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Through District Dialogues, the Richmond Fed’s signature public discussion series, the Bank continues to explore national and global issues through an economic lens, and the most recent program covered some familiar and some lesser-known ways that extreme weather is affecting the economy and local communities.

Renee Haltom, the Bank’s regional economist for Virginia, moderated the May 18 program, Building Resilient Communities: Preparing for Extreme Weather Challenges.

“The Federal Reserve does not make climate policy, but it does have the responsibility to understand factors that can impact the national and regional economy,” Haltom explained to the event’s in-person and virtual attendees. “In addition, the Fed has the responsibility to understand climate-related financial risks that could impact our financial and banking system.”

Richmond Fed senior economist Toan Phan kicked off the discussion with an overview of how economists have viewed the potential effects of extreme weather on the economy and financial system. The effects include industry-specific changes to labor productivity with higher temperatures and changes to asset prices in riskier areas.

Panelists for the event were Erica Anderson with Land of Sky Regional Council, an organization representing four counties in western North Carolina; Jeremy Hoffman with the Science Museum of Virginia; and Jessica Whitehead with Old Dominion University’s Institute for Coastal Adaptation and Resilience.

They discussed what extreme weather has looked like in rural, coastal and urban areas and the effects on the local economies and industry.

“Even though there might be regional difference in culture … the interest in bolstering your community’s resilience to something like extreme heat is something everyone seemingly wants to get behind,” Hoffman said.

For example, in rural, mountainous regions of the Fifth District there is limited land available for development, and much of it is prone to landslides and flooding. Anderson noted that a 2009 landslide closed Interstate 40 for six months and resulted in a 150-mile detour of a major freight line. The cost to the transportation system alone was around $175 million. Weather-related issues in coastal regions also have resulted in escalated real estate prices and disruptions to the critical shipping and transportation systems in those areas, which serve as drivers for the Hampton Roads economy.

As for urban areas, “There is a dramatic rise of flooding ... because of intense amounts of rain falling in a shorter time frame,” Hoffman said. “Flooding can affect sewage capacity, (and) more development impedes natural water runoff.”

Echoing insights that Phan shared from the economics literature, the panelists also discussed how extreme weather issues are not felt equally by everyone. Members of historically marginalized communities who live in urban areas tend to experience more flooding and heat-related challenges, and in many cases, these align closely with patterns of historic redlining in communities. Hoffman indicated it is likely similar in rural areas with a similar lack of capacity, where poorer residents are more likely to live in manufactured housing, which leaves them more vulnerable.

The panelists also shed light on how communities are responding to weather-related disruptions to their economies. The strategies ranged from local to regional — from neighborhood efforts to plant trees and create green spaces, overhauling the storm water system for a city, to fostering regional collaboration around infrastructure needs and resiliency planning. Anderson’s organization, Land of Sky Regional Council, has produced a toolkit to help communities understand options available to them so they can invest based in their unique circumstances. Yet, she and others noted that investments can be costly and, as a result, impede preparation.

Participation from the audience included a query about how flood insurance fits into the decisions being made.

Not all coastal property or property owners are equally situated, Whitehead noted. Someone purchasing a second home or a rental property in a coastal area will likely have different impacts from extreme weather than a working-class individual whose home has been in the family for years. Flood insurance is intended to spread out the risk, but the affordability of the insurance for low-income property owners can be an issue.

Haltom brought the program to a close by asking panelists what gave them hope. The presenters referenced both growing interest in this issue and the engagement of younger generations.

“There is so much that we do not know, but there has been an explosion of research in the past 10 years,” Phan said. “I’m encouraged by how fast the economics profession has learned about these issues and how much more we will learn in the years to come.”

“These kids are extremely talented,” Whitehead said of young students she has interacted with around the topic. “I’m really excited to see what they do.”

Share Your Thoughts

The Richmond Fed is interested in learning what your community is doing to prepare for extreme weather and also what topics you’d like us to consider addressing in the future. Please contact the Bank’s Economic Education department.