An Avoidable Corporate Cost That Squanders Your Tax Dollars

With the April 15 tax deadline now behind us, many filers are probably pondering how their tax money is used -- and whether those uses are constructive or wasteful. Given that some companies have made great use of "negative externalities" over decades, we might want to ponder how lack of foresight has pushed costs onto all of us, whether we like it or not.

Sadly, one of the issues squandering taxpayer resources is the ramifications of climate change. Had more corporate managements thought long-term, these effects could have been avoided. Fortunately, some companies and investors are currently trying to do something about it. These are the companies investors should keep their eye on, because they're actively preparing for the future.

Public funds going down the storm drain
Just in time for the end of tax season, Ceres, a coalition of investors, companies, and public interest groups advocating for sustainability leadership, has recently revealed some figures about the tax ramifications of climate change.

Take extreme weather's burgeoning costs: Many of these are shifted to taxpayers through federal and state spending. The National Flood Insurance Program is a case in point. With the devastation of Superstorm Sandy, losses from last year are expected to reach about $8 billion. The NFIP may collect $3.5 billion each year in premiums, but the agency's paid claims have exceeded its premiums collection in four of the last eight years.

With the recent major drought impacting farmers, the Federal Crop Insurance program has experienced triple the losses of just three years ago, skyrocketing to $16 billion in 2012.

Last year, wildfires raged through more than 9 million American acres, resulting in the third-worst year for fires in U.S. history. The Forest Service exceeded its fire suppression budget by $400 million, a trend that has continued for 20 years now. It's so busy putting out fires that money is not allocated to other land-management uses. Meanwhile, climate models are predicting increased fires in the future.

Obviously, 2012 has been a turning point, and in a scary way. It has given stark and more frequent examples of how climate change is altering the world we live in more and more all the time.

Embracing positive change instead of fearing it
Fortunately, some companies and organizations are actively dealing with the issue, despite the lack of U.S. government policies.

Ceres has formed a splinter advocacy coalition, Business for Innovative Climate & Energy Policy, which seeks to work with policymakers to pass energy and climate legislation to hurry along a shift to a low-carbon modern economy in America.

Part of the coalition's mission reminds us that America has a can-do attitude. Major companies like Starbucks, eBay, Ikea, Seventh Generation, Patagonia, Annie's, and many others have signed on.

Indeed, many companies are voluntarily doing their part in reducing waste, pollution, and reliance on fossil fuels.

Google (NASDAQ: GOOGL  ) has long made aggressive reduction of its environmental impact part of its corporate DNA. Its "Big Picture" page illustrates a dizzying array of ways Google has reduced its carbon footprint since 2007. Efficiency initiatives, green energy purchase, and carbon offsets take its footprint down to zero. In addition, Google funds plenty of alternative energy initiatives; in late 2012, it invested $200 million in a Texas wind farm, and in 2011, it invested $280 million in a fund that helped now-public Solar City (NASDAQ: SCTY  ) finance more solar installations in America, focusing on the residential and business markets.

Speaking of SolarCity, its CEO, Lyndon Rive, recently vowed that the energy storage issue -- a major problem for solar -- will be solved within the next 10 years. It's planning 100 energy storage systems for some customers this year, to be provided by Chairman Elon Musk's electric car concern Tesla Motors. 

Apple (NASDAQ: AAPL  ) often gets flak on some issues, but it's not standing still when it comes to renewable energy. Amazing photos have surfaced of its massive solar array to power data centers in North Carolina, touted as the world's largest private solar array. The company says that it has increased its use of renewable energy by 114% in the 2010-2012 time frame.

Cut the costs of apathy
Weather-related disasters, reliance on volatile fossil fuels, and other negative outcomes all squander billions in taxpayer funds. Those who ignore how businesses must evolve when landscapes change will have some jarring wake-up calls on the horizon in coming storms, fires, and droughts: ruined investments, companies that can't do business as they used to, and economies laid to waste.

Taxes are often taxing, but when they're squandered on avoidable messes, it's an insult to Americans' hard-earned money. Action now reduces costs later -- for everyone.

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  • Report this Comment On April 16, 2013, at 4:39 PM, mdk0611 wrote:

    Can you tell me how the deficit run up by the National Flood Insurance Program is a corporate cost? Congress set up the program and there is no "corporate" influence over the setting of rates or the refusal (or lack thereof) to insure properties that have been subject to claims in the past. Hurricane damage is surely not a recent phenomenon as Spanish galleons were sunk by hurricanes in the 1500's. Coastline home ownership, however, has increased in recent decades, placing more structures in the higher risk zones.

  • Report this Comment On April 16, 2013, at 7:34 PM, SuntanIronMan wrote:

    One of the problems with the Forest Service and fire suppression is that they are no longer content with letting nature take its course. They are putting out every fire, big and small. Small fires use to be allowed to spread and burn out on their own (a natural cycle and needed part of the forest ecosystem). Now, however, those small fires are being suppressed, which has the unintended consequence of making it possible for much larger (and harder to control) forest fires to occur more often.

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