Opinion: Fighting Fire with Financing
August 24, 2018
Guest Opinion by Timothy Male
California has 129 million dead trees that fuel wildfires and 2 million homes in areas at high-risk for wildfires. Across the western U.S., about 58 million acres are at high risk of catastrophic wildfire. It’s a problem that begs for a solution.
What if we could pay for enough forest management today to escape the cost of the next catastrophic wildfires?
Consider that much of California’s recent wildfires are taking place in national forests. Almost every dollar from Congress that has gone to suppressing a wildfire on national forests has come at the expense of managing forests to reduce future fire risk. It’s like paying off your college loans by taking on more high interest credit card debt.
Last year Congress passed a gradual increase in the annual federal fire-fighting budget, but it came after decades of Congressional inaction. Look no further than the Mendocino fire for proof of the damage done by lack of forest management.
Managing forests to reduce fire risk costs about $600 per acre. Research suggests one-third of a fire-prone area must be treated to significantly reduce fire risks. Put those numbers together and multiply by those 58 million at risk acres and we need $12 billion to lower fire risk across the West. That’s more than double the Forest Service’s annual budget.
Congress is unlikely to provide that much money at one time, but private investors, local governments and public utilities could.
Globally, the private sector has invested more than $8 billion in profit-seeking ‘green’ projects over the last decade and $3 billion more is held by investors who cannot find projects to fund. Deploying those assets to fund forest management and create rural jobs, would reduce fire risks, keeping millions of people safe.
Denver’s water utility is already making such investments to protect the city’s water supply. Their borrowing program, which is backed by federal dollars and utility ratepayers, is treating about 100,000 acres of forest. By borrowing money today and catching up on management of high fire risk areas, the investment will pay future dividends in a safer water supply.
A bigger initiative is underway to create Forest Resilience Bonds that allow investors to back forest management and get paid back with a return if fire risk goes down and water supply goes up. The first resilience bond is taking shape in a unique, privately funded partnership in California, with support from the Rockefeller Foundation, investors and Blue Forest Conservation (a public benefit company).
The difference between Denver’s approach and the Resilience Bond is that investors only get paid back if their forest management produces measurable fire reduction and water benefits, but the goals are the same: fewer and less intense future wildfire seasons, less property damage and more water.
If investors financed $12 billion in fire risk reduction work, who would pay them back?
The Forest Service is considering the role it can play in supporting privately funded forest investments. The biggest impediment is a Congressionally-imposed limit on their ability to fund long-term contracts that allow enough time to measure the fire and water benefits created by projects that would trigger bond payments.
More drinking water utilities, like Denver’s, may also help repay bonds because well-managed forests provide substantial drinking water quality and quantity benefits. Hundreds of billions in private capital is also available from the municipal bond market, typically at extremely low interest rates. This could be used capitalize the work needed to produce fire-resistant forests. Earlier this year, the Government Accounting Standards Board made clear that management of such natural assets can be an appropriate capital investment for public agencies.
Most people don’t like the idea of borrowing money, but what’s the alternative? There are more dry summers in our future and no current plan to catch up on forest management.
With funding available at extremely low interest rates, private investors could help America build an ambitious fire prevention strategy that would make the West and its water supplies safer from fire over the next generation.