The Congressional Budget Office (CBO) estimates that hurricane damage and the federal financial aid that often follows will likely increase significantly in the coming decades, due to the effects climate change and coastal development. In a report, Potential Increases in Hurricane Damage in the Unites States: Implications for the Federal Budget, the CBO estimated how much hurricane damage might be expected in 2025, 2050 and 2075 compared to today, given four conditions: sea levels in different states; frequency and intensity of hurricanes; population in coastal areas; and per capita income in coastal areas. Sea level and hurricane intensity are affected by climate change while population and per capita income are affected by coastal development. CBO’s report says that climate change will likely result in an increase in the frequency and intensity of hurricanes as well as in sea level rise, while trends in coastal development will result in heightened hurricane damage, even in the absence of an increase in sea levels or in hurricane frequency.
The report includes an overview of CBO’s three-part methodology for analyzing the cost of hurricane damages now and in the future based on the four underlying conditions. The analysis estimates that as a result of these trends, over time the cost to the federal government of addressing hurricane damage will go up more quickly than the economy will grow. CBO suggests three potential policy approaches to reduce the burden of spending so much federal money on hurricane response and recovery. These are: limit greenhouse gas (GHG) emissions; shift more costs to state and local governments and private entities; and invest in structural changes to reduce hurricane vulnerability.
Limiting GHGs is highly dependent on the extent to which other countries reduce their GHG emissions. Shifting more of the costs of hurricane damage to state, local and private rather entities rather than having the costs be borne by U.S. taxpayers, in general would incentivize them to more fully account for potential hurricane damage when choosing whether to locate or redevelop vulnerable areas. Among the approaches identified for shifting a greater percentage of the costs to states is increasing insurance requirements, increasing the minimum amount of statewide per capita damage used as the primary criterion providing assistance and reducing the share of costs borne by the government for funding provided via FEMA’s disaster relief fund. Finally, the report notes there are several ways to invest in structural changes to reduce hurricane vulnerability – typically called hazard-mitigation measures. FEMA lists several such measures in its program. The report also says that assessing the cost-effectiveness of these measures would require case- specific analyses. However, in 2007, the CBO examined some of these measures under FEMA’s Pre-Disaster Mitigation Program and determined that projects developed under this program reduced future expected losses by an estimated three dollars for each dollar spent on the projects.