We salute the close of 2020 with a pairing of artist and scientist. Take a leisurely scroll through photographer Steve Pyle’s virtual gallery for an exquisite reminder of why we love the earth in all its natural diversity. Then give our best scientists—in all their wonkiness—your full attention. Though their work may not razzle-dazzle, it delivers the underpinnings of our climate rescue! We have much to celebrate and more hard work ahead, thanks to individuals and communities fully engaged for change. Full STEAM ahead for a healthier 2021.
Stranded Assets—Conduits for Better Public Infrastructure Planning?
by Carol Barford
Bail out the basement one too many times. Replace the flooded furnace, carpet and drywall until you can’t, or won’t. Flood insurance—vanished or can’t afford it and no one will buy your home, your biggest chunk of personal wealth. This is a classic kind of stranded asset. It is what many coastal homeowners are facing from the sea to the Gulf coasts to the shores of the mighty Mississippi. Stranded assets are a characteristic problem of climate change, in which the conditions and tacit assumptions underlying a large and long-term investment no longer apply.
Stranded assets are not unique to homeowners. In the context of climate change, an asset could be stranded by a combination of physical, economic or policy mechanisms. For example, a coal-fired power plant is a large investment, sometimes publicly owned. Over its lifespan, it could be stranded if coal becomes more expensive than another energy source such as gas or solar, or if laws are enacted that restrict or tax its use. It could also become stranded (literally) if delivery routes for coal are interrupted by a storm or buckled roadway—two frequent occurrences related to climate change. The results are the same: a portion of the original investment in the coal plant is lost.
How can we avoid the problem of stranded assets? Basic planning for public infrastructure provides a partial answer. Infrastructure projects include explicit valuation of the future vs. the present when calculating costs and benefits of the project. Future costs and revenues are discounted by a certain percentage depending on how far off in the future they are; the farther off, the less they count. The standard discount rate used by the federal government historically varies around 2–5 percent. The outgoing administration has used discount rates up to 7 percent to assess costs of greenhouse gas emissions. Under this policy, the most negative future impacts of climate change are ignored. Some advocates for climate change adaptation have pushed for zero discount rates, to reflect our care for future generations and the importance of evaluating multiple future scenarios. A shift toward smaller discount rates would promote more robust planning for the future.
That doesn’t solve the problem of assets that are already stranded. The thorny problem of residential flooding is being addressed by government buyouts, including many billions of dollars already spent by the Department of Housing and Urban Development, the Army Corps of Engineers and the Federal Emergency Management Agency. The State of New Jersey has bought out whole neighborhoods, partly to rescue homeowners, and partly to decrease costs of public services in threatened areas. The dollar cost is high, and the social and cultural costs of abandonment are high as well. Still, housing and insurance markets have failed to foresee and address the problem, so society is stepping in.
Ironically, the decrepit state of U.S. public infrastructure today provides an opportunity to prevent stranded assets. In the American Society of Civil Engineers 2017 “report card” on infrastructure, the U.S. earned a D+. Europe renewed its infrastructure after World War II, but many dams, bridges, levees, roads and parts of the electric grid in the U.S. were built before WWII. We now have a chance to retire infrastructure for which the investment has already played out, and to plan and build carefully for the future. With the attendant jobs and future benefits for the economy, public health and climate mitigation and adaptation, it’s one of the best opportunities we have.
When Carol Barford isn’t working with the LWVDC Climate Crisis Subcommittee or coaching Nordic ski youth, she is fully engaged as Director of the Nelson Institute’s Center for Sustainability and the Global Environment (SAGE), at the University of Wisconsin–Madison.
Steve Pyle is a self-described Earthling with camera! Former speedy endurance athlete, now environmental activist and decent photographer based in Boulder, CO, USA.
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