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Speaking of the Economy
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Speaking of the Economy
May 10, 2023

Local Impacts of Global Weather Risks

Audience: General Public

Jeremy Hoffman of the Science Museum of Virginia and Toan Phan at the Federal Reserve Bank of Richmond share their research on the relationship between redlining and the risks of extreme heat and flooding. They also discuss other ways that the economy intersects with weather and the actions that communities can take to make themselves more resilient in the face of extreme weather threats.



Tim Sablik: Hello, I'm Tim Sablik, a senior economics writer at the Richmond Fed. My guests today are Jeremy Hoffman, the David and Jane Cohn Scientist at the Science Museum of Virginia and an affiliate at Virginia Commonwealth University's Urban and Regional Planning Department, and Toan Phan, a senior economist at the Richmond Fed. Jeremy and Toan, welcome to the show.

Jeremy Hoffman: Hi, Tim. Thanks so much for the invitation.

Toan Phan: Yes, Tim, thanks for having us here.

Sablik: You're both panelists on an upcoming District Dialogues event here at the Richmond Fed about the effects of extreme weather on communities across our region. You've also worked together on a recent paper exploring how environmental risks vary across urban neighborhoods. I thought we could start our discussion there.

In that paper, you found a connection between discriminatory lending practices in the 1930s and neighborhoods' exposure to climate risks today. Can you describe your findings and what motivated you to examine this connection in the first place?

Hoffman: This story actually starts a few years ago when me and my co-author, Vivek Shandas, and a student, Nick Pendleton, were looking at patterns of urban heat that we found in cities like Richmond and Baltimore and Portland, Ore. We were finding that poorer communities of color in these cities were consistently warmer by several degrees Fahrenheit than wealthier, whiter communities only a few miles away within the same cities.

Over a few years, we were looking at this database that was published by the University of Richmond's Digital Scholarship Lab that made public for the first time this nationwide database of what are known as redlining maps. If you're unfamiliar with that process, the Home Owners' Loan Corporation was given the opportunity to go and rate these neighborhoods across over 250 cities nationwide by their relative risk for financial investment in the form of real estate. Because of the color of the skin of the people that were living in these neighborhoods and their class and their ethnicity, their immigrant status, these neighborhoods were assigned lower grades or higher risk for investment.

When we overlaid these redlining maps for Richmond and Baltimore and Portland over these maps of extreme heat exposure that we had been generating, the story was really, really clear that these formerly redlined areas were much warmer than their non-redlined counterparts. We worked on a hypothesis that this is a ubiquitous feature of this housing policy that was undertaken in the 1930s. And we found in our original paper, it was 94 percent of the cities that had been redlined had this exact same pattern of warmer in redlined [areas], cooler in the wealthier areas.

What's interesting is [our paper] contributed to this real boom of interest in understanding how redlining relates to present-day environmental and downstream health impacts in our communities. Our paper garnered a lot of criticism when we were first shopping it around and in the review process. These correlative associations between something does not prove in any way causality.

I knew that other economists had looked at over generations how socioeconomic deficiencies played out over many generations in these redlining contexts. So, I became really interested in figuring out how can I get an economist to work on this with me. Somebody introduced me to Toan and, over the next year and a half since that point, we have really been focusing on how do we tease out not only these causal linkages for heat exposure, but a variety of other climate-related stressors. Toan has educated me in how to make that happen.

Sablik: Thanks, Jeremy, for sharing that background. Toan, maybe you could tell us about how you got involved in this project with Jeremy.

Phan: Certainly. I actually learned about his research by reading a New York Times article about how he and his team found that redlining is correlated with unequal heat exposure. I find it surprising because —think about it — it's a policy that was set up roughly nearly 100 years ago. It officially ended in the 1960s, right? So how can the policies that ended so long ago potentially still have an effect today? When Jeremy contacted me asking, "Hey, can we go beyond just correlations?" it made me very interested.

We decided an appropriate method is something called a boundary design. What it does is basically compares similar houses, similar properties. Tim and Jeremy, let's say you guys both live in Richmond. Your houses are similar and you live in the same neighborhood. One of your houses, let's say Tim's house, is on one side of the boundary of the original redlining map and Jeremy is on the other side. Let's say Tim is on the side that's graded "B" and Jeremy is on the side that's graded "D" — D is the lowest grade, a redlined neighborhood. When comparing these kind of properties, the properties that lie on the lower graded side — in this case, Jeremy's house — tend to have higher exposure to future flood risk and higher exposure to temperature risks. Because these houses are very similar and the boundary was not drawn, we should expect these two houses should have very similar risk exposure. The fact that they have statistically significantly different risk exposure is evidence that redlining maps has some causal effects.

Sablik: Do you have any theories about why redlining policies might lead to this greater exposure to environmental risks?

Phan: One mechanism I would have in mind is that houses in the lower graded neighborhoods will have less investment in something called environmental capital compared to similar houses on the higher graded side. For example, they have less investment in parks. They have less investment in environmental quality that could contribute to higher risk exposure today. Just to be concrete here, if your house is not near a park and instead you live near a lot of parking lots, the lack of surface perviousness would imply that you have a high flood risk. If the flood comes, there's no ground or earth for the water to go. And if you don't live near trees, you're going to have a higher exposure to heat.

To test this story — lower graded properties tend to have lower environmental capital — we use pretty high-resolution data. And we found that [among] similar houses, the ones that are on the lower graded side will tend to have less tree coverage and will tend to have less ground surface perviousness. That's how I explain why the lower graded houses will have higher exposure to flood risk and heat risk.

Hoffman: There's some other broader scale things that we can look at, too. Virtually every stressor and the associated downstream health impact is worse in formerly redlined versus non-redlined areas. Part of it is we know redlining was just one practice implemented by the urban planning profession and housing agencies that worked as a segregation policy.

Only a couple of decades after redlining, there was the interstate highway system construction. Interestingly, if you overlay redlining maps from just about every major city where they occurred, the redlined neighborhoods were bulldozed or bisected by the interstate highway system. At the same time, almost no interstate highways go even close to "greenlined" areas. That is a generational investment in concentrating environmental disamenities like hard surfaces as well as traffic volume and all of the associated air quality issues with that.

You have further urban renewal projects that happen after that. Many of the continued increasing and changeovers in housing stock in our cities tend to be in places that are opportunity zones which, interestingly, also overlap in many cases with places that were originally redlined. So, there's a continual land-use concentration of this disamenity in these formerly redlined areas or no investment whatsoever, which is the environmental capital idea.

Sablik: I think the conversation around climate risks often focuses on extreme weather events like hurricanes or flooding. But as we've been talking about, higher temperatures alone can also have a serious impact on health, particularly in these exposed urban neighborhoods, as you discussed in your paper.

Toan, you've also done some research on how higher temperatures affect the economy more broadly. Could you talk about your findings there?

Phan: Sure. There is a large and growing research literature in climate economics that is trying to understand the different ways that rising temperatures could be affecting the economy.

To be clear, not all effects that researchers have found are bad. For example, rising winter temperatures and warmer winters have been documented to be associated to lower heating costs. That reduces households' and businesses' expenditures on heating in the winter. On the flip side, though, rising summer temperatures increase the cooling cost. Overall, if you add up both estimated effects, the literature has found that the negative effects of rising temperatures tend to dominate the positive effects, at least for the U.S.

The effects that the literature has documented include higher temperatures, especially in the summer. [They] tend to have detrimental effects on labor productivity and, as a consequence, that will lead to lower economic growth across a wide variety of sectors, way beyond just agriculture. It goes as far as construction, some services.

Sablik: Yeah, there's certainly a lot of discussion at a national and even global level about policies that could be adopted to address these risks. But Jeremy, what can individual communities do to help mitigate their exposure to climate risks?

Hoffman: Quite literally, there are dozens of things we can be doing to reduce our exposure to hazard and improve adaptive capacity across our communities.

A couple of really important folks in the urban heat and heat resilience world, Ladd Keith and Sara Meerow, put together a report called "Planning for [Urban] Heat Resilience." They derive two main buckets of things that we can be doing as a community.

There's mitigation. When we talk about climate change mitigation, most of the time we're talking about reducing emissions of heat trapping gases. In the case of heat mitigation, what we're talking about are the built environment changes that we can be making that physically reduce the temperature of a place. Those are typically thought of as increasing tree canopy. A billion dollars in grants was just released from the Forest Service to mitigate and build heat resilience programs through the Inflation Reduction Act. Many cities are evaluating the impact of changing the color of asphalt surfaces. Asphalt has a much higher heat capacity. It has very low reflectivity to the sun's incoming radiation.

On the flip side of that, the other and complementary approach is management. You've got mitigation, which reduces the temperatures, and then management, which is our response to the chronic and acute stressor of extreme heat. Management is like the governance structures around distributing resources like air conditioners or fans or callback programs for people that have made a lot of emergency calls over the last year. During a heatwave, a community might decide [to] check in on the people that regularly need help because we know that those chronic illnesses are the ones that are most exacerbated by extreme heat.

It could also be distributing literature about the warning signs of extreme heat exposure, heat stress, heat stroke. As we know, almost every single heat-related illness and death that has ever occurred has been avoidable and preventable. What these education and engagement opportunities can show a community is that it is a localized issue and there are local solutions. Climate change seems very big and far away and not happening now. But targeting and focusing on these hyperlocal kinds of disparities in environmental exposures, we can actually move people to action.

Sablik: It definitely sounds like both of you have plenty to keep yourselves busy. What other projects are each of you working on in this space right now?

Hoffman: Toan and I are both involved in the fifth National Climate Assessment. If listeners aren't familiar, there's the big Intergovernmental Panel on Climate Change reports that you hear about on the news. You can think of the NCA or the National Climate Assessment as our country's IPCC report.

It's basically the up-to-date, state-of-the-art understanding of climate impacts in the United States, broken out into over 30 chapters. Toan is an author on the economics chapter. On the other side of that, there are chapters that focus on the regions of the United States. I'm the chapter lead for the Southeast, which comprises 11 states from Florida up to Virginia over to Kentucky down to Louisiana.

We both just got back from an all-author meeting in Washington, D.C., which brought together over 400 authors in the same place to talk about how we respond to public comments and National Academies comments on this document that's slated to be published this fall. I think we're both very excited about it.

Phan: Yes, I'm quite excited about it, in particular because this will be the first time that the National Climate Assessment will have an economics chapter. This will be the first time ever there will be a synthesis of existing literature on the research of how climate change interacts with the economy [and] with the financial market.

As far as my own research, my co-authors and I are also investigating how climate-related risks like flood risks of sea level rise affects financial markets. Like Jeremy was saying, a lot of climate damages will happen far off in the future, even though the risk will be potentially large with large damages. So, my co-authors and I are trying to understand how, for example, future sea level rise risk will affect housing markets and mortgage markets, among others.

Sablik: Great, we'll definitely keep an eye out for those reports and the paper that you mentioned, Toan, that you're working on.

Jeremy and Toan, thank you so much for joining me today to talk about your work and research.

Hoffman: Yeah, I'm so excited to be a part of the District Dialogues event coming up and we'll get to go into even more detail. I love talking with Toan because he and I come from very different backgrounds but share such an enthusiasm for rigorously understanding these issues.

Phan: Yes, thank you, Tim. And, like Jeremy said, I'm excited as well to join this conversation with the community.

Sablik: Yeah, so that District Dialogues event will be on May 18, and there's still time to register if you're interested to attend. You can head over to the Events page on our website, And if you enjoyed this podcast, please consider leaving us a rating and review on your favorite podcast app.

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