Opinion: Michigan is not a climate haven. We are already paying for a warming planet

It’s clear that 2023 was a record setting year for global temperatures, which are tracking amazingly close to projections made 50 years ago when science teams began to seriously project the rate of human caused global warming.

In 2023, as a pall of choking wildfire smoke descended over Michigan and a large swath of the eastern US, a number of Americans who thought climate change was something for a faraway place or time began to reconsider.

What 2023 showed us was that dangerous warming is here now, and there will be no “climate havens” – geographic areas where impacts may be minimal. When the summer concluded with a series of unprecedented storms triggering blackouts and flooding in Southeast Michigan, questions arose about the vulnerability of infrastructure, power lines, flood control, roads – even our homes, built decades ago – for the conditions of a different time, and actually, a different planet.

For example, in a recent earnings call, Garrick Rochow, CEO of Consumer’s Energy, said “We are clearly seeing the effects of climate change.” “In the last 20 years, we’ve seen an increase in both the frequency of storms and higher wind speeds, some of the most extreme winds in the last four years.” Historically, the design standard for Consumer’s system was to withstand 40 mph winds. Now, with climate amplified extreme weather, that’s changed to 80 mph – an expense that ratepayers will have to bear.

While dikes, levees, and storm sewers make up our physical protections against disastrous events, our critical financial protection has always been the global insurance industry.

Dr. Andrew Hoffman of the Ross School of Business at the University of Michigan points out that a recent survey by the Society of Actuaries named climate change as the top concern among underwriters. Companies, he said, are throwing away risk assessments that are more than 10 years old – “it’s not useful anymore. We’re in a new normal, and they’re hiring climate scientists to figure out how they can price their instruments to provide insurance.”

Texas A&M Climate Scientist Andrew Dessler told me, “Once you lose insurance, the whole economy falls apart. You can’t get a mortgage without insurance. Businesses can’t operate without insurance. The fundamental problem is the risk of damage has gotten really high.”

In states like Florida, California, Texas, and Louisiana, due to increasingly extreme storms, once reliable insurance companies are now radically raising rates, or even ceasing operations, leaving citizens to rely more and more on taxpayer backed insurers of last resort, like Florida’s Citizen’s Insurance, (or California’s FAIR plan). As more insurance companies flee Florida, more Floridians fall back on the state backed plan. In the event of a one-in-one hundred year storm, (which seem to be happening more frequently) Florida taxpayers could be on the hook for 36 to 124 billion dollars, according to Insurance giants Swiss Re, and Munich Re. In that case, the state would be overwhelmed and might then turn to federal taxpayers for a bailout. The US Senate Budget Committee is concerned enough it has begun looking into the matter. Meanwhile, the Federal Government’s safety net, the National Flood Insurance Program, is 20 billion dollars in the red. As a response, Michigan has now joined 26 other states in asking insurance carriers to evaluate and disclose climate risk exposure.

In fact, a newly published study shows that unpriced climate risk means US housing stocks may be overvalued by more than 200 billion dollars – “creating a bubble that threatens the stability of the US housing market.” Right here in Southeast Michigan, some neighborhoods may have already lost home value due to the impact of repeated severe flooding. And it’s getting worse. Reuters reports that as of September, major floods and storms had already cost the United States $38 billion for the year, nearly tripling the historical yearly average. Dr. Megan Kerchmeier-Young of Environment and Climate Change Canada told me “A heavy rainfall event that would have occurred about once every 100 years on average, in a world without human influence, is now occurring about once every 20 years on average. And if we continue warming, at 2 degrees of global warming,..that same precipitation event will be occurring about once every 5 years.”

According to Dessler, “This is the cost of climate change. This is where the economists have really failed. They haven’t taken these kinds of factors into account.” Hoffman adds, “Maybe if governments don’t get their act together (on climate change) insurance companies may do it for them.”