A congressional report showed that wildfires in the United States cost up to $893 billion annually, with a significant impact on property values.

A congressional report showed that wildfires in the United States cost up to $893 billion annually, with a significant impact on property values.

Ivan Pierre Aguirre/USA Today/Reuters

The McBride Fire is seen burning in Ruidoso, New Mexico, on April 12, 2022.



CNN

A new congressional report indicates that climate change-induced wildfires cost the US economy between $394 billion and $893 billion annually — a shocking figure that is more than double what previous government reports estimated.

The new report from the Joint Economic Committee, chaired by Democratic Senator Martin Heinrich of New Mexico, examined a wide range of costs beyond direct damage from wildfires, including impacts on property values; Premature deaths and health risks from wildfire smoke; Threats to watersheds. And loss of income. The report was first shared with CNN.

The range found by the Heinrich Commission, adjusted for inflation, is much higher than a Trump administration report that examined smaller impacts and found the annual cost of wildfires to be between $87.4 billion and $427.8 billion.

“The overall numbers are scary,” Heinrich told CNN. “Even if you live somewhere where wildfires have never been a problem, these are large enough numbers to cause a systemic problem for the economy.”

Heinrich said he and his staff want to look at the cascading economic costs caused by wildfires — including effects that last long after a fire is extinguished — and explain reasons why lawmakers and officials should proactively spend money on resiliency measures.

“There has always been this frame on the part of some policymakers that we can’t do anything about climate change,” Heinrich said. “The reality is that the real costs to our economy are doing nothing about it and allowing this to escape into a worse outcome in the future.”

Declining real estate values ​​in the United States represent the bulk of the total cost. The report estimates that properties suffered $67.5 to $337.5 billion annually due to wildfires. By comparison, the report estimates wildfire damage insurance payouts at $14.8 billion annually, increasing annual premiums at about $1.6 billion.

But an outside expert said the numbers are also uncertain because the impact on property markets is only just beginning to be understood.

“There’s a lot of uncertainty, and that’s fair,” said Ed Cairns, chief data officer at the nonprofit First Street Foundation, who was not involved in the report. “It’s still evolving as we speak right now because the insurance industry is just making these adjustments. And what those will ultimately be, we’re not quite sure how big they will be yet.”

Disaster experts warn that the United States is on the verge of greater economic impacts around wildfires and property fires. In fire-prone California, home insurance rates are skyrocketing, and many insurers have stopped writing new policies, citing the more destructive fires.

There is also evidence that the emerging insurance crisis is already having an impact on home prices, said David Jones, a former California insurance commissioner and director of the Climate Risk Initiative at the UC Berkeley Center for Law, Energy and the Environment.

Homeowners who have had to bear higher insurance premiums may have difficulty selling their homes. Homebuyers also need to include higher premiums in their monthly payments, which reduces the amount of home they can afford — assuming they can get an insurance policy at all.

“It stands to reason that if you’re a homebuyer, you’re going to ask the question, ‘How much does it cost to insure this place, and can I get insurance?’ Jones told CNN in a recent interview. He added that if the answer is that insurance is really expensive and hard to get, homebuyers say, “I’m not going to pay as much money for this house, because it’s simply not worth as much.”

Kearns agreed, saying that the federally backed mortgage giants, Fannie Mae and Freddie Mac, have begun to notice some California insurers removing fire coverage from their policies, or not issuing new policies altogether.

“It wasn’t really on their radar; Cairns said flooding was the main driver of the default. “Fannie and Freddie have changed their tune now that the insurance companies are starting to separate.”

The congressional report also looked at the effects wildfires could have on drinking water — something that was not measured in the previous federal report, but an issue that is becoming more important as the West faces a drier future. In recent years, wildfires have polluted nearby streams and rivers that supply water to communities — leaving some at risk of running out of drinking water.

When massive wildfires swept through northern New Mexico last year, ash and charred soil slid into the Galinas River — threatening the drinking water supply of the city of Las Vegas, New Mexico. With only weeks of fresh water remaining before additional supplies were found, city officials had hoped to obtain federal grant money for an upgraded water treatment system to filter out small particles of pollution and make the water safe to drink.

Heinrich said the watershed costs the report found were “very significant.”

“Communities like Mora and Las Vegas that had to figure out how to provide clean drinking water to their constituents after the fire are realizing how expensive clean water really is and how dependent they are on infrastructure,” Heinrich said.

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