and OMB have not implemented any of these recommendations.

Further, to meet our criteria for removal from the High-Risk List, the federal government’s approach will need to include measurable goals; identify the responsibilities and relationships among federal, state, and  other entities; determine how such efforts will be funded and staffed over time; and establish mechanisms to monitor and demonstrate its progress. Because decisions at the state and local levels drive much of the federal government’s fiscal exposure, coordination between levels of government is essential.


Technical Assistance to Federal, State, Local, and Private-Sector Decision Makers

The federal government needs a government-wide approach for providing federal, state, local, and private-sector decision makers with (1) the best available climate-related information, and (2) assistance for translating climate-related data into accessible information.

In November 2015, we found that federal efforts, such as the National Climate Assessment, provide useful information about climate change impacts. However, we also found that these efforts did not fully meet the climate information needs of federal, state, local, and private sector decision makers, which hinders their planning efforts. We found that these decision makers would benefit from a national climate information system that would develop and update authoritative climate observations and projections specifically for use in decision-making. As a result, we recommended that EOP should:

  • designate a federal entity to develop and periodically update a set of authoritative climate observations and projections for use in federal decision-making, which other decision makers could also access, and
  • designate a federal entity to create a national climate information system with defined roles for federal agencies and nonfederal entities with existing statutory authority.

EOP neither agreed nor disagreed with our recommendations and as of this report, has not implemented them.

Looking for our recommendations? Click on any report to find each associated recommendation and its current implementation status.
  • portrait of J. Alfredo Gomez
    • J. Alfredo Gomez
    • Director, Natural Resources and Environment
    • gomezj@gao.gov
    • (202) 512-3841