Minimizing Asset Loss
Following the house resolution on a Green New Deal, policy experts, politicians, and thinktanks around the country have been inspired to contribute their own vision for a national climate plan. The Kleinman Center wants to ensure that we too are offering our vision for a successful national response to the global climate crisis. The below is one of six policy efforts that we see as essential elements of an effective climate plan. View the full list here.
Climate change, if left unchecked, will destroy billions of dollars in property, infrastructure, land rights, and ecosystem services. The necessary transition to renewable energy also threatens billions of dollars in stranded assets designed for the transportation, extraction, processing, and consumption of fossil fuels. There are steps that can be taken to minimize these costs, but they will require a difficult prioritization of what should be saved and how much should be spent to save it.
When it comes to the impacts of sea level rise, storms, and wildfires, communities that can successfully adapt to emerging environmental conditions should have a path to financial support. Instead of providing costly federal insurance for property that can never be effectively protected from the impacts of climate change, the federal government should instead begin offering incentives for individuals to relocate away from high risk areas, or to invest in adaptation measures for their home and community. In order to sustainably provide this help, and to do so in a way that does not threaten public health by incentivizing communities to wage an unwinnable war against nature, there needs to be a renewed government effort to better understand the risks of climate change to US communities. This will help governments and communities determine when it is best to fight, and when it is necessary to flee. Federal and state governments should undertake robust community engagement efforts to both learn about the climate impacts that people are already experiencing, and to educate communities about the realities of the dangers that they face. For adaptation or managed retreat to successfully protect communities, there needs to be local buy-in, understanding, and consensus that the government is advocating in the best interest of the community.
For fossil fuel assets, innovative methods of complete methane and CO2 capture should be implemented where possible, allowing these facilities to continue operating and providing energy and job opportunities without contributing to global climate change. Unfortunately, these retrofits will be costly and many facilities will not be able to absorb this additional financial burden. For assets that are unable to conform with necessary efforts to eliminate carbon emissions, alternative uses ought to be pursued. These alternative uses may include: processing other forms of petrochemicals that do not produce lifetime CO2 of methane emissions, reusing refinery modules for the purposes of atmospheric CO2 capture and carbon-neutral synthetic fuel production, or using pipelines and rail to transport other materials such as hydrogen which can be used as an energy source either in fuel cells or as an input into carbon neutral synthetic fuels.
Even with all of these steps to minimize economic loss from climate change and the energy transition, there will still be significant asset losses. Only by recognizing which assets can be adapted and which are beyond saving can the US minimize overall costs. To achieve this, government, community, and corporate understanding of the likely outcomes of the climate transition need to be far better understood, and the only way to build this knowledge is through rigorous qualitative and quantitative government, academic, and private research.