The Future of FAMs
| Date | 01 August 2018 |
| Author |
48 ELR 10672 ENVIRONMENTAL LAW REPORTER 8-2018
COMMENT
The Future of FAMs
by Rosalie L. Donlon
Rosalie L. Donlon is the Managing Editor of National Underwriter Property & Casualty magazine and PropertyCasualty360.com.
Zachary Arnold’s proposal of a policy framework to
prevent coastal industrial disasters is quite timely,
coming as it does after the 2017 hurricane season
on the East Coast, followed by the equal ly devastating
wildre season in the West. Arnold suggests that imposing
nancial assurance mandates (FAMs), such as minimum
insurance coverage, would induce coa stal industries to pro-
actively manage climate adaptation, and thus, proactively
manage risk.
Arnold point s out that government at all le vels—local,
state, and federal—could do more. A major drawback is
that many governments are not encouraging businesse s or
developers to invest in climate adaptation. Without a gov-
ernment directive, it is likely to take longer to convince
businesses of all sizes to be proactive.
I. Climate Does Not Equal Weather
In describing “climate adaptation,” Arnold uses scientic
terms that, while accurate, may have the eect of turning
o those who should be paying better attention. Generally,
businesses and governments are not composed of scientists,
and as Dr. Louis Gritzo, vice president and manager of
research at FM Global, has said, “climate science is not a
long-term weather forecast.”1 As long as the public, includ-
ing polic ymakers and busines s owners and operators con-
fuse the two, there is likely to be resistance to the need for
a FAM and no interest in gaining greater understanding.
At least one state appears to have adopted Arnold’s
idea, at least in part. Louisiana has adopted an aggressive
response to climate-linked ooding in t he United States.
e plan calls for prohibitions on building new homes in
high-risk areas, buyouts of homeowners who live there
now, and hikes in taxes on those who won’t leave. Com-
mercial de velopment would still be allowed, but developer s
would need to put up bonds to pay for those buildings’
eventu al demolition.2
According to published reports, the draft plan is part of
a state initiative funded by the federal government to help
1. Dr. Louis Gritzo, e Economic Risk of Climate Change, PC-
360 (July 29, 2014), https://www.propertycasualty360.com/2014/07/29/
the-economic-risk-of-climate-change.
2. Christopher Flavelle, Louisiana, Sinking Fast, Prepares to Empty Out Its
Coastal Plain, Bloomberg (Dec. 27, 2017), https://content-service.bloom-
berg.com/articles/P1C0RY6JTSEA.
Louisiana plan for the eects of coastal erosion. at ero-
sion is happening faster in Louisiana t han anywhere else in
the United States, due to a mix of rising seas and sink ing
land caused in part by oil and gas extraction. State o-
cials say they hope the program, ca lled “Louisiana Strate-
gic Adaptations for Future Environments,”3 or LA SAFE,
which focuses on community adaptat ion, becomes a model
for coast al area s around the countr y and around the world
that are threatened by climate cha nge.4
II. EU Environmental Liability Directive
e European Union has begun dealing with climate
change in a more formal way, as Arnold proposes for
the United States. In 2004, the European Commission
(EC) issued Directive 2004/35/EC, the Environmental
Liability Directive (ELD).5 e Directive established a
framework based on the polluter-pays principle to pre-
vent and remedy environmental damage. e ELD is an
administrative approach, based on the powers and duties
of public author ities.6
Under the ELD, European Union Member States
are expected to ensure the eective implementation and
enforcement of the Directive. Although the Directive was
issued by the EC, Member States had three yea rs to enact
appropriate domestic legislation adopting the terms.
In practice, the ELD has not been as successful as the
EC hoped it would be. On Oct. 26, 2017, the commission
issued a resolution noting that7:
[O]wing to the discretionar y powers awarded in the
ELD and to the signi cant lack of clarity a nd uniform
application of key concepts as wel l as to underdeveloped
capacities and exper tise, the transposition of the ELD i nto
national liabilit y systems has not resulted in a level playi ng
eld and that, as con rmed in the Commission report ,
it is currently totally d isparate in both lega l and practi-
cal terms, with g reat variability in t he amount of cases
3. Liz Russel, Louisiana Strategic Adaptations for Future Environments, https://
lasafe.la.gov (last updated Apr. 27, 2018).
4. Flavelle, supra note 2.
5. European Commission, Environmental Liability, http://ec.europa.eu/envi-
ronment/legal/liability/ (last updated July 2, 2018).
6. Id.
7. Implementation of the Environmental Liability Directive (2017) Eur. Parl.
Doc. PV 0414.
Copyright © 2018 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®, http://www.eli.org, 1-800-433-5120.
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