While state and local leaders in transportation departments, water utilities, and housing and planning agencies directly manage and oversee many of these built environment issues, they do so with little to no federal guidance on their climate impacts. And it is often lower-income households and communities of color that suffer the most, whether through higher housing and transportation costs or greater exposure to climate risks.
The natural environment and our economy can no longer afford federal inaction and obstructionism. Increasingly extreme and unpredictable weather events continue to unleash widespread damage across the country. As the Biden administration shapes its climate agenda, many policymakers and practitioners are calling for large-scale legislation to spur sizable emissions reductions and other climate adaptation efforts. However, even if Congress does pass major climate legislation, it will take years (if not decades) to see measurable results.
Bold legislative action matters, but federal leaders also need to seize short-term wins in the next two to four years that show measurable progress and build support for larger-scale, longer-term investments. Additionally, the federal government shouldn’t focus strictly on the renewable energy transition; it is equally important to address unsustainable land use systems, which we define as our transportation networks, water facilities, and real estate assets. In other words, changes to how we govern and invest in our built environment must be central to a renewed federal climate agenda.
This Blueprint focuses on how the White House can immediately kick-start climate solutions across our built environment through a new Climate Planning Unit (CPU). The mandate of this office should be to reduce the federal fiscal impacts of climate change by developing strategic intra-agency and cross-agency mitigation and adaptation projects and programs. The CPU would specifically offer: 1) a policy vehicle to address staffing and budget limitations with the White House; 2) a programmatic structure to provide lasting leadership and promote long-term experimentation; and 3) a clear system for tracking and evaluating progress on greenhouse gas (GHG) emissions reduction, climate adaptation, and cost savings.
CHALLENGE
America’s climate challenges are mounting, and hitting many communities with greater frequency and severity. While the global dimensions of climate change continue to attract attention—from melting ice caps in the Arctic to GHG emissions in developing countries—local transportation, land use, and other built environment components are central to addressing our challenges.
There is a spatial mismatch between where housing is built in the U.S. and where commercial activity is concentrated. Development practices do not consider sea level rise or altered precipitation. Outdated building codes contribute to world-leading carbon footprints and persistent fragility. Aging roads, pipes, and other infrastructure facilities are costing more to maintain and threatening our safety. Put simply, our built environment—including transportation networks, water facilities, and real estate assets—is not only a major cause of our climate challenges, but is also failing to shield us from climate harms or mitigate future risks.
Climate impacts are not equally distributed across our built environment, creating environmental injustices for many lower-income households and communities of color living in neighborhoods at the highest risk of flooding, fires, and other climate crises. As Hurricane Harvey illustrated in Houston, ongoing development in vulnerable floodplains continues to put many of these disadvantaged communities at risk. Major storms and other acute climate shocks aren’t the only problems; chronic climate threats such as air pollution and extreme heat remain a hazard in poorly designed neighborhoods that lack parks, walkable transportation options, and sustainable housing. Low-density neighborhoods also require more use of polluting vehicles, greater water consumption, and higher utility expenses—outcomes which are bad for households and the environment.
Since our infrastructure is often long-lived, investment decisions can lock communities into inefficient and inequitable outcomes for decades. Legacy infrastructure systems (such as outdated highways, aging dams and levees, and transmission lines) can divide communities, lead to further disinvestment, and expose places to greater climate risk. Low-income households—especially Black and Latino or Hispanic families with children—struggle to afford high-quality housing, and are pushed into older homes with higher maintenance costs and greater exposure to health hazards. Deferred maintenance remains a reality in many fiscally constrained localities, further complicating efforts to undo these harms. Even in localities with greater fiscal capacity, the continued emphasis on incremental repairs and outdated designs perpetuates our economic and climate vulnerabilities, creating a vicious cycle of added dangers and costs.
While climate risks and economic inequities are widespread throughout our built environment, federal leadership on these issues has often been lacking. State and local governments remain the primary owners and operators of our transportation and water facilities as well as the overseers of land use planning and housing development. Yet the scale of needed climate action goes beyond any single jurisdiction. National leadership is essential to accelerate and scale infrastructure improvements in support of greater climate protections; however, the federal government continues to provide limited guidance on climate objectives, inadequate funding, and inconsistent measures of climate costs and benefits.
Currently, the federal government relies on several different agencies to drive down GHG emissions and reduce climate risks. Each agency often acts in isolation and with narrow mandates, resulting in a lack of nimbleness and foresight to drive needed systemic change across the federal government. From the Federal Emergency Management Agency (FEMA) to the Environmental Protection Agency (EPA) to the Department of Housing and Urban Development (HUD), there is no consistent climate framing or programmatic priorities around future-looking investments. With an emphasis on climate relief rather than resilience, some federal programs are confronting the reality of responding to multiple billion- dollar disasters per year and, consequently, teetering on the edge of insolvency. Existing agency staff rarely have the flexibility or authority to test out new ideas and drive programmatic change, making it hard to chart a new course. The result is a lack of coordinated, imaginative leadership that can proactively address our mounting climate challenges, and few politically safe spaces within which to test big ideas, show meaningful and steady progress, and scale up successful interventions.
LIMITS OF HISTORIC AND EXISTING POLICIES
Current policies governing federal investments in the built environment fail to address climate change because of three systemic problems. First, there are no clear, consistent metrics that federal agencies can use to assess the climate impacts of programs and investments that affect the built environment. Second, financial incentives are not aligned for individual programs or agencies to make decisions that increase long-run environmental and economic returns. Third, there isn’t a framework or vehicle to coordinate cross-agency decisionmaking. Below, we discuss each of these failures in more detail.
A core tenet of evidence-based policymaking is that public agencies need to know what outcomes or targets they are aiming for: increasing high school graduation rates, for instance, or reducing racial disparities in the employment-to-population ratio. Yet when it comes to assessing the climate impacts of built environment investments, federal agencies have little to no guidance. What do climate-conscious housing, transportation, water, and other land use policies look like? Which public investments in the built environment create net economic and social benefits from a climate perspective? Currently, agencies do not have usable metrics to assess climate-related impacts or guide decisions.
The metrics to judge success may vary some across agencies or types of infrastructure, but should largely agree on “good” outcomes. For instance, the federal agencies that originate or purchase mortgage loans (the Federal Housing Administration, the Department of Veterans Affairs, Fannie Mae, Freddie Mac, and the Department of Agriculture) do not currently take into account variations in climate risk for properties located in different parts of the country when underwriting or pricing mortgage loans. Other than brief experimentation with location-efficient mortgages (allowing lower down payments for homes near public transportation), climate concerns are largely absent from the underwriting decisions of loans held in federal agencies’ portfolios. The EPA relies on a number of regulations (such as the Clean Air Act and Clean Water Act) that were designed in an entirely different era and may not be responsive to evolving demands. And FEMA still maps flood risks without always taking into account changing precipitation patterns. Developing a clear, consistent set of targets or benchmarks for climate “success” that would apply across all federal agencies, regulations, and programs impacting the built environment is a critical first step toward better governance.
Second, federal agencies have few financial incentives to encourage climate-conscious investments in the built environment. In some cases, agency policies even embed perverse incentives within their programs. Federal insurance programs associated with disaster recovery offer the clearest examples. Homeowners whose properties are destroyed by wildfires, hurricanes, and floods receive federal insurance payments that allow them to rebuild in the same location—even if those locations face a high probability of similar disasters in the future. The Stafford Act forces rebuilding based on what was destroyed, not what is most needed as a replacement. The design of these insurance programs also reinforces racial and economic inequities: Renter households displaced by disasters are eligible for much less federal assistance than homeowner households, despite renters having lower incomes and less wealth than owners.
The lack of financial incentives also extends to federal property. An inexhaustive list of federally owned assets includes military bases owned by the Department of Defense, office space owned or leased by the General Services Administration, federally managed wildlands under the Department of the Interior, and the network of Veterans Affairs hospitals. Many of these assets will face increased risk from climate change, requiring either adaptation to protect and preserve their use or relocation of some activities. In many cases, the consequences of inaction are already evident on agency balance sheets.
Third, applying a consistent climate lens to all types of federally owned or financed infrastructure requires coordination and integration across a broad set of agencies, each run through a separate bureaucracy. Yet current governance systems hinder effective coordination and communication across agencies, across programs within agencies, and between national and regional offices within agencies. For example, stormwater management and wetlands protection are handled by the EPA, while ocean pollution is handled by the Department of Commerce, through the National Oceanic and Atmospheric Administration (NOAA). This hinders the development and implementation of a unified vision or management of natural resources.
What is needed is a unit that can identify opportunities (and outcomes) of effective climate action with direct and capturable federal financial benefits. That can be within agencies or among multiple agencies, where there are targeted opportunities for savings and benefits. Past administrations have made some efforts to coordinate investments in related policy areas across agencies, albeit at a small scale and temporarily. The Obama administration’s Sustainable Communities Initiative encouraged integrated planning for some projects across HUD, the Department of Transportation, and the EPA. However, the pilot project was small ($250 million) relative to the agencies’ overall portfolios, and it had limited reach. And while the White House Council on Environmental Quality (CEQ) can coordinate interagency meetings related to climate issues, it does not have the staffing capacity or budget to pioneer larger programmatic change.
Governance reforms can set a new course for action. For instance, an 18F model can serve as a template for staffing, funding, and growing a new, dedicated federal unit focused on forward-looking research, metrics, and plans. The Biden administration has already taken steps to better coordinate and elevate federal climate leadership, including the creation of an international “climate envoy” position to sit on the National Security Council. The administration has also announced a parallel high-level domestic climate policy lead. However, federal staffing and funding challenges are likely to persist, and outcome-oriented coordination across the federal bureaucracy remains a concern.
POLICY RECOMMENDATIONS
We recommend that the White House create a new Climate Planning Unit (CPU) within the Office of Management and Budget (OMB). The mandate of this unit should be to reduce the federal fiscal impacts of climate change by developing strategic intra-agency and cross-agency mitigation and adaptation projects and programs—a point previously emphasized in Government Accountability Office (GAO) analyses. The focus on fiscal risk reduction can help expand data collection, improve accounting and accountability, and bring long-term coherence to ad hoc federal climate initiatives.
Using a governance structure modeled on elements of the U.S. Digital Service (USDS) and 18F, the White House can overcome traditional internal staffing and funding constraints to efficiently launch and scale up a new program to deliver quick wins while developing a long-term bipartisan cost-saving agenda. The four main functions of this new unit should be:
- Establish a fiscal agenda for climate risk reduction to identify quick wins and opportunities for structural change within and between federal agencies.
- Draw on the expertise of internal and external climate project managers to provide technical and operational leadership.
- Create a stable, self-sustaining funding structure to drive cost recovery.
- Improve accountability and long-term evaluation through new analytics partnerships within government and with leading private sector climate data providers.
Establish a fiscal agenda for climate risk reduction
Currently, there is no system for collecting the best ideas for federal climate action and rigorously reviewing them for their financial value and practicality. In a November 2016 report titled “Climate Change: The Fiscal Risks Facing The Federal Government,” OMB and the Council of Economic Advisers (CEA) highlight the significant expenditure and revenue impacts associated with climate change. The report focuses on five areas with substantial climate data: crop insurance, air quality and health care, wildfire suppression, coastal storm disaster relief, and federal facility flood impacts.
The fiscal impacts identified by OMB and GAO can be starting points for the new unit. Beyond that, top priorities for the CPU should be to identify land use liabilities related to current federal policies, test new ideas, and ultimately better manage federal, state, and local government climate risks. In order to take advantage of the tremendous expertise across the federal government and U.S. universities and research institutions, we propose a three tier priority-setting and project selection process.
First, the CPU should create an online portal to solicit submissions of ideas for federal GHG emissions and climate risk reduction actions. This process could be structured as an annual competition or open process to review submissions on a rolling basis. Proposals would be encouraged both from within federal agencies and from outside experts. The CPU could develop transparent evaluation and ranking criteria and establish agency- or sector-specific review processes with internal and external experts for evaluating submissions based on their short- and long-term quantitative mitigation/adaptation benefits and financial value. Models for this approach include the World Bank Development Marketplace, the Department of Energy’s innovation challenges, and Challenge.gov prize and challenge programs. “Winning” submissions would be funded to deploy a team of technical and operational experts to execute proposed solutions in three areas: quick wins, cross-agency benefits, and structural changes.
- Quick wins
Examples of quick fiscal wins through climate action are areas where individual federal agencies and programs are facing greater risk, rising costs, or other budgetary impacts. Interventions in this category should create near-term cost savings and efficiencies by mitigating GHGs, measurably reducing risk and liabilities to federal programs, and/or improving long-term solvency. Ideas include electrifying the U.S. Postal Service fleet and reducing the health impacts of extreme heat for public housing residents.
- Cross-agency benefits
One of the many challenges of effective climate action is that benefits are diffuse and long-term. This second category of action would focus on opportunities at the intersection of one or more sectors, agencies, and programs that can create significant fiscal and climate benefits for the federal budget as a whole. A cross-agency example of this type of project is where green stormwater infrastructure (funded by EPA) could reduce flood risk for HUD-subsidized housing units and lower urban-heat-island-related health impacts (benefitting the Department of Health and Human Services) for public housing residents. Individual public housing authorities might not have the resources to fund flood mitigation projects on their own, but taking into account wider federal budget impacts of flood damages and public health consequences could motivate coordinated action across a portfolio of at-risk properties and communities. In this case, the CPU could target proposals for quantifiable actions in one agency that create benefits (or decrease climate impacts or risks) for another and convene potential beneficiaries, optimize joint outcomes, and serve as a broker.
- Structural changes
The final category of proposals and priorities should open the door to long-term, economy-wide transitions. In this category, the focus should not be on immediate implementation but rather on analysis of the fiscal and climate impacts of, for example, improving land management practices, replacing highways with transit, or making building retrofits at scale. This category of ideas could involve partnerships with local and state government agencies and should support nationwide scale-up over a decade or more based on what works and what doesn’t. The Land and Water Conservation Fund represents one way the federal government has been able to better support natural infrastructure through local and state collaborations, grants, and other projects.
Draw on the expertise of internal and external climate project managers
Climate action involves a different skill set than climate science. Strong scientific knowledge and analytical expertise are important, but so are project management skills. Here, the USDS and 18F programs offer successful examples of translating IT and data system expertise into meaningful federal services. The CPU could be a small and nimble unit, with a small corps of permanent executives and career staff to provide continuity across administrations, and a rotating set of outside experts tailored to specific problems. Climate and financial experts could be brought in from within and outside government on short-term (six to 12 months) appointments or details to participate in outcome-oriented, time-bound analytical or delivery teams.
These teams and CPU executives could support the White House domestic policy lead for climate, provide a depth of expertise and implementation experience, and offer dedicated capacity that would be extraordinarily difficult to marshal efficiently through direct federal hiring or voluntary initiatives. The open idea solicitation process described above could serve as a mechanism for identifying candidates from within and outside government. One cohort could have budget expertise to help with federal accounting; another cohort (not necessarily simultaneous) could help with programming coordination at the federal level and with state and local public sector partners. Finally, networks and engagements with subject matter experts and senior leaders with federal governance experience could guide priority setting.
Create a stable, self-sustaining funding structure
Given the fiscal impacts of climate change already identified by OMB and GAO, there is tremendous potential for cost-saving and financial value creation through effective federal climate action. Similar to energy efficiency programs that redirect savings to pay for projects, the CPU would be well served by adopting a cost-recovery structure, which can help insulate it from the politics of annual appropriations cycles and enable successful projects to support future experiments.
For example, 18F requires federal agencies to request its services on a pay-by-project basis, which incentivizes program managers to identify and champion high-value projects that pay for themselves quickly. Although the approach has had limited success in covering the full costs of the 18F program, a hybrid of annual funding through OMB plus a performance-based cost-recovery and revolving fund structure could incentivize the CPU to strike a balance between pursuing quick wins and taking strategic risks.
Improve accountability and long-term evaluation
In its 2016 report, OMB notes that: “We remain in the early stages of quantifying the total likely burden for American taxpayers…Despite these limitations, the accumulated evidence suggests the fiscal impacts of further unmitigated climate change could leave a significant imprint on the Federal Budget over the course of this century.”
Climate risk forecasts continue to improve, and there is a wealth of information across federal agencies and programs, including but not limited to NOAA, EPA, FEMA, GAO, the Department of Defense, the Office of Science and Technology Policy, and the Congressional Budget Office, among others. Bringing a rigorous fiscal lens to integrate existing climate data and modeling results can help fill critical data gaps and lay the groundwork for performance evaluation along three key metrics: emissions reductions, risk reductions, and public sector cost savings. The CPU should coordinate with climate data services and insurance and risk modelers within and outside the U.S. government. The key analytical support functions would include: validating the emissions and/or risk reductions value of proposed ideas, estimating the fiscal benefits of specific proposals to support cost-recovery, tracking performance over time, and enabling analysis and prioritization of large-scale and long-term structural changes.
CONCLUSION
This Blueprint supports the new high-level international and domestic climate leadership in the White House by establishing a stable basis for long-term, fiscally defensible, bipartisan federal climate action to complement other legislative and executive actions. By having a new Climate Planning Unit in place, the federal government can support faster, more widespread climate action and enable politically safe experiments to support evidenced-based policymaking. A focus on low-hanging fiscal fruit can help initiate immediate actions in service of long-term change. These types of efforts can give the new administration some quick policy wins that also deliver long-run, transformative impact.
