Key Issues > Limiting the Federal Government's Fiscal Exposure by Better Managing Climate Change Risks - High Risk Issue
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Limiting the Federal Government's Fiscal Exposure by Better Managing Climate Change Risks - High Risk Issue

Climate change presents a significant financial risk to the federal government.

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This key issue page is related to an area on GAO’s 2017 High Risk Update and will be updated shortly. In the meantime, visit the related High Risk area for the newest information.

As stated in GAO's 2015 High Risk report, climate change is considered by many to be a complex, crosscutting issue that poses risks to many environmental and economic systems—including agriculture, infrastructure, ecosystems, and human health—and presents a significant financial risk to the federal government. Among other reported impacts, climate change could threaten coastal areas with rising sea levels, alter agricultural productivity, and increase the intensity and frequency of severe weather events. As observed by the United States Global Change Research Program (USGCRP), the impacts and costs of weather disasters—resulting from floods, droughts, and other events—will increase in significance as what are considered "rare" events become more common and intense due to climate change. In addition, less acute changes, such as sea level rise, could also result in significant long-term impacts. According to the National Research Council (NRC), although the exact details cannot be predicted with certainty, there is a clear scientific understanding that climate change poses serious risks to human society and many of the physical and ecological systems upon which society depends, with the specific impacts of concern, and the relative likelihood of those impacts, varying significantly from place to place and over time.

These impacts call attention to five areas where government-wide improvement is needed to reduce fiscal exposure, including, but not limited to the federal government's role as (1) the leader of a strategic plan that coordinates federal efforts and also informs state, local, and private-sector action; (2) the owner or operator of extensive infrastructure such as defense facilities and federal property vulnerable to climate impacts; (3) the insurer of property and crops vulnerable to climate impacts; (4) the provider of data and technical assistance to federal, state, local, and private-sector decision makers responsible for managing the impacts of climate change on their activities; and (5) the provider of aid in response to disasters. As a result, GAO added Limiting the Federal Government's Fiscal Exposure by Better Managing Climate Change Risks to the High Risk List in 2013.

One way to reduce the potential impacts of climate change is to enhance resilience. The National Academies define resilience as the ability to prepare and plan for, absorb, recover from, and more successfully adapt to adverse events. When discussing climate change, the term adaptation—defined as adjustments to natural or human systems in response to actual or expected climate change—is synonymous with enhancing resilience. Adaptation is a risk-management strategy to help protect vulnerable infrastructure and communities that might be affected by changes in the climate. It includes, for example, raising river or coastal dikes to protect infrastructure from sea level rise, building higher bridges, and increasing the capacity of storm water systems. State and local authorities are responsible for planning and implementing many types of infrastructure projects. Decisions at these levels of government can drive the federal government's fiscal exposure.

Enhanced resilience means reducing potential future losses rather than waiting for an event to occur and paying for recovery afterward. Enhancing resilience can create additional up-front costs, but could also reduce potential future damages from climate-related events that—given expected budget pressures—would otherwise constrain federal programs. As stated in a 2010 NRC report, increasing the nation's ability to respond to a changing climate can be viewed as an insurance policy against climate change risks.

Furthermore, according to NRC and USGCRP, the nation's vulnerability can be reduced by limiting the magnitude of climate change through actions to limit greenhouse gas emissions. The federal government has a number of efforts underway to decrease domestic greenhouse gas emissions, and the success of these efforts depends in large part on cooperative international efforts. However, limiting the federal government's fiscal exposure to climate change risks will present a challenge no matter the outcome of domestic and international efforts to reduce emissions, in part because greenhouse gases already in the atmosphere will continue altering the climate system for many decades, according to NRC and USGCRP.

This High Risk Report is updated every two years, at the start of each new Congress. For more information on this High Risk Issue, see What We Found and What Remains to Be Done.

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Climate Change: Energy Infrastructure Risks and Adaptation Efforts
http://gao.gov/products/GAO-14-74

GAO-14-74: Published: Jan 31, 2014. Publicly Released: Mar 4, 2014.

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