The LA fires: Revealing the hidden costs of Climate Change

Wildfires destroy local environments and are doubly bad because they emit vast amounts of CO2. These emissions contribute to a negative feedback loop, where more fires result in more emissions, and more emissions cause more fires.

?You may have forgotten the headlines about some of the biggest fires which occurred in the last few years, so here is a list of some of the worst ones.

?·?????? Australian bushfires – 2019 & 2020

·?????? Siberia (Russia) -2022

·?????? Canada wildfires - 2023

·?????? Attica region (Greece) - 2024

·?????? Amazon forest (Brazil) – 2024

?The LA fires stand-out from other wildfires for two reasons. First, due to the damage caused (upwards of $250 billion) and second, the number of celebrities directly affected by the fire.

A positive that can be drawn from the ashes of the LA fire, is the widespread social-media coverage that it received. The whole world was talking about the LA fires. This is important because it highlights the cost of natural disasters. We should not miss this opportunity to think about the implications of living in a world with more natural disasters.

The jury is out on how much of the damage can be attributed to Climate change (some say about a third), but this debate misses the point. The fact is: natural disasters (fires, floods, hurricanes etc.) are becoming more frequent and more destructive.

In 2024, natural disasters caused losses of US$320bn (2023: US$268bn), in coming years, this cost is only getting bigger – the LA fires have already caused US$250bn of damage.

It begs the question: What is the cost of doing nothing about Climate Change, and who will pay for it?

The LA fires highlighted the insurance challenges facing LA, and the rest of the world. Wildfires and natural disasters are becoming more frequent, more intense, and more costly.? More houses are at higher risk of damage due to natural disasters. Whether politicians acknowledge it or not, insurance underwriters do.

Over the last 5 years, insurance premiums have sky-rocketed around the world in response to higher risk of property damage. The impact on you and me, is that we are paying (significantly) more for insurance. Think of this as the first Climate Cost.

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Many ‘Rich-world’ governments also have disaster relief funds, to pay for the costs of a disaster. This is funded by tax-payer money.

As the adage goes: In a Capitalist world, we privatise the gains and socialise the losses. The second hidden cost of global warming is borne through increased government relief.? More and more fiscal budget is allocated towards disaster relief. This dilutes the impact of our taxes - more is spent on disaster relief, less is spent on things like education, infrastructure, and security.

Socialising the losses also has a disproportionate burden on those with lower emissions (and lower contribution to Climate Change). The richest 10% are responsible for 50% of global GHG emissions (Oxfam).

We are already paying the costs of Climate Change, without even knowing it. Insurance premiums, and tax-funded disaster relief are subtle cost increases that are akin to “Boiling the Frog.” These are reactionary measures which fail to address the cause of the issue – GHG emissions.

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A third mechanism, which is not so subtle, and a lot less popular, is a Carbon tax. Carbon taxes distribute the cost of GHG emissions (and Climate Change) on an equitable basis - the more you pollute, the more you pay. Most importantly, a Carbon tax addresses the cause of Climate Change, as it incentivises investment in emissions reduction and removal.

It’s worth acknowledging there is a great deal of complexity and nuance to the implementation of a Carbon Tax (Measurement & pricing), but the bigger problem is, that like any tax, there is not a lot of public support. This is a bit of a touchy subject, with lots of misinformation flying about, clouding judgement.

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It is important to realise that we have choice: We can do nothing and “Boil the frog” - pay more insurance and tax and hope the problem will go away - or we can choose to implement a Carbon tax and face the challenge head-on.

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The cost of being wrong about Climate Change less than the cost of doing nothing.