TL’DR
1) A look into how humans are funding and perpetuating our own environmental problems
2) Floods are becoming more frequent and severe thanks to climate change, and many Americans in high-risk areas still do not have flood insurance
3) Koalas have officially move from threatened to endangered
Take a peek under the hood at the way we use subsidies around the world and it’s hard not to get frustrated. It’s also somewhat easy to see how big of a swing we could make in the right direction if we reversed course on these.
Subsides are government handouts, typically in the form of tax breaks or price discounts that help a business or industry grow. The two biggest recipients of subsidies are fossil fuels and industrialized agriculture – which also happen to be the two biggest drivers of climate change and biodiversity collapse.
A recent report shows that $1.8 trillion in subsidies globally directly go to environmentally damaging practices. This is 2% of all global GDP. These take the form of tax breaks for cattle ranching in the Amazon to tax breaks for fossil fuel companies subsidizing groundwater pumping in the Middle East to price breaks on fertilizers in the US that decimate soil health.
We are quite literally financing our own problems.
Livestock is the biggest of the problems in the agricultural business. It is the largest recipient of framing subsidies globally while using 83% of all farmland to produce just 18% of calories consumed.
Here are some other concerning statistics:
- 3 billion people on the planet are unable to afford a healthy diet because we don’t subsidize healthy foods, we subsidize unhealthy foods
- As a result 2 billion people are overweight
- 800 million people deal with chronic hunger yet we waste 33% of all the food we grow and produce
- Agriculture contributes 25% of all greenhouse gas emissions, 70% of biodiversity loss, and 80% of deforestation
Yet we continue to subsidize the worst forms of agriculture in terms of environmental impact & health – beef and dairy in particular.
If an industry needs such subsidies to be affordable, well then, maybe it’s not actually all the cost beneficial in the first place, which is the claim most of these industries make.
Moving over to fossil fuels, the numbers are even more concerning. The International Monetary Fund reported last year that fossil fuels alone receive $5.9 trillion per year in subsidies when you factor in costs of the damages they cause which they don’t have to pay for – such as global warming and pollution. The report estimates that a majority of fossil fuels sit at least 50% below true costs thanks to subsidies.
Subsidies are the lifeblood keeping the wrong end of these industries in power. They keep these forms of energy and food cheap and affordable. Not because they actually are, but because our government systems allow them to be. Which in turn is damaging our health and planet in droves. It’s time to change that.
REDIRECTING SUBSIDIES
There are many ways to solve this problem, which needs to start with ending subsidies for problematic fossil fuels, livestock, and fertilizers and redirecting them towards making alternatives more affordable.
Many have called for this change to happen by 2030 in order to hit our climate and biodiversity targets. Ehh wait, we still don’t have biodiversity targets! Which is another pain point that needs to be addressed in short order.
That aside, we still can get to work on changing this system. Because the math just doesn’t add up.
For example, international finances are pledging $100B per year for climate change mitigation and $5B per year for deforestation support. Yet we spend $470B per year on farming subsidies that directly drive deforestation and soil erosion, limiting those natural carbon sinks which leads to more climate change. It is estimated that the financial damage from large scale industrialized farming causes $4-$6 trillion per year! Yet all the subsidies go into these practices, not into small and medium size regional or local farming operations.
As for the argument that erasing these subsidies will lead to higher energy and food costs. Well that’s not so much an issue long-term, but short-term the effects will hit different people in different ways, so it’s not so smooth. We need to take care of those negatively impacted along the way.
On the energy front, we can shift subsidies away from fossil fuels and towards renewables so that the latter can be just as affordable as they continue to scale and become more efficient. We also could make fossil fuel subsidies still partially available so long as the companies behind them are hitting goals for the renewable shift. I.e. Exxon can keep their natural gas subsidies so long as they convert at least 5% of their energy mix per year towards renewables, for example.
There may also be a way to pay for the energy transition by charging a higher variable cost per unit of electricity for those in higher-income brackets using it more intently. A sort of geography and economic based electricity tax.
In terms of food, the concern over higher costs also doesn’t hold water. This assessment here actually finds that subsidizing healthy, sustainable food actually brings food prices down over time because healthier soil leads to higher yields. As well as less costs needed for fertilizers. Regenerative farming leads to less cost of paying for pesticides, even if initially it takes a bit more effort.
The problem is not math or economics at all. The problem is:
- The big players receiving these subsidies have a stranglehold on our political system via lobbyists and in-roads to government
- People are often not willing to shift habits. For example we could pass a sugar tax which would remove the subsidy for added-sugar and phase that out over time. Better for our health and our environment. However there would be outrage initially from higher costs in all of our sugary products that people are addicted to.
OUR TAKE
The Great Subsidy Shift as we like to call it is probably one of the single-most impactful things we can do to meet our global warming and biodiversity goals. Folks are chipping away at this and conversations are happening like never before, but there remains a lot of political power and influence to overcome.
One thing that would help is driving a remodel of our macroeconomics. Economics are what drive almost all policy and business decisions globally. For a long time, costs like environmental damage, public health damage, and social justice damage have been treated as externalities. Costs that don’t hit a company’s bottom line.
They should. And if they did, we would see shifts in our energy and food systems much faster towards where we want to be. Open, free market capitalism could properly do it’s job in this way if actual costs were recognized, as it would make renewable energy more cost favorable over fossil fuels, or regenerative agriculture more cost favorable over industrialized, mono-agriculture.
There is a great book called Donut Economics that really spells this out in detail, a read we highly recommend.
And just last year at the COP15 Biodiversity Summit in China, there was talk of ending the wrong end of subsidies by 2030. We are hoping this year that will move from talk to commitments from participating countries, which includes everyone except the United States, Syria, and The Vatican (yup we are not kidding, that’s the list, thanks to the Trump Administration which removed us and the Biden Administration who has been too preoccupied with policing culture rather than harmful subsidies, but we digress….).
Let’s end these absurd subsidies. There is momentum for doing so.
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THE MASSIVE GAP IN FLOOD INSURANCE AND PREPAREDNESS IN THE US MUST BE SOLVED
It seems year after year, extreme heat, droughts, rainfall, wildfires and more hit record highs. The climate is changing faster than even the most pessimistic climate scientists believed just 10-20 years ago. One of the biggest problems facing the US and many other parts of the world is the gap in preparedness for increased flooding.
The 2020 Atlantic Hurricane season was a record high with 30 named storms, 13 hurricanes, and $65B in damages. According to the 2018 National Climate Assessment, the Northeast is producing 55% more rain today compared to 60 years prior. It’s not just the Northeast that is being hit. Hurricane Harvey in 2017 dropped 60 inches of rain on Houston, 100,000 damaged homes and $125B in damages. By 2040, major cities like Miami and Charleston, SC could be flooded up to 100 days per year!
The reason of course is the warmer atmosphere. Warmer air holds more water vapor, hence heavier rainfalls. Warmer surface ocean levels also accelerate hurricanes and make them even wetter. It’s not only that climate change is creating a higher frequency of hurricanes and floods necessarily, but that those that happen are far more intense and drop a lot more rain.
So are we prepared? Ehhh, not at all.
Today only 5.5 million homes in the US have active flood insurance. Yet some 60 million homes are in moderate to high risk flood areas. That is a massive, massive gap. So why is the gap so large? The answer to this question, alongside the reason why so many cities also sit unprepared, is due to how outdated the National Oceanic & Atmospheric Administration (NOAA) info is, and right now there is a war brewing in Congress on updating it.
NAOO —> CITY PLANNING —> INSURANCE —> POLITICAL BATTLE
Here’s a little crash course in the system behind our flood planning and insurance market here in the US.
The NOAA supplies the models and analysis for flood risk that nearly every city and state in the US runs from. That planning then drives insurance rates for the National Flood Insurance Program that 90% of those with flood insurance rely on, a government program that gets tacked onto your property insurance. There are private insurers out there too, but they only make up 10% of the market. Few cities outside or recently hit markets like Houston (Hurricane Harvey) and New Orleans (Hurricane Katrina) require homeowners to carry flood insurance, typically through the NOAA modeled price of the NFIP program. For the cities that don’t require it, very few homeowners get insurance because they do not believe the risks are all that real.
Now the NFIP lies under FEMA, the same organization that funds all the rescue and relief efforts when floods happen, and it has been extended 27 times over the past 10 years funding wise in efforts to cover more and more damages.
So why is there such a gap in high risk cities requiring flood insurance and homeowners seeking it out? Because of how outdated the NOAA models are. At the state level, states such as Wyoming, Oregon, and Washington are still working off models from the 70s.
There are even parts of Texas using models from the 60s. This is because states have to pay for updated NOAA studies. Many choose not to, especially when they have leadership that does not buy into the science of climate change 100%. This in turn leads to risk being underreported and big gaps in insurance. But it also contributes to a lack of city adaptation in infrastructure, namely the storm drains that are pretty much the only mitigation tool on hand for cities to handle floods. So many are outdated, and getting funding for updating them is hard to come by when the city is working off ancient models from a time where the climate and weather patterns are far different.
Congress & The Biden Administration recently pushed a plan forward to update all of the NOAA modeling nationally, called RR2.0 (Risk Rating). Sounds like a good idea right?
Well, many in Congress are standing tall against it, such as Republican Congressmen from Louisiana John Kennedy. This is because for the highest risk states, such as Louisiana, updating the risk models will almost undoubtedly lead to higher premiums for NFIP insurance, which is unavoidable in states like Louisiana where flood insurance is required in much of the state. In Kennedy’s cause, he’s routinely against any climate change induced policy changes, often standing behind fossil fuel companies for example, so this is no surprise.
However he is right that insurance rates would go up under the current system for many working and middle class homeowners, which is a problem at a time where folks are dealing with rising inflation and volatile financial markets.
OUR TAKE
This is a really complex issue to tackle, but an important one.
For one, the cost of insurance for homeowners in say Louisiana would not be as high if cities were better prepared for increased rainfall. Changing that though requires more funding, and thus often more taxes, as these would be massive projects to undertake. However, given the long term savings this adaptation would have on minimizing future damages paid out by FEMA and lowering the long-term effective cost of flood insurance, this seems to be the right starting point on addressing this problem.
We need RR2.0 to happen. Standing in the way of improving our data is a non-starter in our minds. However the government should be prepared to subsidize the insurance plans for working and middle class homeowners. The cost of which should be in the same infrastructure bill that is funding adaptation efforts for our cities. Yes, this means higher spending upfront, which likely requires printing more money and thus driving up inflation even more – not ideal right now- which is why this is such a delicate financial challenge to solve. We need the nation’s top economists working on this problem. Because as much as this increased spending may create short term side-effects, long term they minimize overall spending and loss of life by better preparing our cities and neighborhoods for increased flooding.
Private flood insurance is also a viable solution if the government drags its feet on updating RR2.0 and with it the NFIP modeling, or simply for any homeowner that wants more options for protection. Just this week, startup Flood Flash raised $15M in funding for its private insurance program.
There are also new companies popping up to map and model flooding and flood risks instead of waiting for NOAA to do the same, such as FloodMapp, which raised a venture round this week as well.
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WILL KOALAS NEW ENDANGERED STATUS LEAD TO CHANGE IN AUSTRALIA OR MORE OF THE SAME?
This last week Koalas officially moved from threatened to endangered. Something unfortunately long anticipated. It is believed over 30% of koalas have been lost in the last 3 years alone, a collapse accelerated by the record setting bushfires in 2019/2020. This beloved symbol of Australia is now on a path to extinction by 2050. Will this be a turning point for the country’s god awful track record on climate and ecosystem protection, or will Australia just keep business as usual and check the PR box of concern?
Let’s first start with some background on how koalas got to this place, and then delve into the larger issues in Australia that need to be addressed.
Koalas have been decimated by 3 main things:
- Habitat Loss
- Climate Change
- Disease, namely a deadly strain of chlamydia
All three of these drivers feed into each other. Climate change accelerates habitat loss as the bushfires demonstrated. Habitat loss feeds climate change by losing our natural carbon sinks. The stress of both habitat loss and climate change lower koala immune systems making it harder for them to fight the deadly or infertility effects of chlamydia.
In 2012, koalas were classified as endangered for the 1st time. A shock to the system for many Australians. Not so much for the government, mining, or agricultural industry. Since 2012, habit loss as accelerated by 25%. And here we are with koalas now facing extinction.
The Prime Minister, Scott Morrison, a bit of a goober if you ask us, declared $35M in funding for koala conservation. Which honestly is such a token gesture it’s almost laughable. Koala conservation doesn’t need a financial handout, they need Australia to stop destroying its natural forests and burning coal. However, given the country’s track record on these issues, major sea changes are needed in order to get there.
AUSTRALIA’S RATHER ATROCIOUS ENVIRONMENTAL TRACK RECORD
Last year going into COP26, the Climate Change Performance Index ranked Australia dead last in the world when it comes to Climate Policy. Last! Ok, so it was last amongst the 64 countries measured in detail, but still, that list included oil titans Saudi Arabia and Iran. Yet, last nonetheless!
Australia is the #2 exporter in the world of coal. In 2017, the goober minister Scott Morrison actually brought a lump of coal to a committee hearing defending it as the fruit of Australia’s future economic prosperity. Don’t believe us? Here’s the photo.
While nearly every major nation has set a goal of cutting emissions by 50% by 2030, and the collective world needing to cut by 45% by 2030 to reach our warming limit targets, Australia has held fast on a 26% commitment. In fact their environmental minister just up and left COP26 last year with a week to go!
Meanwhile, Australia is actually warming faster than other parts of the world. Temperatures are up 1.44C vs. pre-industrial levels compared to 1.1C globally. This is increasing drought conditions, bleaching and killing coral reefs, and leading to deadly heat waves.
All the while, as a country that has a lot of direct sunlight and wind and land mass particularly in the central and western areas that could produce so much renewable energy it would quickly be a net exporter, the current powers that have been sticking on a path of coal and natural gas.
The public sentiment against this position has been growing, and perhaps koalas could push it over the top to get to the changes we need to see.
OUR TAKE
It’s hard to put into words the sentimental value Australian’s hold for koalas. It trumps our love of bald eagles – typically our national wildlife symbol – by leaps and bounds.
The threat of losing this species becoming more real and near-term than ever may push enough Australian’s to prioritizing climate and environmental needs that we see big changes in elected officials in the years to come.
There are many things that can and should be done to help koalas – from vaccine development for the chlamydia wave to designed recovery zones – however there is little doubt that the major need near-term is to stop destroying their habitat and long term to lower emissions and limit global warming.
Koalas just may be the ambassadors that Australia needs to make these things a priority. And it goes to show that not only do wildlife serve critical roles in keeping ecosystems together (keystone species) and telling us when there is concern and where to look (indicator species) but they can also serve as beacons for larger changes we need to make (what we call ambassador species) to save this planet.
That’s what we are hoping for at least. It’s a shame so many koalas need to die and suffer to incite such change, but if they do, an already cherished marsupial will become absolute legend.
