CLIMATE CHANGE: THE FISCAL RISKS FACING THE FEDERAL GOVERNMENT
Risk Assessment
Modeling by the USDA Forest Service for this assessment indicates that the impact of climate change alone on fire suppression expenditures[1] in the contiguous United States could be in the billions each year within just a few decades. Median estimates are $1.3 billion by mid-century and $2.3 billion by late-century, with ranges of $800 million to $2.0 billion per year and $1.2-$3.5 billion per year, respectively. In comparison, historical average total expenditures (1995-2013) were just over $1.3 billion. The estimated cost increases are the equivalent in today’s economy of approximately $600 million per year ($400-$900 million) in mid-century and $500 million per year ($200 million - $1 billion) in late-century.
Climate change is one of several factors that will affect the pattern, extent, and cost of wildland fire in the United States over the course of this century, and results suggest that, all else equal, the impact of climate change could double Federal fire suppression expenditures by mid-century and triple them by late-century, relative to historical average expenditures. These additional costs could put considerable pressure on the Federal land management agencies responsible for fire suppression, as well as allocations across the Federal Budget.
In addition, these costs could be compounded by continued growth in the WUI. Gebert et al. (2007) found that suppression expenditures are 0.11 percent higher per 1 per cent increase in housing value in proximity to an ignition. Holding that relationship constant and assuming that WUI property value increases commensurately with real GDP,[2] total Federal fire suppression costs could be 13 percent higher in mid-century and 44 percent higher in late-century. This would bring the combined effect of climate change and WUI development on Federal fire suppression expenditures in late-century to $3.6 billion with a range of $1.7-$5.0 billion.
The first step of this assessment analyzed historical relationships between maximum daily temperature and other variables, and the total area burned by fire on USFS- and DOI-managed lands using multiple regression. Since temperature has been shown to influence fuel moistures, fire season length, extreme fire weather, and lightning and storm tracks, it serves as a rough proxy for many ways that climate can influence wildfire.
The second step estimated the relationship between area burned and suppression expenditures, also using regression. The third step used projected increases in temperature from climate models in an unmitigated climate change scenario to project changes in area burned. Finally, the fourth step used projected climate-related changes in area burned, together with the results of the second step, to project mid- and late-century changes in suppression expenditures. Uncertainty in the temperature change projections from climate models as well as uncertainty related to regression model estimates of area burned and suppression expenditures were quantified using Monte Carlo simulation, producing the ranges presented above.
Key Limitations and Uncertainties
While there is little doubt that both a changing climate and a long-term growth trend for residential and commercial development in the WUI are already impacting—and will continue to impact—wildland fire management, substantial uncertainty remains regarding the extent of those impacts over the coming
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- ↑ Estimates include wildland fire suppression expenditures only and do not include other wildland fire management expenditures.
- ↑ This assumption is roughly consistent with both past trends and future projections for the net effect of household formation, housing depreciation and demolition, and home price growth.
