On the NSW floods and the great big new tax that’s coming to all of us

NEWS FROM THE FRONT DESK: The ongoing floods across NSW highlight the massive risks we face from climate-related disasters. 

You’d think the floods probably had a bit to do with the new Labor government instructing Treasury to once again model the impact of climate change on the economy and national budget, after the previous government decided that for the past nine years this wasn’t important enough to worry about.

But we all know there’s more than the floods to worry about. On financial terms alone, the cost will be huge. It will fall on governments at all levels – meaning we the taxpayers. It will fall on individuals who won’t be compensated for their personal loss from flood or fire or the health impacts of heat, and almost certainly never in full nor for the psychological cost of losing a home to fire or to flooding twice, three times and sometimes four times.

If we thought Covid was expensive, or the supply chain disruptions of the war in Ukraine, we “ain’t seen nothing yet”. 

It’s why the world’s biggest investors, led by UN frameworks, are factoring in the elephant in the room that our previous government refused to see and that now, sadly, that the US Supreme Court is ignoring, as it winds back climate advances in the US, along with fundamental human rights for women with its Roe versus Wade decision.

Financial cost is what makes the biggest players in the room sit up and start paying attention. So at last we have action folks. 

It’s also what gives this industry immense opportunities. There is an incredible stockpile of investment ploughed into climate mitigating technologies. Every day we, at The Fifth Estate, come across ever more amazing, inventive and creative solutions to slow down climate change and make our world more sustainable. 

To be truthful it’s what gives us the strength to keep going with this humble little publication that relies entirely on this optimistic potential.

But if you’re a humble homeowner instead you will want to know about the likely cost of your family, yourself, your future… and your state of mind.

The bad news is there is risk everywhere we look

Last week, The Fifth Estate tackled the need for more resilient places and buildings: because many will soon be rendered uninhabitable.

Unfortunately, the comments section revealed some heads might still be buried deeply in the sand.

“I’m willing to bet my life that the author’s claim — that buildings and suburbs will be uninhabitable ‘within the next decade’ — will turn out to be completely false,” one commenter wrote.

The cruel irony is that it didn’t take a full decade for homes and towns to become uninhabitable because of climate change. It took a couple of days.

Towns and suburbs across Sydney and NSW were inundated, once again, from Kiama and Shoalhaven on the south coast to Lismore in the state’s north. In Western Sydney, the Warragamba Dam overflowed into the Nepean and Hawkesbury Rivers.

When some people – such as that commenter – think about the risks of climate change to the built environment, the vision in their head is still of rising seas after Arctic icebergs fall into the ocean.

It’s a comforting thought. If the big costs of climate are still decades away, then we can put off mitigating the risks for the time being.

But. 

While sea level rise is certainly a big climate change impact we need to plan for, it’s far from the risk we face.

The current floods – along with more intense droughts, bushfires and cyclones – are what the impacts of climate change looks like in Australia. And we need to prepare, because they’re literally happening right now.

Don’t look up!

There’s a growing body of evidence that shows that climate change is already intensifying the Indian Ocean Dipole and the El Niño-Southern Oscillation (ENSO).

In Australia, this is leading to more intense, frequent and prolonged cycles of either extremely dry or extremely wet weather. This causes more frequent and intense droughts and bushfires (El Niño) and floods (La Niña).

These disasters can absolutely render buildings, and whole towns, uninhabitable. 

And let’s be absolutely clear about this: A building that’s on fire or under flood waters fits the bill for being uninhabitable.

As in, it literally turns them into “a place unsuitable for living in”.

If you’re still inclined to think that this is hyperbole, then here’s an actual photo of an actual cow on an actual roof to avoid floodwaters in Lismore.

Uninsurable places? You can drive there right now

The idea that some towns in Australia could become uninsurable because of climate risks isn’t just a hypothetical – it’s already happening.

A great example is the Queensland town of Roma, which was ravaged by three record floods between 2010 and 2012.

After these floods, insurance giant Suncorp declared that it wouldn’t sell home and contents insurance in the town until mitigation measures were put in place. People stopped moving there as a result. 

Thankfully for Roma, the local and state government protected the town by building levies and higher banks along the local creek.

“And as a result of those mitigation strategies, we’ve seen a dramatic reduction in the price of insurance premiums in Roma, leading insurance industry analyst Scott Guse, KPMG’s partner for audit and assurance, told The Fifth Estate.

We’re seeing NSW planning ministers literally taking adaptation and resilience measures off the table. It’s just ridiculous but it does raise questions about whether the political system we have at the moment is able to support community adaptation.

Dr Karl Mallon

Governments have also already relocated entire towns, in Australia, because of flooding risk.  

They include Grantham, near Toowoomba in south-east Queensland, where around 100 houses were moved to a hilltop in 2011 following a huge flash flood on the Lockyer Creek.

“You’ve probably got similar instances happening as we speak in Lismore, where they’re looking at what they should do about riverbanks and levees, as well as moving certain places to higher grounds,” Mr Guse said.

Is my property at risk of a climate disaster, and what should I do?

Right about now, you’re probably wondering whether you live in a place that’s likely to become uninhabitable. How can you find out the risks, and where’s the best place to like?

The good news (if you can call it that) is that the Climate Council, in partnership with Climate Valuation, have put together a free risk map. It shows the percentage of properties in each council area, suburb, or electorate that are at high-risk of climate-related disasters.

If you’re looking for more in-depth information while buying a home or building, Climate Valuation also offers paid risk climate assessment reports for individual properties.

Three types of property

Climate Valuation’s chief executive Dr Karl Mallon told The Fifth Estate there’s three categories of properties when it comes to climate risk.

The first is where adaptations can be made at the individual property level. 

In some cases, this means managing specific risks, such as building with fire-resistant materials in a bushfire risk area, or upgrading roofs to deal with severe cyclonic winds.

“You can have a property in a cyclone zone which is built to modern standards, and it will actually do really well. Just saying a property is in a cyclone zone is only half the picture,” Dr Mallon said.

There are also many lower risk properties that are not, for example, in a flood, bushfire, drought-risk or cyclone prone area. The main issue they are likely to face is rising temperatures, which can be mitigated with cool roofs and good insulation and if there is a cooling suburbs plan in place.

The second group of properties is for areas where those mitigation measures will need to be applied at a community level – such as the flood defences in Roma.

The final group of properties are those where long-term adaptations are either not possible, or become unaffordable.

“Grantham was an example where it was easier to move the town than it was to try and protect against the floodwaters. And, with coastal inundation, there’s nowhere to take the water – you can’t just put it somewhere else,” Dr Mallon said.

The good news is that it is possible to build climate resilient buildings in a high risk area.

But the bad news, Dr Mallon said, is that climate change is shifting more properties into those riskier categories.

The insurers are watching closely

There’s one industry, in particular, that’s been keeping a keen eye on the risks of climate-related disasters: the insurers.

As a spokesperson from the Insurance Council of Australia told The Fifth Estate: “climate change is driving an increase in the frequency and severity of extreme weather events, which can impact the affordability and availability of insurance in Australia.”

And premiums are “absolutely” rising exponentially in places affected by climate-related disasters, KPMG’s Scott Guse said.

In fact, he said insurers regularly seek advice from the Bureau of Meteorology about future weather events that might impact their prices.

“Insurance companies have the ability these days to narrow down to an individual property. They have sufficient data and systems in place that they can price for particular risks on a particular property, whether the risks are bushfires, cyclones, and of course, floods.”

The real “big new tax”

Now here’s the really bad news: even if you’re not directly at risk of a climate disaster, you’re still likely to foot the bill.

You can think of it as a great big new tax on everything, because of climate inaction.

Partly that’s because of reinsurance, which is basically insurance for insurance companies. It’s where an Australian insurer pays a global insurance company to cap its losses if a major natural disaster happens.

“If a major flood happens, insurance companies will say we’re going to wear a certain amount of risk, and that risk may be $100 million. Anything over that risk of $100 million is going to be covered by reinsurance,” Scott Guse said.

“That reinsurance covers all properties. If the cost of that goes up, all policyholders, regardless of whether their property is likely to be impacted by a major event, will have some sort of increase in their premium prices as well.”

And then there’s the humanitarian aid that government, federal state and most likely local will have to contribute, on top of our own individual humanitarian inclination to help those in need.

Not to mention the widespread costs of implementing new resilience strategies that no matter what developers or their lobby groups hope for is going to cost someone somewhere a lot of money.

In the case of the resilience planning, we demonstrated the biggest cost would be on the seller of the land, not the developer whose feasibility studies will factor in the cost of resilience and not the consumer who will generally pay only market prices.

It’s the residual number that will degrade the value of vulnerable land.

Policy failure

Unfortunately, at a policy level, the politicisation of climate change has made talking about “climate impacts” a taboo topic.

“We’ve seen states unwilling to, for example, discuss sea level rise within the planning framework or within risk disclosure framework for telling homebuyers that this property will be a future risk of flooding,” Dr Mallon said.

Worse, he said, we’re seeing “very questionable” political interference in planning processes that are supposed to provide consumer protection.

This includes the current NSW Planning Minister Anthony Roberts’ controversial decision to drop a key climate resilience policy, called the design and place SEPP.

“We’re seeing NSW planning ministers literally taking adaptation and resilience measures off the table. It’s just ridiculous but it does raise questions about whether the political system we have at the moment is able to support community adaptation.”

Thankfully, the new Labor government is at least starting to grapple once more with measuring the economic and budgetary costs of climate change. After a nine year hiatus thanks to the head in the sand mentality, if not outright hostility of the former government to action on climate.

The threat is real

So if, after all that, you’re still willing to bet your life that no building or town will be rendered uninhabitable due to climate-related disasters in Australia within the next 10 years, then by all means feel free to move to a flood or bushfire prone area.

But good luck keeping it that way for the next 10 years.