Canada will have to set aside more money to deal with natural disasters like wildfires, storms and floods as climate change starts to bite, the head of the country’s property insurance industry group said on Wednesday.
A wildfire sweeping through the heavily forested oilsands region of Alberta near the town of Fort McMurray could eventually cost $6 billion, according to one industry estimate.
Don Forgeron, chief executive of the Insurance Bureau of Canada, noted there are a range of estimates out there on how much insured damage the wildfire will do, from a low-end of “a couple billion dollars” to a high of $9 billion.
“It will likely be somewhere in between but we really don’t know,” he said following a speech in Ottawa.
Asked whether the wildfire would lift insurance premiums in Fort McMurray and other areas where the perceived risk is higher, Forgeron said it is “rare that one event will cause that kind of reaction.”
A special fund that the Canadian government runs to help provinces recover from disasters covers 90 per cent of all eligible costs.
In his speech, Forgeron cited a February report by the parliamentary budget officer that said disasters linked to climate change would cost the government $900 million a year over the next five years.
This amount is far in excess of what Ottawa has currently set aside to deal with such events, he said.
“That’s a problem. That means (money to pay for) damages beyond what the fund can cover will need to be found elsewhere, resulting either in cuts to other programs or an increase in the federal deficit,” he said in the speech.
“Climate change … has moved from future threat to present danger.”
The Insurance Bureau represents more than 90 per cent of all car, home and business insurers in Canada.
Forgeron said the world had entered a troubling new era in which natural disasters such as fires and floods were happening more frequently.
Ways to help mitigate the damage include taking steps to better identify risks and then manage them.
“This means limiting or ending the practice of building in areas deemed high risk by flood mapping and having a hard discussion about where to build in areas that are close to our boreal forests,” he said.
Building codes also need to be upgraded to make houses more resilient, he added.
“Yesterday I was thinking about how we have this convention that it’s acceptable to lend and borrow certain things, like books, that we don’t question—like that’s a really normal thing, but if you start extending it to different things, people sometimes think it’s weird. Things that have issues around hygiene I can understand, but we could probably extend this sharing economy, utility-based kind of borrowing system to so many different things in our lives. In the last little while we’ve accepted that it’s okay to share bicycles and cars. It’s okay to share your living space with strangers when you’re going on vacation, but for some reason we’re still attached to our things, so this is kind of trying to get people away from the idea of ownership by just using something when you need it. I think there’s a bunch of varying anecdotes about this, but they say that the average drill is used between ten and twenty minutes in its lifetime. When you think about it—in and out of the wall—it really doesn’t take much time, so this idea that we could have a hundred people using one drill instead of a hundred people using a hundred drills is pretty potent environmentally too. It takes a lot of effort to mine and manufacture a hundred drills.”
The Alberta government is speeding ahead with aggressive action to address climate change, introducing new legislation on Tuesday that would require the province’s population and industry to pay for their pollution and reduce energy consumption.
Environment Minister Shannon Phillips tabled her government’s climate change legislation - Bill-20, the Climate Leadership Implementation Act, exactly one year after her New Democratic Party assumed power and ended 44 years of Progressive Conservative governments ruling the province.
She said the new law would deliver on the New Democratic government’s promise from last November to respond to the challenge of climate change while focusing on the priorities of everyday Alberta families.
“For too long, governments in Alberta chose to ignore and deny the problem,“ Phillips said at a news conference. "That approach didn’t work.”
Alberta is home to the world’s third largest crude oil reserves after Saudi Arabia and Venezuela but its economy has been pummeled for nearly two years by a significant drop in global commodity prices.
If adopted, the Climate Leadership Implementation Act would apply the NDP government’s new carbon tax, pricing carbon at $20 per tonne in 2017, before raising the levy to $30 per tonne in 2018.