Limiting the Federal Government's Fiscal Exposure by Better Managing Climate Change Risks
What We Found
To reduce its fiscal exposure to climate change, the federal government needs a cohesive, strategic approach with strong leadership and the authority to manage risks across the entire range of related federal activities.
Since our 2019 High-Risk Report, the federal government has yet to make measurable progress to reduce its fiscal exposure to climate change. As a result, ratings for all five criteria remain unchanged at partially met or not met.
Similarly, ratings for each of the five segments in this high-risk area remain unchanged at partially met or not met.
This update is based primarily on reports we issued as of mid-January 2021.
Federal Insurance Programs
Since 2019, the ratings for this segment remain unchanged at partially met or not met.
Leadership commitment: partially met. Leadership commitment remains partially met to reflect actions by Congress and federal agencies, such as the passage and implementation of the Biggert-Waters Flood Insurance Reform Act of 2012.
As directed by the act, the Technical Mapping Advisory Council (TMAC) produced a “Future Conditions Risk Assessment and Modeling Report” in 2015 with several recommendations on how to ensure (1) flood insurance rate maps incorporate the best available climate science to assess flood risks, and (2) the Federal Emergency Management Agency (FEMA) uses the best available methodology to consider the impact of rising sea levels and future development on flood risk.
FEMA is working to implement these recommendations. For example, in a February 2020 testimony, an official from FEMA said it has conducted several pilot studies on sea level rise and is working to identify specific research gaps to inform the design of additional future conditions pilot projects.
However, the federal government should take additional actions to improve the long-term resilience of insured structures and crops and address structural weaknesses in the insurance programs. For example, Congress should consider comprehensive reform to the National Flood Insurance Program, as we suggested in April 2017.
Capacity: partially met. Capacity remains partially met to reflect the continuing actions by FEMA and the U.S. Department of Agriculture (USDA) to improve stakeholder capacity to increase their resilience to climate change. For example, in a February 2020 testimony, an official from FEMA said it is working to identify best practices for developing products and tools useful in communicating risk around future conditions to communities. Additionally, USDA’s Climate Hubs—which deliver relevant science-based knowledge to agricultural producers—continue to provide information that may improve producers’ capacity to manage climate change impacts for crop insurance.
However, the federal government should take additional actions to increase capacity. For example, the Secretary of Agriculture should direct USDA to incorporate resilient agricultural practices into expert guidance for growers, as we recommended in October 2014.
Action plan: partially met. FEMA and USDA previously identified actions to address aspects of climate change in their programs on an advisory basis in FEMA’s 2015 TMAC report and USDA’s 2016 Building Blocks for Climate Smart Agriculture and Forestry initiative. However, these actions do not fully address our recommendations, such as incorporating forward-looking requirements into floodplain management minimum standards.
Monitoring: not met. The federal government has not established a mechanism to monitor the effectiveness of actions to improve the long-term resilience of federally insured structures and crops. For example, FEMA has not published metrics and milestones to assess its progress incorporating future conditions into flood map products. USDA established milestones for certain actions to improve resilience and monitored its progress from 2016 through 2018, but no longer does so.
Demonstrated progress: not met. The federal government has not implemented our recommendations to improve the resilience of federally insured property or address structural weaknesses in each program.
Disaster Aid and Resilience
Since 2019, the ratings for this segment remain unchanged at partially met or not met.
Leadership commitment: partially met. Leadership commitment remains partially met to reflect actions by Congress and federal agencies, such as passage of the Disaster Recovery Reform Act of 2018 (DRRA) in October 2018. Among other things, DRRA allows the President to set aside, with respect to each major disaster, a percentage of the estimated aggregate amount of certain grants to use for pre-disaster hazard mitigation. DRRA also makes federal assistance available to state and local governments for building code administration and enforcement.
However, we have reported that the federal government’s approach to disaster risk reduction has been reactive and fragmented. Top leadership within the executive branch should take additional actions to improve state and local resilience, and develop the information needed to manage disaster assistance programs. For example, the Executive Office of the President (EOP), among others, should use information on potential economic effects of climate change to help identify significant climate risks and craft appropriate federal responses, as we recommended in September 2017.
In addition, the Office of Management and Budget (OMB) should adopt adequate budgeting procedures to account for the costs of disasters, as we recommended in 2003. OMB should also provide funding information for federal programs with fiscal exposure to climate change, as we recommended in April 2018.
Capacity: partially met. Capacity remains partially met to reflect actions by FEMA and DOD. For example, as a result of DRRA, in August 2020, FEMA established the Building Resilient Infrastructure and Communities grant program to support pre-disaster investment in community resilience efforts and has begun accepting applications. Additionally, the Department of Defense (DOD) launched two new grant programs in fiscal year 2020 that support resilience in communities near DOD facilities. However, it is too early to tell whether these measures will improve state and local capacity for resilience.
The federal government has yet to implement key recommendations to improve capacity in this area. For example, FEMA should determine what additional actions may be needed to close capability gaps at each jurisdiction level, as we recommended in March 2011.
Action plan: not met. In August 2019, FEMA and its partners published the National Mitigation Investment Strategy to plan for disaster resilience investment. However, the strategy does not explicitly address future climate change risks or include a strategic approach to identify and prioritize specific climate resilience projects for federal investment, as we recommended in 2015.
Additionally, FEMA’s 2018–2022 Strategic Plan—issued in March 2018— established performance targets doubling the number of properties covered by flood insurance and quadrupling the amount of pre-disaster mitigation by 2022. However, without a comprehensive strategy in place to identify and prioritize FEMA and the federal government’s climate resilience investments, it is unclear whether these efforts will reduce federal fiscal exposure.
Monitoring: not met. The federal government does not have a mechanism to track the effectiveness of federal investments in disaster resilience. Without progress in leadership commitment, capacity, and action planning, there is currently little to monitor.
Demonstrated progress: not met. The federal government has not developed the information necessary to account for its fiscal exposure to climate change or a strategy to reduce this exposure.
Federal Government as Property Owner
Since 2019, the ratings for this segment remain unchanged at partially met and not met.
Leadership commitment: partially met. Leadership commitment remains partially met to reflect actions by Congress, such as passage of the National Defense Authorization Acts for Fiscal Years 2020 and 2021. Among other things, the 2020 act directs DOD to incorporate resilience to current and future projected climate-related risks and threats into its installations’ master plans. The act also requires DOD to amend its criteria related to construction planning and design to ensure that building practices and standards promote climate resilience.
The 2021 act, among other things, directs DOD to update its 2014 Adaptation Roadmap to include a strategy to address the current and foreseeable effects of extreme weather and sea level fluctuations on the department’s mission, including a discussion of these effects on various infrastructure, such as military installation resilience. Further, in September 2020, the Army published Directive 2020-08 which requires commanders of Army installations to assess, plan for, and adapt to the projected impacts of climate change and extreme weather.
However, top leadership within the executive branch should develop a comprehensive approach to improve the resilience of the facilities the federal government owns and operates and land it manages. For example, we previously reported that without guidance from the Council on Environmental Quality (CEQ) directing agencies to consider climate change in their National Environmental Policy Act of 1969 (NEPA) reviews, agencies do not have White House direction to consider climate change impacts, such as sea level rise, when planning federally-funded infrastructure.
Additionally, we have reported that implementing the January 2015 federal flood risk management standard—which required all future federal investments in, and affecting, floodplains to meet a certain elevation level—would have enhanced federal flood resilience by ensuring agencies addressed current and future flood risk. However, since Executive Order 13807 was rescinded in August 2017, the federal government has not taken any further action as of December 2020.
Capacity: not met. The federal government has not increased capacity in this area. The federal government has not implemented our recommendations to increase capacity in this area, such as by providing the best available forward-looking climate information to standards-developing organizations as we recommended in 2016. Nor has DOD fully implemented our June 2019 recommendation to issue guidance on incorporating climate projections into military installation master planning.
Action plan: partially met. Action plan remains partially met to reflect actions by agencies. For example, DOD has made some progress implementing our (1) May 2014 recommendations to consider climate change impacts for its domestic installations, and (2) June 2019 recommendations to issue guidance on incorporating climate projections into installation master planning and facilities project designs. However, DOD has yet to implement our November 2017 recommendations to consider climate change impacts for its overseas installations.
Further, the federal government has not developed a comprehensive approach to improving the resilience of the facilities it owns and operates and land it manages by incorporating climate change resilience into agencies’ infrastructure and facility planning processes.
Monitoring: not met. The federal government does not have a mechanism to track agencies’ progress toward sustainability goals, including federal facilities’ resilience to climate change impacts. Executive Order 13834 revoked Executive Order 13693, which we previously found partially met this criterion because it established a mechanism for OMB to monitor agencies’ progress toward sustainability goals. These goals included federal facilities’ resilience to climate change impacts.
Demonstrated progress: not met. The federal government has not implemented our recommendations to improve resilience government-wide.
Federal Government as Leader of National Climate Strategic Plan
As of 2019, the ratings for this segment remain unchanged at not met.
Leadership commitment: not met. The federal government has not demonstrated leadership commitment to reducing fiscal exposure to climate change. For example, the federal government has not led the development of a national climate strategic plan.
A strategic approach for federal investments in climate resilience would allow for a more purposeful, coordinated, and comprehensive federal response to climate risks, as we reported in October 2019. For example, a strategic approach could help target federal resources toward high-priority projects that manage some of the nation’s most significant climate risks. The federal government is currently not well organized to address the fiscal exposure presented by climate change, in part because of the inherently complicated crosscutting nature of the issue.
Capacity: not met. The federal government has not increased capacity in this area. For example, entities within EOP, including OMB, have not provided information to Congress on fiscal exposures related to climate change.
Action plan: not met. The federal government has not developed a strategic plan to guide the nation’s efforts to adapt to climate change. For example, as previously mentioned, FEMA and its partners issued the National Mitigation Investment Strategy in August 2019. However, the strategy does not include a detailed strategic approach to prioritize investments for disaster risk reduction that explicitly accounts for future climate change risks.
Monitoring: not met. The federal government has not established mechanisms to monitor progress in this area. Without progress in leadership commitment, capacity, and action planning, there is currently little to monitor.
Demonstrated progress: not met. FEMA and its partners implemented our 2015 recommendation to develop a national mitigation investment strategy. However, the federal government still needs to take actions to fully address the following recommendations.
Technical Assistance to Federal, State, Local, and Private-Sector Decision Makers
As of 2019, the ratings for this segment remain unchanged at not met.
Leadership commitment: not met. The federal government has not demonstrated top leadership support for federal technical assistance. For example, it has not led the development of a government-wide approach for providing decision makers with the best available climate-related information and assistance with translating such information. Nor has the federal government taken action to ensure projects that receive financial assistance adequately address risks from climate change.
Capacity: not met. The resources and government-wide structure for providing technical assistance to decision makers—with clear roles, responsibilities, and working relationships among federal, state, local, and private-sector entities—remain undefined. For example, in 2019, we reported that federal, state, local, and private-sector decision makers may be unaware that climate information exists or may be unable to use what is available, largely because the federal government’s own climate data are fragmented across individual agencies that use the information in different ways to meet their missions.
Since 2013, we have made multiple recommendations to EOP and individual agencies to address these issues; however, EOP and individual agencies have yet to make progress implementing them.
Action plan: not met. The federal government has not developed a plan to implement a system to provide information to decision makers to support climate resilience, as we recommended in November 2015.
Monitoring: not met. There are no programs or mechanisms to monitor government-wide progress in addressing the challenges we have identified related to the federal government’s role in providing climate-related technical assistance. These challenges include, for example, clarifying the roles, responsibilities, and working relationships among federal, state, local, and private-sector entities; identifying the necessary resources and establishing the government-wide structure necessary to implement plans; and addressing the fragmentation of federal climate information across individual agencies that use the information in different ways to meet their missions.
Demonstrated progress: not met. The federal government has not improved its technical assistance to decision makers, as we have recommended.
Numerous studies have concluded that climate change poses risks to many environmental and economic systems and creates a significant fiscal risk to the federal government. For example, according to the November 2018 National Climate Assessment report, the continued increase in the frequency and extent of high-tide flooding due to sea level rise threatens America’s trillion-dollar coastal property market and public infrastructure, with cascading impacts on the larger economy. We added this area to the High-Risk List in 2013.
There are five areas in which government-wide action is needed to reduce federal fiscal exposure, including, but not limited to, the federal government’s roles as (1) insurer of property and crops; (2) provider of disaster aid; (3) owner or operator of infrastructure; (4) leader of a strategic plan to coordinate federal efforts; and (5) provider of data and technical assistance to decision makers.
We have made 75 recommendations and suggested five matters for congressional consideration related to this high-risk area; 15 and three of which were made since the 2019 high-risk update, respectively. As of December 2020, 30 recommendations remain open.
Federal Insurance Programs
The federal government should incentivize climate resilience by incorporating it into the requirements for receiving payments from federal flood and crop insurance programs. For example, agencies should implement these recommendations we made in October 2014:
- The Secretary of the Department of Homeland Security should direct FEMA to consider amending the floodplain management minimum standards to incorporate forward-looking requirements, similar to the minimum flood risk reduction standard adopted by the Hurricane Sandy Rebuilding Task Force. FEMA agreed with this recommendation; however, FEMA has not implemented it as of December 2020.
- The Secretary of Agriculture should direct USDA to consider working with agricultural experts to incorporate long-term resilience into the good farming practices that are required for claim payments. USDA neither agreed nor disagreed with this recommendation, and has not implemented it as of December 2020.
Congressional Actions Needed
Reducing federal fiscal exposure to climate change risks will also require congressional action to address other structural challenges in the insurance programs that send inaccurate price signals to policyholders about their risk of loss or that increase the cost of these programs to taxpayers. For example:
- Congress should consider repealing certain provisions in the Agricultural Act of 2014 that hinder the crop insurance program’s ability to adjust participating private insurers’ rate of return and share of premiums as changing conditions warrant, as we suggested in July 2017.
- Congress should consider comprehensive reform to the National Flood Insurance Program to improve its solvency and enhance the nation’s resilience to floods, including funding for flood mitigation and flood mapping, as we suggested in April 2017.
Disaster Aid and Resilience
The federal government should develop the information needed to manage disaster assistance programs’ long-term exposure to climate change and fully implement measures that promote resilience from our prior recommendations and DRRA. For example:
- OMB should provide, concurrent with any future climate change funding reports to Congress, funding information for federal programs with fiscal exposure to climate change, including costs for disaster assistance programs, as we recommended in April 2018. OMB disagreed with this recommendation and has not implemented it as of December 2020.
- EOP and others should use information on the potential economic effects of climate change to help identify significant climate risks facing the federal government and craft appropriate federal responses, as we recommended in September 2017. EOP neither agreed nor disagreed with our recommendation and has not implemented it as of December 2020.
- FEMA should update the methodology for assessing jurisdictions’ capability to respond to and recover from a disaster without federal assistance, as we recommended in September 2012. In December 2020, in response to a requirement in DRRA, FEMA issued a notice of proposed rulemaking to substantively revise its methodology. However, it is too early to determine what changes, if any, will be made.
- FEMA should complete a national preparedness assessment of capability gaps at each jurisdiction’s level based on tiered, capability-specific performance objectives to enable better prioritization of FEMA grant funding to states and localities, as we recommended in March 2011. FEMA has taken steps to implement it, such as developing guidance for jurisdictions. However, the agency has not determined what additional actions may be needed to close the remaining gaps.
- OMB should adopt adequate budgeting and forecasting procedures to account for fiscal exposures, such as major disaster costs, as part of the federal budget process, as we recommended in 2003. OMB neither agreed nor disagreed with this recommendation and has not taken any action to implement it as of December 2020.
Federal Government as Property Owner
The federal government needs a comprehensive approach to improve the resilience of the facilities it owns and operates and land it manages. This involves incorporating climate change resilience into agencies’ infrastructure and facility planning processes. It also involves accounting for climate change in NEPA analyses and working with relevant professional associations to incorporate climate change information into structural design standards. For example:
- DOD should issue guidance on incorporating climate projections into installation master planning and facilities project designs, as we recommended in June 2019. DOD agreed with this recommendation and expects to finish developing such guidance by the second quarter of fiscal year 2021.
- The Department of Commerce (Commerce) should convene federal agencies to provide the best available forward-looking climate information to standards-developing organizations, as we recommended in November 2016. Commerce neither agreed nor disagreed with this recommendation and has not implemented it as of December 2020.
- CEQ should finalize guidance on how federal agencies can consider climate change in their evaluations of proposed federal actions under NEPA, as we recommended in April 2013. In August 2016, CEQ issued final guidance, but it rescinded this guidance in April 2017.
Federal Government as Leader of National Climate Strategic Plan
The federal government could better reduce its fiscal exposure if federal efforts were coordinated and directed toward common goals, such as improving climate resilience. For example, entities within EOP, including OMB, should do the following:
- Develop a strategic plan to guide the nation’s efforts to adapt to climate change. This plan should include clear priorities that reflect the full range of climate-related federal activities, as well as establish clear roles, responsibilities, and working relationships among federal, state, and local governments, as we recommended in May 2011.
- Use information on potential economic effects from climate change to help identify significant climate risks and craft appropriate federal responses, as we recommended in September 2017.
- Provide information on fiscal exposures related to climate change to Congress in conjunction with future reports on climate change funding, as we recommended in April 2018.
EOP neither agreed nor disagreed with our recommendations to develop a strategic plan to guide adaptation efforts and to use information on potential economic effects from climate change to identify significant risks and responses. OMB disagreed with our recommendation to provide information on fiscal exposures related to climate change to Congress in conjunction with any future climate change funding reports. As of December 2020, EOP and OMB have not implemented these recommendations.
Congressional Actions Needed
Reducing federal fiscal exposure to climate change risks will also require congressional action. For example, we have suggested the following:
- Congress should consider establishing a federal organizational arrangement to periodically identify and prioritize climate resilience projects for federal investment, as we suggested in October 2019.
- Congress should consider establishing a pilot program with leadership from a defined federal organizational arrangement. This program would identify and provide assistance to climate migration projects for communities that express affirmative interest in relocation as a resilience strategy, as we suggested in July 2020.
Technical Assistance to Federal, State, Local, and Private-Sector Decision Makers
The federal government needs a government-wide approach for providing federal, state, local, and private-sector decision makers with (1) the best available climate-related information, and (2) assistance with translating climate-related data into accessible information. As a result, we recommended in November 2015 that EOP:
- designate a federal entity to develop and periodically update a set of authoritative climate observations and projections for use in federal decision-making, which other decision makers could also access; and
- designate a federal entity to create a national climate information system with defined roles for federal agencies and nonfederal entities with existing statutory authority.
EOP neither agreed nor disagreed with our recommendations and has not implemented them as of December 2020.
Further, federal agencies could better provide technical assistance to decision makers. For example, we have made the following recommendations:
- The Environmental Protection Agency (EPA) should identify technical assistance providers and engage them in a network to help water utilities incorporate climate resilience into their infrastructure projects, as we recommended in January 2020. EPA neither agreed nor disagreed with this recommendation and has not implemented it as of December 2020.
- EPA should provide direction on how to integrate information on the potential impacts of climate change effects into risk assessments and risk response decisions at Superfund sites, as we recommended in October 2019. EPA disagreed with these recommendations and expects to issue a memorandum to provide such direction by fall of 2021.
- DOD should issue guidance on incorporating climate projections into installation master planning and facilities project designs, as we recommended in June 2019. DOD agreed with these recommendations and is developing such guidance; it expects to implement these recommendations by the second quarter of fiscal year 2021.
Congressional Actions Needed
Reducing federal fiscal exposure to climate change risks will also require congressional action to ensure infrastructure projects that receive financial assistance adequately address risks from climate change. For example,
- Congress should consider requiring that climate resilience be incorporated in the planning of all drinking water and wastewater projects that receive federal financial assistance, as we suggested in January 2020.
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