California Faces Growing Wildfire Crisis
As California continues to battle explosive wildfires, experts warn that everyone in the state is paying the price – literally and figuratively. Koko Tomassian, a program manager at California’s public utilities regulator, emphasized that “we are all paying” for the financial and health-related damages caused by these disasters.
The issue was discussed in depth at a recent Stanford Institute for Economic Policy Research (SIEPR) Policy Forum, where policymakers, business leaders, and academics gathered to examine the economic impact of wildfires. The forum came nearly four months after devastating Southern California blazes that ranked among the most destructive in state history.
Experts at the forum highlighted the massive toll on government budgets, utility companies, insurers, and residents. Direct costs include lost property, canceled home insurance policies, and fire prevention programs straining government coffers. Indirect costs, such as those related to dangerous wildfire smoke, are estimated to be at least as large as the direct damages.
“Inhaling wildfire smoke, unfortunately, kills people,” warned Marshall Burke, SIEPR senior fellow and associate professor of environmental social sciences. Research has shown that wildfire smoke is reversing decades of air quality improvements nationwide.
Addressing the Home Insurance Crisis
The state’s home insurance market is in crisis, with 60% of residents worried about insurance availability and 75% concerned about rising costs. Private insurers are exiting the state or canceling policies due to increased wildfire risks. The state-created ‘insurer of last resort,’ known as the FAIR Plan, is not sustainable long-term.
Experts proposed several solutions, including allowing homeowners to take out second mortgages to cover home protection costs. Technology, such as machine learning, could also help insurers better understand their risk in California.
Learning from Other Regions
Experts suggested that California could learn from other regions that have successfully managed wildfire risks. For instance, the southeastern United States has a robust logging industry that motivates companies to harvest trees responsibly, lowering fire risk.
Western Australia was cited as another example, where large-scale prescribed burning helps contain wildfires. In Western Australia, 80% of land burned annually is prescribed, compared to California’s 5%.
The forum concluded that addressing California’s wildfire crisis will require a multi-faceted approach involving government, industries, and individual homeowners. As Stephen Benson of the California Department of Finance noted, “It really takes an all-hands-on-deck approach.” Individual homeowners must appreciate their risks and responsibilities, potentially shouldering more mitigation costs by ‘hardening’ their homes against wildfires.
