USA: California's wildfire costs are just the tip of the iceberg

By Mark Specht

As California’s electric utilities grapple with the aftermath of record-breaking wildfires, the potential impact on customer bills is starting to come into focus. While it is still unclear who will end up paying for wildfire damages, one thing is clear: extreme wildfires are here to stay, and they will likely keep getting worse. With climate change increasing not only the risk of wildfires, but also threatening many other economic and human health impacts, the costs of preventing extreme climate change pale in comparison to the costs of inaction.

Wildfires in California

To cover the costs of only the 2017-2018 wildfires, one estimate indicates that residential utility bills for customers of the state’s largest utility, Pacific Gas and Electric (PG&E), would need to increase by $300 annually. However, another estimate indicates that, if wildfires in California continue to inflict as much damage as they have over the past two years, PG&E bills would need to double to cover the recurring costs, while bills for electricity customers across all of California would need to increase by 50%. Unfortunately, the last two years of wildfires have not just been an extraordinary fluke.

Over the past few decades in the Western US, the number of large wildfires has been rising and the fire season has been getting longer. While there are multiple factors driving these changes, climate change is increasing the risk of wildfires. As climate change drives up temperatures and changes precipitation patterns, California can expect more frequent wildfires and more acres burned in the future.

Costs of climate change inaction

But the costs of climate change will not just show up in higher electricity bills.

A recent report from scientists at the Environmental Protection Agency calculated the costs of climate change by the end of the century under different scenarios. While the report found that climate change will cost the US economy hundreds of billions of dollars annually, it also showed that a slow response to climate change, or worse, inaction, will cost us far more in dollars, property losses, public health and human lives.

If we limit global warming to two degrees Celsius, tens of billions of dollars in damages could be avoided every year by the end of the century – which works out to savings of $250 to $600 per person per year. This just goes to show how costly it will be not to address climate change.

A vicious cycle

This brings us back to PG&E, which is grappling with massive wildfire costs. If these costs end up being passed on to electricity customers, it could ultimately hinder California’s ability to prevent further climate change. If electricity prices go up significantly, people who own electric vehicles or have all-electric homes will face much higher costs. Since vehicle and building electrification are key components of California’s strategy to reduce global warming emissions, substantially higher electricity costs would disincentivize electrification and make emissions reductions more difficult to achieve.

There is vicious cycle at play here:

• Climate change is increasing the risk of wildfires.
• Wildfire costs might increase the cost of electricity.
• Higher electricity prices would disincentivize electrification, which is one of California’s main tools for preventing climate change.
• Maintaining or, even worse, increasing, our global warming emissions trajectory will lead to more climate change impacts, such as extreme wildfires.

In short, climate change may make it more difficult for California to prevent climate change.

You have to spend money to save money

At the end of the day, this problem is not going to solve itself. We will need to make all sorts of investments to prevent further climate change and to adapt to the climate change we have already locked in.

Encouragingly, the governor of California is taking climate change prevention and adaptation very seriously. The governor’s office recently released a report that details a wide array of policy options meant to address the climate change and wildfire problems faced by California’s electric utilities.

While some of those policy changes will no doubt be necessary, California also needs to continue investing heavily in solutions that we know are necessary for the transition to a clean energy economy. Renewable energy, electric vehicles, energy efficiency, and many more solutions are critical to the state’s emissions reduction goals, and California needs to continue making these investments even in the face of expensive disasters exacerbated by climate change.

These investments will not just be out of the goodness of our hearts. With hundreds of billions of dollars in climate-change-caused damages on the line, putting money into climate change prevention is a wise investment.