The consequences of GOP climate denial will be costly

With the second Trump administration refusing to acknowledge ongoing climate change, primary concern is naturally with its plan to gut U.S. efforts to reduce greenhouse emissions and again exit from the Paris Agreement. Unfortunately, this is not all the wreckage that is to come.

Persistent climate denial will increase the domestic cost of extreme weather events driven by the warming now built into the global system. Incentives for where to live and build will be mis-aligned, needed institutional reform will be shelved, and priorities for protective investment will be distorted. Leaders of vulnerable states like Texas and Florida are following the same playbook.

Over decades of more stable climate, the U.S. has developed two types of institutions to help manage weather risks. In one, losses by individuals and communities impacted by extreme events are reduced by a combination of insurance and government disaster aid. For residential and commercial property, costs of storm damage or wildfire are passed (for a fee) into private insurance markets, and flood risks in vulnerable coastal and river zones are provided (also for a fee) by a National Flood Insurance Program. (A federal crop insurance program managed by the Department of Agriculture covers weather-related loss.)

Meanwhile, governments, supplemented by the Red Cross and other nonprofits, stand by to provide aid, in programs that range from city cooling centers provided on dangerously hot days to housing assistance.

In the other response, weather risks are reduced by lowering the probability of impact when a weather extreme occurs. This is achieved by measures like flood control, building standards and strategic retreat from danger zones. The likelihood of damage is further reduced by providing forecasts of coming events, so people can get out of the way, as with the warning the day before the start of the Los Angeles fires.

With extreme weather magnified by a warming climate, leading to an increase in billion-dollar climate-driven weather disasters, these private markets and government aid programs are under increasing stress — some to the point of collapse. Denial of what is happening, and refusal to support corrective action, is going to be costly.

The most dramatic impact of the increase in extremes has been on residential and commercial property insurance, leading to its rise in cost and gradual disappearance in vulnerable states like Florida and California.

Abandoned property owners have turned to state Fair Access to Insurance or FAIR systems, which were intended to provide coverage to the few owners unable to get normal policies because of special risks such as unusual weather exposure, high theft risk or poor construction.

California’s FAIR system has expanded to cover over 400,000 properties and growing; as of last fall, Florida’s Citizen’s Property Insurance Corporation had 1.3 million policies in force and is the largest policy holder in the state.

The subsidy needed to cover these properties is first passed on to the wider state insurance pool. Should that source prove inadequate, it ultimately goes to the state budget. There are growing concerns that the Florida system is insolvent, though state officials deny they might seek a federal bailout. There are national policy implications as well, as threats rise for the federally sponsored agencies that back most U.S. mortgages.

The National Flood Insurance Program is in similar trouble. It was supposed to be priced to cover the aggregate risk, though the program can borrow from the U.S. Treasury (now limited to $30 billion) to cover large losses in some years, to be paid back in quieter times. This arrangement balanced out in the early decades, but in the early 2000s the debt began to rise as fees did not cover the rising risk. In 2017 Congress bailed out the system, simply cancelling $16 billion of what was owed. By 2024 the debt was back up to $20 billion — and that was before hurricanes Helene and Milton.

These policies of socializing of property risks — passing the subsidy for vulnerable homes and businesses onto others in the state and imposing the losses of an underpriced federal flood program onto the nation as a whole — creates incentives to build in areas made more vulnerable by climate change. A move into danger is under way for a number of reasons, and misallocation of rising weather risk makes it worse.

Fixing the insurance system is a challenge, involving concerns that extend from the stability of the national housing market to issues of distribution and fairness, as citizens in less vulnerable areas now subsidize those who want to live near the flammable forest margin or on an exposed Atlantic beach. But progress is hardly aided by denial of the primary cause of the problem.

Systems of government disaster aid are also in trouble. FEMA is the biggest national source of government aid after weather disasters, though the Small Business Administration, the Department of Housing and Urban Development and other federal agencies also contribute, as do state and local entities. Most of the declared disasters to which federal agencies respond are influenced by extreme weather: fire, severe storm, flood and tropical storm.

Agency budgets regularly prove inadequate for these events and require special congressional allocations: $90 billion in 2005 (Katrina), $50 billion in 2013 (Sandy) and $120 billion in 2017 (Harvey, Irma, and Maria). Most recently, the November 2024 stopgap spending bill included a special allocation of $100 billion to cover costs of that year’s events, including hurricanes Helene and Milton. The need for aid to victims of the Los Angeles fires is yet to be calculated.

The realization that FEMA and other agencies have not adjusted to the growth of heavily damaging weather extremes, and need to be reformed to deal with what is coming, will get no attention from federal and state officials who deny the warming that is driving the change.

Many public activities are devoted to the second way of reducing weather risk: lowering the probability of impact when an extreme occurs. For example, flood control works are developed by the U.S. Corps of Engineers (such as the $53 billion project to protect New York harbor), states and cities mandate retreat from vulnerable areas, and authorities set revised standards for street drains. Not only do these investments provide direct financial and social benefits, they also lower the cost of insurance and its component burden of reinsurance.

These actions are going forward, and the potential cost — not to mention the economic, human and environmental damage if these plans are wrong — is huge. Yet the Trump administration is on track to gut federal climate science and analysis programs needed to inform decisions about the evolving threats: the pace of sea level rise, changing fire conditions, and rising rainfall intensity.

Apparently, ostriches don't actually stick their heads in the ground when threatened, but it remains an apt metaphor for what the Trump administration and some state leaders are doing. Denying there is a problem stimies efforts to correct the damaged insurance system, organize disaster relief appropriate for changing threats, and properly inform decisions about protective investment. Besides the urgent need to protect programs to limit U.S. greenhouse gas emissions, and to bring the nation back into the global effort, the federal administration and recalcitrant state leaders must be convinced to pull their heads out of the dirt and face the change that is coming — whether they want to acknowledge it or not.

Henry Jacoby is the William F. Pounds Professor of Management, emeritus, in the M.I.T. Sloan School of Management and founding co-director of the M.I.T. Joint Program on the Science and Policy of Global Change. Richard Richels served as lead author for multiple chapters of the Intergovernmental Panel on Climate Change in the areas of mitigation, impacts and adaptation. Gary Yohe is the Huffington Foundation professor of Economics and Environmental Studies, Emeritus, at Wesleyan University in Connecticut.

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