The Government is Actively Considering These Issues

Updated 15 December 2018 

Last week I wrote about the ethical dilemmas around the issue of who pays for climate change adaptation summed up in the phrase “the rich get seawalls and the poor get moved”.  Yesterday, Stuff reporter Andrea Vance has revealed that the government is actively grappling with this dilemma and that we should expect some decisions next year.

Government officials have been quietly working with the insurance industry, banks and local government in the last year.  This work dovetails with the nationwide risk assessment on sea level rise impacts which I spoke about in this article.

Andrea Vance provocatively phrases the dilemma in terms of “Does the taxpayer fund climate compensation for beachfront homeowners?”.  Equity is important and so is support for those affected by disasters, but there is a moral hazard and inequity in taxpayers paying beachfront owners or those building on river floodplains. For example, will beachfront owners continue to upgrade their properties and will real estate agents continue to promote coastal properties if compensation is assured?

One option tentatively under discussion is buying up coastal homes that will eventually become uninsurable and allowing the owners to continue to live there, at their own risk.

“People could live in those properties for a couple of decades. They may not be able to be privately insured, but [the owner] takes an element of risk and lives there…but knows that at some point the house will basically become unusable.

“Some exposed properties are $12 million oligarch-owned on Omaha Beach and some of them are $200,000 shanties in South Dunedin. [Does the Government] buy up both at their market value? Because the person who will get $200,000 for their leaky shanty in Dunedin cannot buy another house anywhere in New Zealand for that money. And at the same time we’re handing out $12m to Viktor from Moscow? “

Should the taxpayer compensate  –

• anyone?  It will not just be coastal owners who are impacted by climate change.
• those who have bought beachfront property in the last 20 years knowing full well that there were risks from sealevel rise?  Where should the line be drawn – at 30 years? 10 years?  5 years?”
• With priority given to people on lower incomes and-or high social deprivation, or
• those with low equity – e.g. with a large mortgage? 
• give preference to those who live in their homes rather than to holiday homeowners?

There isn’t going to be a one-size-fits all solution and is going to present an ethical and moral nightmare trying to find a fair and equitable balance.

Climate Change Minister James Shaw wouldn’t be drawn on whether the Government was weighing up a compensation scheme. But he said it’s not true that ministers are avoiding the issue.

“We committed in Budget 2018 funding for the country’s first nationwide risk assessment and the corresponding adaptation plan, and by definition, that exercise will include the questions of who pays, and how you manage that financial risk over time.”

The question of how you manage financial risk over time for climate change adaptation has been discussed in this excellent paper from Jonathan Boston and Judy Lawrence

Update

This Editorial in Stuff on 15 December takes a look at the dilemma facing the government and all of us …..

“We may understand the Government’s argument about risk to the economy, but will we be comfortable compensating the wealthy owners of multimillion-dollar properties?

They are already best-placed to handle the predicted surge in rates, insurance, fuel taxes and other compliance costs; burdens that will likely swamp those with less resources. Now we are considering many billions of dollars for lives and locations many of us can only dream about. Some of whom will know now that their recent purchase comes with great risk.

If the Government does proceed, it will need to establish a strong case for why such assistance is necessary and how the greater number benefit by helping the wealthy few.

It will need to ensure that it is not establishing its own de facto insurance regime for the ignorant and those willing to chance their arm with the state’s backing.

Whatever the Government decides will undoubtedly test our beliefs in fairness, altruism and our largely egalitarian culture.

It will place many of our strongest and tightly held values under a dome and the greatest pressure.”