The Insurance Bureau of Canada recommends that Canada devote at least $5.3-billion annually, over the next five years, to adaptation, based on growing climate risk.WALTER TYCHNOWICZ/AFP/Getty Images
Blair Feltmate is head of the Intact Centre on Climate Adaptation at the University of Waterloo.
The Canadian government touts the carbon tax rebate as revenue-neutral to slightly positive for about 80 per cent of Canadians. At first glance, this sounds good – but independent studies show that Canadians would receive a much greater return if the carbon revenue is invested in adaptation to reduce the effects of flooding and wildfire, the country’s two most costly climate perils.
By redirecting even 50 per cent of the carbon tax away from “neutral to slightly positive rebates,” Canada has a fighting chance to reduce the costs of climate change.
The Global Commission on Adaptation, the World Resources Institute, the Insurance Bureau of Canada and the Intact Centre on Climate Adaptation, all find that $1 invested in adaptation – for example, taking action to direct flood water away from homes, or stopping fire at a town’s edge – results in roughly $3 to $8 in avoided losses per decade. “An ounce of prevention is worth a pound of cure” applies well to physical climate risk.
With such a return, if 50 per cent of the $11.8-billion that Canada’s Parliamentary Budget Officer predicts will be collected in fuel charges in 2023-24 was invested today in flood and wildfire preparedness, this would result in approximately $17.7-billion to $47.2-billion in avoided losses over 10 years.
Canada’s lack of preparedness for climate change and extreme weather has resulted in costs that are growing exponentially. From 1983-2008, the property and casualty insurance sector bore claims of $250-million to $450-million a year. But for 14 of the past 15 years, starting in 2009, losses exceeded $1-billion, for an average annual insurable loss of $2.1-billion. Additionally, for every $1 in insurable loss an additional $3 to $4 in uninsurable losses were incurred by governments, businesses and individuals.
The consequences of increasing flood risk in Canada continue to compound. Ten per cent of the residential housing market (1.5 million homes) is now uninsurable for basement flooding owing to rivers overflowing or sewers backing up. Additionally, Desjardins Group recently announced that it would no longer offer new mortgages in high-risk flood zones – areas in the zero to 20-year flood plain where there is a 5-per-cent chance of flooding in any given year – affecting select cities in Quebec. It also doesn’t provide flood insurance in those areas. With flood risk on the rise across Canada, the contagion of homes that cannot secure mortgages – turning them into worthless stranded assets – could spread to other provinces.
Insurable losses owing to wildfire are showing trends similar to flooding. For example, the Okanagan and Shuswap fires of 2023 resulted in insurable claims of $720-million, the most costly insured event in British Columbia’s history. More broadly, the cost of fighting wildfires in B.C., Alberta, Saskatchewan and the Northwest Territories last summer surpassed $1.4-billion, not including the cost of evacuations and economic interruptions.
Such record-setting insurance claims and non-renewable mortgages indicate that Canada should consider investing in adaptation, rapidly.
Based on growing climate risk, the Insurance Bureau of Canada recommends that Canada devote at least $5.3-billion annually, over the next five years, to adaptation. Proceeds from the carbon tax could cover this cost, with a hefty surplus.
For some good news, starting in 2018, the Standards Council of Canada, the National Research Council, the Intact Centre on Climate Adaptation and scores of professional associations, developed practical guidance for homeowners to lower their exposure to flood and wildfire risk.
For example, to limit flood risk homeowners should ensure grading around their property directs water away from the foundation, sump pumps should be equipped with backup power, and installing a valve on the sewer line will ensure that water does not surge into the basement. For wildfires, homeowners should apply Canada’s FireSmart program – this includes removing burnable scrubs close to a house, replacing wood fences with chain-link, and installing fire-resistant roofing and siding.
Preparedness to limit flood and wildfire risk is not technically challenging. When homeowners receive guidance on means to protect their homes from extreme weather, 70 per cent take at least two actions to lower their exposure. Canadians will act to protect their homes when they know how.
The fate of homes and communities subject to flooding and wildfire is determined in advance of these events, based on preparedness. Canada has the tools to limit future losses.