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

This information appears as published in the 2017 High Risk Report.

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Climate change is considered by many to be a complex, crosscutting issue that poses risks to many environmental and economic systems and presents a significant financial risk to the federal government. According to the National Research Council (NRC), although the exact details cannot be predicted with certainty, there is clear scientific understanding that climate change poses serious risks to human society and many of the physical and ecological systems upon which society depends.1 According to the United States Global Change Research Program (USGCRP), among other reported impacts, climate change could threaten coastal areas with rising sea levels, alter agricultural productivity, and increase the costs of severe weather events as these once “rare” events potentially become more common and intense due to climate change.2

For example, the Department of Defense's (DOD) 2010 and 2014 Quadrennial Defense Reviews state that climate change poses risks to defense infrastructure, particularly on the coasts. DOD's infrastructure consists of more than 555,000 defense facilities and 28 million acres of land, with a replacement value of close to $850 billion.3 In addition, extreme weather events have cost the nation tens of billions of dollars over the past decade. For example, in January 2013, about $60 billion in budget authority was provided for expenses related to the consequences of Superstorm Sandy. Further, based on a 2013 analysis of disaster relief appropriations by the Congressional Research Service, the amount of inflation-adjusted disaster relief per fiscal year increased from a median of $6.2 billion for the years 2000 to 2006, to a median of $9.1 billion for the years 2007 to 2013 (46 percent).4

These impacts call attention to areas where government-wide action is needed to reduce fiscal exposure, because, among other roles, the federal government (1) leads a strategic plan that coordinates federal efforts and also informs state, local, and private-sector action; (2) owns or operates extensive infrastructure vulnerable to climate impacts, such as defense facilities and federal property; (3) insures property and crops vulnerable to climate effects; (4) provides data and technical assistance to federal, state, local, and private-sector decision makers responsible for managing the impacts of climate change on their activities; and (5) provides disaster relief aid. As a result, we added Limiting the Federal Government's Fiscal Exposure by Better Managing Climate Change Risks to the High-Risk List in 2013.

One way to reduce the potential impacts of climate change is to enhance climate resilience.5 When discussing climate change, the term adaptation—defined as adjustments to natural or human systems in response to actual or expected climate change—is synonymous with enhancing climate resilience. Adaptation measures to protect infrastructure, for example, include raising river or coastal dikes to protect infrastructure from sea level rise, building higher bridges, and increasing the capacity of storm water systems. Enhancing climate resilience can cost additional money up front, but could also reduce potential future damage from climate-related events that—given expected budget pressures—would otherwise constrain federal programs. As stated in a 2010 NRC report, increasing the nation's ability to respond to a changing climate can be viewed as an insurance policy against climate change risks.6

Furthermore, according to NRC and USGCRP, the nation can reduce its vulnerability by limiting the magnitude of climate change through actions to limit greenhouse gas emissions.7 We recognize that (1) the federal government has a number of efforts underway to decrease domestic greenhouse gas emissions, and (2) the success of efforts to reduce greenhouse gas emissions depends in large part on cooperative international efforts. However, limiting the federal government's fiscal exposure to climate change risks will be challenging no matter the outcome of efforts to reduce emissions, in part because greenhouse gases already in the atmosphere will continue altering the climate system for many decades, according to NRC and USGCRP.8

[1] NRC is the principal operating agency of the National Academy of Sciences and the National Academy of Engineering. NRC, Committee on America's Climate Choices, America's Climate Choices (Washington, D.C.: 2011). See also NRC, Climate Change: Evidence, Impacts, and Choices. Answers to common questions about the science of climate change (Washington, D.C.: 2012). For more information about NRC's recent reports on climate change, click here.

[2] Melillo, Jerry M., Terese (T.C.) Richmond, and Gary W. Yohe, eds., Climate Change Impacts in the United States: The Third National Climate Assessment, U.S. Global Change Research Program (Washington, D.C.: U.S. Government Printing Office, May 2014). USGCRP coordinates and integrates the activities of 13 federal agencies that research changes in the global environment and their implications for society. USGCRP began as a presidential initiative in 1989 and was codified in the Global Change Research Act of 1990 (Pub. L. No. 101-606, § 103 (1990)). USGCRP-participating agencies are the Departments of Agriculture, Commerce, Defense, Energy, Interior, Health and Human Services, State, and Transportation; the U.S. Agency for International Development; the Environmental Protection Agency; the National Aeronautics and Space Administration; the National Science Foundation; and the Smithsonian Institution.

[3] GAO, Climate Change Adaptation: DOD Can Improve Infrastructure Planning and Processes to Better Account for Potential Impacts, GAO-14-446 (Washington, D.C.: May 30, 2014).

[4] GAO, Climate Change: Better Management of Exposure to Potential Future Losses Is Needed for Federal Flood and Crop Insurance, GAO-15-28 (Washington, D.C.: Oct. 29, 2014).

[5] The National Academies define resilience as the ability to prepare and plan for, absorb, recover from, and more successfully adapt to adverse events. The National Academies, Committee on Increasing National Resilience to Hazards and Disasters; Committee on Science, Engineering, and Public Policy; Disaster Resilience: A National Imperative (Washington, D.C.: 2012).

[6] NRC, Panel on Adapting to the Impacts of Climate Change, America's Climate Choices: Adapting to the Impacts of Climate Change (Washington, D.C.: 2010).

[7] In the atmosphere, greenhouse gases absorb and reemit radiation within the thermal infrared range of the electromagnetic spectrum. This is the fundamental cause of the greenhouse effect, or the warming of Earth's atmosphere. In order of their prevalence by volume, the primary greenhouse gases are water vapor, carbon dioxide, methane, nitrous oxide, and ozone.

[8] The focus of this high-risk area may evolve over time to the extent that federal climate change programs and policies change.

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

As of December 2016, the federal government has taken additional steps since our 2015 update and partially met four of the five criteria for removal from our High-Risk List—leadership commitment, capacity, action plan, and monitoring. Specifically, the federal government partially met the monitoring criterion, which had been rated not met in the 2015 report, and has taken further action in three criteria that remain partially met—leadership commitment, capacity, and action plan.1 However, the demonstrated progress criterion remains not met because it is too early to determine whether the federal government has made progress.

Various executive orders (E.O.), task forces, and strategic planning documents identify climate change as a priority and demonstrate leadership commitment. This leadership commitment needs to be sustained and enhanced to address all aspects of the federal fiscal exposure to climate change in a cohesive manner. As we reported in 2015, the federal government has some capacity to address the federal fiscal exposure to climate change. However, across its actions and strategies, the federal government has yet to clearly define the roles, responsibilities, and working relationships among federal, state, local, and private-sector entities, or how these efforts will be funded, staffed, and sustained over time. The federal government has taken further action by establishing a monitoring mechanism to review certain federal agencies' efforts to reduce some aspects of their fiscal exposure to climate change, such as building efficiency. However, it is too early to determine the new mechanism's effectiveness at demonstrating progress in implementing corrective measures, or whether the federal government will apply a similar mechanism across all areas of federal fiscal exposure to climate change.

[1] For example, in response to a recommendation we made in May 2014, the Office of the Secretary of Defense and the services took a number of actions to develop a project plan and milestones for completing DOD's screening-level climate change vulnerability assessment. GAO-14-446.

The federal government needs a cohesive strategic approach with strong leadership and the authority to manage climate change risks that encompasses the entire range of related federal activities and addresses all key elements of strategic planning. Such an approach includes implementing our May 2011 recommendation to establish federal strategic climate change priorities and develop roles, responsibilities, and working relationships among federal, state, and local entities.1

The federal government has had many climate-related strategic planning activities that demonstrated leadership commitment, such as the President's June 2013 Climate Action Plan and the March 2015 E.O.13693 Planning for Federal Sustainability in the Next Decade. However, it was unclear how the various planning efforts related to each other or whether they amounted to a government-wide approach for reducing federal fiscal exposures. Accordingly, leadership commitment needs to be enhanced, with increased focus on developing a cohesive strategy to reduce fiscal exposure across the full range of related federal activities. Further, the federal government will need to focus on implementing this strategy—by developing measurable goals; identifying the roles, responsibilities, and working relationships among federal, state, and local entities; identifying how such efforts will be funded and staffed over time; and establishing mechanisms to track and monitor progress.

In addition to addressing these broad strategic challenges, there are specific areas that require attention including the following:

  • Federal property and resources: This involves federal agencies' consistently implementing (1) the January 2015 E.O. 13690, Establishing a Federal Flood Risk Management Standard and a Process for Further Soliciting and Considering Stakeholder Input, which requires all future federal investments in, and affecting, floodplains to meet a certain elevation level, as established by the standard;2 (2) the Council on Environmental Quality's (CEQ) final guidance for considering climate change in agencies' National Environmental Policy Act of 1969 (NEPA) implementation; (3) the Office of Management and Budget's (OMB) Circular A-11—government-wide guidance to agencies for developing their annual budgets—which directed agencies to include funds for resilience in construction and renovation of federal facilities in agency fiscal year 2017 and 2018 budget requests; and (4) actions to achieve the government-wide goals for improving the climate resilience of federal facilities established by E.O. 13693.
  • Federal flood and crop insurance programs: This entails building climate resilience into the requirements for federal crop and flood insurance programs. Although the Federal Emergency Management Agency (FEMA) has plans to provide updated hazard products and tools that incorporate climate science on an advisory basis, and the U.S. Department of Agriculture (USDA) provides information on voluntary resilience-building actions for producers—policyholders are not required to use the information to improve their resilience and reduce federal fiscal exposure. As such, the federal government needs to address our October 2014 recommendations to incorporate, as appropriate, forward-looking standards into required minimum flood elevation standards for insured properties and long-term agricultural resilience into the allowable agricultural practices required for crop insurance by the federal government.3
  • Technical assistance to federal, state, local, and private-sector decision makers: This involves the Executive Office of the President (EOP) helping federal, state, local, and private sector decision makers access and use the best available climate information by designating a federal entity to (1) develop and periodically update a set of authoritative climate observations and projections for use in federal decision making, which state, local, and private sector decision makers could also access to obtain the best available climate information; and (2) create a national climate information system with defined roles for federal agencies and nonfederal entities, such as academic institutions, with existing statutory authority. Additionally, to assist standards-developing organizations incorporate forward-looking climate information into building codes and other standards, we recommended in November 2016 that the Secretary of Commerce should direct the National Institute of Standards and Technology (NIST) to convene federal agencies for an ongoing effort to provide the best available forward-looking climate information to these standards-developing organizations.4
  • Disaster aid: This involves implementing adequate budgeting and forecasting procedures to account for the costs of disasters. Additionally, the federal government has not yet defined the resources and government-wide structure to implement existing plans for reducing the federal fiscal exposure to disaster relief by improving resilience—with clear roles, responsibilities, and working relationships among federal, state, local, and private-sector entities.

Recognizing that each department and agency operates under its own authorities and responsibilities—and can therefore be expected to address climate change in different ways relevant to its own mission—federal efforts have encouraged a decentralized approach, with federal agencies incorporating climate-related information into their planning, operations, policies, and programs. While individual agency actions are necessary, a centralized national strategy driven by a government-wide plan is also needed to reduce the federal fiscal exposure to climate change, maximize investments, achieve efficiencies, and better position the government for success. Even then, such approaches will not be sufficient unless also coordinated with state, local, and private-sector decisions that drive much of the federal government's fiscal exposure. The challenge is to develop a cohesive approach at the federal level that also informs state, local, and private-sector action.

The interagency Council on Climate Preparedness and Resilience (Resilience Council) established by E.O. 13653 recommended many of the same actions to future administrations in its October 2016 report Opportunities to Enhance the Nation's Resilience to Climate Change. Among other actions, the Resilience Council called on the federal government to strengthen resilience coordination across federal agencies and increase the capacity for climate resilience efforts government-wide, expand incentives and requirements to increase resilience of infrastructure and buildings, improve awareness and dissemination of climate information, and enhance the usability of climate tools for decision making. Importantly, the Resilience Council recognized the need to coordinate resilience among multiple stakeholders—including all levels of government, academic institutions, and the private sector—through partnerships, shared knowledge and resources, and coordinated strategies, and to evaluate government-wide progress and performance of resilience investments. These are key elements of our criteria for removal from the High-Risk List.

[1] GAO, Climate Change: Improvements Needed to Clarify National Priorities and Better Align Them with Federal Funding Decisions, GAO-11-317 (Washington, D.C.: May 20, 2011).

[2] GAO, Hurricane Sandy: An Investment Strategy Could Help the Federal Government Enhance National Resilience for Future Disasters, GAO-15-515 (Washington, D.C.: July 30, 2015). The Consolidated Appropriation Act for fiscal year 2016 prohibited the use of appropriated funds to implement several aspects of E. O. 13690, but the prohibition does not apply during fiscal year 2017.

[4] GAO, Climate Change: Improved Federal Coordination Could Facilitate Use of Forward-Looking Climate Information in Design Standards, Building Codes, and Certification, GAO-17-3 (Washington, D.C.: Nov. 30, 2016).

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    • Alfredo Gomez
    • Director, Natural Resources and Environment
    • (202)512-3841