05/11/2014 12:28 EDT | Updated 07/11/2014 05:59 EDT

Climate Change Is About To Hit Your Pocketbook... Hard

One of the most difficult issues facing climatologists is making climate change relevant to John Q Public.

"Why do I care when a massive chunk of ice falls into the Arctic Ocean? What do these people with strings of degrees longer than their names talking in some arcane language have to do with me? I'm just trying to cover this month's mortgage payment, make sure that the kid stays in school and have a cold one at night while watching yet another Toronto team lose."

Unfortunately, climate change is about to hit John Q. Public's pocket book in a big way. One way or another, every one of us is about to start paying for climate change and its evil twin, extreme weather events. The Toronto Dominion Bank has compiled a list of the top 10 natural catastrophes since 2003. Cumulatively, the total cost is in excess of $6.2 Billion with the two biggest catastrophes happening last summer totalling more than $2.6 billion.

"Over the long term natural catastrophes have significant financial implications. As events occur more frequently, infrastructure damages will put a major strain on pocketbooks and productivity of governments, firms and households alike. If no efforts are made to upgrade infrastructure to withstand harsh conditions, natural catastrophes could cost Canadians dearly -- an estimated 5 billion per year in 2020 and $21-$43 billion by 2050."

Unlike most climate change reports, the Toronto Dominion special report is written in a way that we can all understand. TD doesn't have its Chief Economist write a report just as a contribution to great Canadian literature. Rather it is looking for something and in this case it's asking its Chief Economist to quantify the cost of natural disasters so that it can price its insurance and mortgage products in a more realistic manner.

Unlike recent climate change reports, which are routinely in excess of 2000 pages, the TD Report is a slim four pages -- but in those few pages it's laying the groundwork for re-evaluating mortgage and insurance risk.

TD does not want to be stuck with a multi-million dollar bill like it was after the Calgary flood last June. It's trite but true -- no bank or insurance company is in the business of losing money, so all of TD's losses will be passed on to its customers one way or another.

A TD News Release dated July 2013 states "TD Insurance expects that claims costs from the severe weather events in Southern Alberta on June 20 and the Greater Toronto Area (GTA) on July 8 will have a pre-tax impact of approximately $170 million... In addition, TD will recognize a pre-tax provision of up to $125 million... related to the Alberta flood. This charge will be treated as an item of special note." It is safe to say that TD is not alone.

Yet there is a strange, even wilful ignorance of climate change consequences among our political classes. The Harper Government™ has succeeded in making any discussion of pricing carbon so toxic that he is even willing to risk a signature economic initiative like Keystone XL rather than price GHG emissions. The Prime Minister's failure to even initiate greenhouse gas talks with the major emitters has given President Obama the political leeway to delay Keystone XL's approval indefinitely.

As a consequence, there is little or no reason why anyone should change their carbon emission behaviours. With the notable exception of the work done by governments in British Columbia, Ontario and Québec, there has been no progress on pricing carbon.

Very little mitigation or adaptation activity is happening at any level of government. For example, the Mayor of the City of Toronto seems to have much more enthusiasm for tax cuts than installation of storm sewers, notwithstanding last summer's catastrophic storm which the TD economists price at $944 million.

As the TD report notes on page 2, "there is some evidence that severe weather is becoming more common in Canada, with storms that used to occur once every 40 years now occurring once every six, in some regions of the country. Changes in weather patterns are not fully responsible for the increased incidence of natural catastrophes in Canada, as socioeconomic factors have also played a significant role."

If governments see tax increases as "the third rail of politics," then Canadians are left to fend for themselves. Wealthier Canadians may be able to pay for increases in insurance premiums or more costly mortgages or higher taxes but the rest of us may not be so fortunate.

Canadians are in the worst of all possible worlds. There is no incentive or penalty for changing our personal or business carbon behaviours. There are no serious national initiatives to contain GHG emissions. Infrastructure projects which may help mitigate extreme weather events get sacrificed on the altar of bogus balanced budgets. So, the federal budget only allocates a paltry $210 million to the Building Canada Fund this year after a year of multi-billion dollar catastrophes.

So, who pays for climate change? Regardless of whether we pay through insurance premiums, mortgage payments or taxes -- one way or another we all pay.


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