🔥 State Farm exits

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In today’s brief:

• State Farm stops selling new insurance policies to homeowners in California.

• Texas avoids potential damaging measures that could have impacted its thriving renewable energy industry.

• Cities struggle to access funding from the Inflation Reduction Act.

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THE BIG IDEA

🔥 Wildfires drive insurance exits

What happened:

State Farm, one of the largest insurers in the US and a leading provider of homeowners insurance in California, announced last week that it would no longer sell new insurance policies to homeowners in the state.

The decision was motivated by a combination of factors, including significant increases in construction costs outpacing inflation, growing exposure to catastrophes, and a challenging reinsurance market. Other prominent insurers like Liberty Mutual and Allstate have also withdrawn from the California market, leaving residents grappling with expensive home insurance.

Why it matters:

California is not the only state experiencing rising insurance costs. Louisiana and Florida have witnessed insurers going bankrupt due to major floods and hurricanes.

In 2023, global insurers face a tough road ahead as reinsurers, who insure the insurers, have raised rates by as much as 200%. Natural disasters such as Hurricane Ian in Florida, losses from conflicts like the war in Ukraine, and increasing interest rates have been cited as reasons for these rate hikes.

However, California faces additional challenges due to worsening wildfire seasons, state-specific insurance regulations, and the requirement for rate hikes to be approved by the state insurance commissioner. The presence of the California FAIR Plan, a privately run insurance pool for high-risk homes, adds another layer to the state's insurance landscape.

Hot take:

The situation surrounding home insurance in California is complex. While climate change is an obvious contributing factor, wildfires in California are also exacerbated by poor land management practices.

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🎯 News That Matters

• Renewable energy in Texas has been spared from potentially damaging measures proposed in the state's legislature. The bills, if passed, could have disrupted the thriving renewables industry in Texas, which leads the nation in wind, solar, and battery projects. Read more.

• A dispute at the United Nations over carbon credits could determine the fate of the carbon removal industry. The debate revolves around whether nature-based or technological approaches should be prioritized. If nature-based solutions are favored, it could exclude the growing carbon removal industry from the market, posing risks to climate goals. Read more.

• The U.S. Senate passed the debt ceiling bill, including provisions that speed up permitting for energy projects and weaken the National Environmental Policy Act (NEPA). The revised bill is expected to benefit energy developers but may pose challenges to environmental protection agencies by reducing requirements for project reviews under NEPA. Read more.

• Arizona faces a water shortage crisis as officials determine there is insufficient groundwater to support approved housing construction in the Phoenix area. New subdivisions will be halted, and alternative water sources must be found for future development, potentially impacting the real estate market. Read more.

• The National Science Foundation has announced funding of $91.8 million to develop a next-generation radar technology for hurricane forecasting. The technology, called an airborne phased array radar (APAR), will provide detailed 3D slices of hurricanes and other storms. Read more.

• California, Georgia, and Texas discuss their plans for high-speed rail projects, reflecting the growing interest in bullet trains across various states and cities. The 2021 infrastructure law has allocated up to $12 billion over five years for rail projects outside the Northeast Corridor, including the development of intercity passenger rail services such as high-speed trains. Read more.

• Ford and Uber are collaborating to offer flexible leases on EVs to Uber drivers. As part of the Ford Drive program, drivers will have the option to lease a Ford Mustang Mach-E for one to four months. The program is initially being piloted in San Diego, Los Angeles, and San Francisco. Read more.

• Cities face challenges accessing funding from the Inflation Reduction Act due to lack of expertise and evolving rules. The law empowers local governments with direct pay tax credits. Cities must act quickly and prepare for paperwork to seize this opportunity. Read more.

• Environmentalists are pressuring insurance companies to stop insuring LNG terminals, citing contradictions with net-zero emission goals. The campaign seeks to make insurance for LNG exporters more difficult and costly, but industry advocates highlight the role of LNG in the transition to cleaner energy. Read more.

• The Energy Department aims to use hydrogen energy to achieve a 10% reduction in US emissions by 2050. The strategy focuses on key industries, cost reduction, regional hubs, and clean hydrogen from carbon-free sources. Debate continues regarding the use of existing energy sources for hydrogen production. Read more.

CHARTS & DATA

Clean energy investment to hit $1.7T

Clean energy investment is expected to reach $1.7 trillion this year, surpassing the projected $1 trillion investment in fossil fuels. Renewables will receive the largest portion of clean energy spending, with solar leading the way at $382 billion. This marks a significant shift, as solar investment now exceeds global oil production investment for the first time. However, the current investment falls short of the $4 trillion annually needed by 2030 according to the International Energy Agency. Read more.

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