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Are drought and wildfire partly to blame for falling real estate prices in the Western U.S.? It's complicated, experts say.
The American West is a hot and increasingly dry place — afflicted by drought, wildfires, and a declining Colorado River basin that is struggling to meet the demands of the millions of thirsty people who live in the region.
Also: It’s not a great time to sell a house there.
The Wall Street Journalreports that in America’s 12 major housing markets west of Texas — places like Salt Lake City, Las Vegas, and Seattle, and every place in between — home prices were lower in January than a year before. That’s a sharp contrast to housing prices just about everywhere else in the country, where they’re going up.
What’s going on? WSJ cites the end of the tech boom. Companies like Facebook, Amazon, and Google have laid off thousands of workers this year, hitting cities like San Francisco and San Jose, California exceptionally hard: Both cities saw 10-percent-plus drops in home prices. Climate was mentioned nowhere in the Journal’s story.
If you’ve been paying attention to the climate crisis in America, though, you might notice something interesting about the newspaper’s map showing the major cities where home prices are falling: It doesn’t look terribly different from the U.S. Drought Monitor map showing that much of the country west of the Mississippi River is laboring under the effects of a long-running drought — a drought that, at the very least, has been exacerbated greatly by the effects of climate change.
So that’s correlation. Is there causation?
Or to put it another way: Is climate change denting home prices in places like Washington, Oregon, and California? And if not now, what might a warming West mean for home prices in the future? The West is already hot and dry. Will people want to buy houses there if it becomes hotter and dryer?
The answer, as with many things climate-related: It’s complicated.
“What's really driving this now is just everything got, I think, too overheated during COVID and prices are just sort of coming back to what should have been their equilibrium,” says UNLV’s Nicholas Irwin, an expert on urban and environmental issues. (He means the market was “overheated,” not the environment.) But he allows that worries about current and future heat waves and droughts could be one factor — among many — that influence the interplay between buyers and sellers when a home is changing hands. “All that is kind of embedded in that bidding process that homebuyers make when they decide to buy a house.”
What seems clear is that Western homeowners are challenged by the warming environment. A lot of media attention about climate change and real estate has focused on coastal properties, where communities struggle with protecting — or even moving — beachfront properties that find themselves in the path of rising oceans. One recent study found that American homes are overvalued by as much as $237 billion due to unacknowledged flood risks due to climate factors.
But the drought is also taking its toll on current and prospective homeowners who live a long way from the oceans and rivers.
The 2020 California wildfires destroyed more than 11,000 structures in the state, turning residents into de facto climate refugees and putting renewed strains on the Golden State’s insurance industry. In places like Arizona, drought and climate change are putting pressure on builders who are having difficulty finding enough water to supply the giant new housing developments they want to put up in the desert.
And that struggle is pitting neighboring communities against each other: In January, the city of Scottsdale, Arizona shut off water sales to homes in the unincorporated community of Rio Verde Foothills, leaving residents there to eat off paper plates and use rainwater to flush their toilets. (They sued Scottsdale.) As long as that situation persists, those homes will be difficult to sell for anything like the investment the current owners put into them.
These developments have gotten the notice of the real estate industry. A 2013 study estimated that a decline in Colorado River flows could cut riverfront real estate prices by nearly 10 percent in coming decades. In October, a survey by the Redfin real estate brokerage found that 62 percent of Americans who plan to buy or sell a home — and nearly three-quarters of Gen Z respondents — were reluctant to move to places with rising temperatures and encroaching sea levels.
The industry’s responses, though, have been uneven. The Sierra Club in March pointed out that “some real estate companies like Redfin and Realtor.com offer information about a property's climate-related disaster risk; others, like Zillow, don't.”
Despite the recent home price drop, there is evidence that Americans are still eager to move to the West — even when the climate risks are plain.
In 2021, for example, the “Marshall fire” in Boulder County, Colorado, killed two people and destroyed nearly 1,000 homes and businesses. But "the fact that hundreds of homes burned down hasn't reduced demand,” says Ethan Shapiro, founder of Boulder’s Climate Change Realty. (The company directs half its commissions to the environmental cause of the client’s choice.) While there’s “flickering” awareness of a threat, he says, "I haven't spoken to anybody who is spooked to the point they wouldn’t want to live in Boulder."
The West is complicated because it has an unusually volatile real estate landscape to begin with, says Susan Wachter, a professor of real estate and finance at the University of Pennsylvania’s Wharton School of Business. “A large share of land in the West is actually outside of development due to national parks, tribal lands, et cetera,” she says. In good times, Western housing prices go up faster than the rest of the country. In the bad times — right now — they go down much faster, too.
Climate change is just one more factor affecting that volatility.
While it’s hard to estimate just how big a factor it is right now, says UNLV’s Irwin, it may become more apparent in the near future as homeowners start to understand the risks of wildfires — and as mortgage lenders get skittish about making loans for houses that have a tough time getting insurance for such disasters.
“You could buy a house in cash if you want, but you wouldn't be able to get a mortgage in an area without homeowners insurance and then that's going to shift some people away,” he says. “And maybe that's probably a good thing if we get fewer people living in these areas, because it's very expensive to fight wildfires.”
If you’re a homeseller, though, that might not be so good. For the real estate industry in the West, climate change just might end up having a cooling effect.
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The Environmental Protection Agency just unveiled its argument against regulating greenhouse emissions from power plants.
In federal policymaking, the weight of the law can rest on a single word. When it comes to reducing planet-warming emissions from the power sector, that word is “significantly.” The Clean Air Act requires the Environmental Protection Agency to regulate any stationary source of emissions that “causes, or contributes significantly to, air pollution which may reasonably be anticipated to endanger public health or welfare.”
The EPA has considered power plants a significant source of dangerous greenhouse gases since 2015. But today, Trump’s EPA said, actually, never mind.
A proposed rule published in the Federal Register on Wednesday argues that U.S. fossil fuel-fired power plants make up “a small and decreasing part of global emissions” and therefore are not significant, and do not require regulation under the law. The rule would repeal all greenhouse gas emission standards for new and existing power plants — both the standards the Biden administration finalized last year, which have been tied up in court, as well as the standards that preceded them, which were enacted by Obama in 2015.
In a separate proposal, the EPA also took steps to repeal limits on mercury and hazardous air pollutants from coal plants that were enacted last year, reverting the standard back to one set in 2012.
The argument that U.S. power plants make up a small sliver of global emissions and thus aren’t worth addressing is like having “a five-alarm fire that could be put out if you send out all the trucks, and you don’t send any of the trucks because no one truck could put the fire out by itself,” David Doniger, a senior attorney and strategist at the Natural Resources Defense Council, told me. “We just think that is a wacky reversal and a wacky interpretation of the Clean Air Act.”
When you add up every plug, power button, and light switch across the country, electricity usage produces 25% of U.S. greenhouse gas emissions each year. Over the past 30 years, American power plants have contributed about 5% of the total climate pollution spewed into the atmosphere worldwide.
In the global context, that may sound small. But in a recent report titled “The Scale of Significance," New York University’s Institute for Policy Integrity estimated that if U.S. power plants were a country, it would be the sixth biggest emitter in the world, behind China, the European Union, India, Russia, and the remainder of U.S. emissions. The report also notes that U.S. actions on emissions make other countries more likely to follow, due to technological spillovers that reduce the cost of decarbonization globally.
In addition to the significance finding, the EPA gave two other reasons for repealing the power plant rules. It argued that “cost-effective control measures are not reasonably available,” meaning there’s no economic way to reduce emissions at the source. It also said the new administration’s priority “is to promote the public health or welfare through energy dominance and independence secured by using fossil fuels to generate power.”
The first argument is an attempt to say that Biden’s standards flouted the law. In 2022, the Supreme Court ruled that the EPA could not simply tell states to reduce emissions from the power sector, which is what the Obama administration had initially tried to do. Instead, the agency would have to develop standards that could be applied on a plant-by-plant basis — so long as those rules were “cost-reasonable” and “adequately demonstrated.”
To comply with that ruling, Biden’s EPA based its standards on the potential to install carbon capture technology that can reduce flue gas emissions by 90%. The regulations would have required existing coal plants to install carbon capture by 2039, or else shut down. (To the chagrin of many energy system observers, the administration chose not to apply limits to existing gas-fired power plants.) But while fossil fuel companies and utilities had, in the past, asserted that carbon capture was viable, they deemed the standards impossible to meet.
Trump’s EPA is now agreeing. “In 2024,” Zeldin said on Wednesday, “rules were enacted seeking to suffocate our economy in order to protect the environment, to make all sorts of industries including coal and more disappear, regulate them out of existence.”
When Trump moved to overturn Obama’s power plant regulations during his first term, his EPA did not contest the significance of the sector’s emissions, and simply enacted a weaker standard. A week before he left office, the agency also finalized a rule that set the threshold for “significance” at 3% of U.S. emissions — which exempted major polluters like refineries, but still applied to power plants.
This time, Trump has a new apparent game plan: Strip the Clean Air Act of its jurisdiction over greenhouse gases altogether. Today’s action was the first step; EPA Administrator Lee Zeldin has said the agency will similarly “reconsider” emissions rules for cars and oil and gas drilling. But the cornerstone of the plan is to reverse what’s known as the “endangerment finding” — the 2009 conclusion that greenhouse gases present a threat to public health and welfare, and therefore are one of the pollutants EPA must address under the Clean Air Act.
“The Trump administration is trying to say, don’t worry about the Clean Air Act. It will never apply, so you can go back to your old ways,” said Doniger. But if the argument that power plant emissions are insignificant is a stretch, appraising greenhouse gas emissions as benign is inconceivable, he said. “The endangerment finding was based, in 2009, on a Denali-sized mountain of evidence. Since then, it’s grown to Everest-size, so there’s no way that they would be able to put together a rational record saying the science is wrong.”
These highly technical questions of whether emissions are “significant” or whether carbon capture is “adequately demonstrated” could soon be determined by a group of people who lack both the expertise to answer them and the inclination to wade through thousands of pages of atmospheric science and chemical engineering documents: judges.
Last year, the Supreme Court overturned a long-held precedent known as Chevron deference. That ruling means that the courts are no longer required to defer to an agency’s interpretation of statute — judges must make their own determinations of whether agencies are following the intent of the law.
When environmental groups begin challenging the EPA’s repeals in court, judges are “going to be bombarded with the need to make these highly technical, nuanced decisions,” Michael Wara, a lawyer and scholar focused on climate and energy policy at Stanford University, told me. He said the reason Chevron deference was established in the first place is that judges didn’t want to be making engineering decisions about power plants. “They felt extremely uncomfortable having to make these calls.”
The conservative Supreme Court overturned the precedent because of a sense that political decisions were being dressed up in scientific reasoning. But Wara doesn’t think the courts are going to like being put back into the role of weighing technical minutia and making engineering decisions.
“It’s a past that the courts didn’t like and they tried to engineer a way out of via the Chevron doctrine,” he said. “I would expect that we’re going to see a drift back toward a doctrine that looks a little bit more Chevron-like, maybe less deference to agencies. But it’s hard to predict in the current environment what’s going to happen.”
Look more closely at today’s inflation figures and you’ll see it.
Inflation is slowing, but electricity bills are rising. While the below-expectations inflation figure reported by the Bureau of Labor Statistics Wednesday morning — the consumer price index rose by just 0.1% in May, and 2.4% on the year — has been eagerly claimed by the Trump administration as a victory over inflation, a looming increase in electricity costs could complicate that story.
Consumer electricity prices rose 0.9% in May, and are up 4.5% in the past year. And it’s quite likely price increases will accelerate through the summer, thanks to America’s largest electricity market, PJM Interconnection. Significant hikes are expected or are already happening in many PJM states, including Maryland,New Jersey,Delaware, Pennsylvania, and Ohio with some utilities having said they would raise rates as soon as this month.
This has led to scrambling by state governments, with New Jersey announcing hundreds of millions of dollars of relief to alleviate rate increases as high as 20%. Maryland convinced one utility to spread out the increase over a few months.
While the dysfunctions of PJM are distinct and well known — new capacity additions have not matched fossil fuel retirements, leading to skyrocketing payments for those generators that can promise to be on in time of need — the overall supply and demand dynamics of the electricity industry could lead to a broader price squeeze.
“Trump and JD Vance can get off tweets about how there’s no inflation, but I don’t think they’ll feel that way in a week or two,” Skanda Amarnath, executive director of Employ America, told me.
And while the consumer price index is made up of, well, almost everything people buy, electricity price increases can have a broad effect on prices in general. “Everyone relies on energy,” Amarnath said. “Businesses that have higher costs can’t just eat it.” That means higher electricity prices may be translated into higher costs throughout the economy, a phenomenon known as “cost-push inflation.”
Aside from the particular dynamics of any one electricity market, there’s likely to be pressure on electricity prices across the country from the increased demand for energy from computing and factories. “There’s a big supply adjustment that’s going to have to happen, the data center demand dynamic is coming to roost,” Amarnath said.
Jefferies Chief U.S. Economist Thomas Simons said as much in a note to clients Wednesday. “Increased stress on the electrical grid from AI data centers, electric vehicle charging, and obligations to fund infrastructure and greenification projects have forced utilities to increase prices,” he wrote.
Of course, there’s also great uncertainty about the future path of electricity policy — namely, what happens to the Inflation Reduction Act — and what that means for prices.
The research group Energy Innovation has modeled the House reconciliation bill’s impact on the economy and the energy industry. The report finds that the bill “would dramatically slow deployment of new electricity generating capacity at a time of rapidly growing electricity demand.” That would result in higher electricity and energy prices across the board, with increases in household energy spending of around $150 per year in 2030, and more than $260 per year in 2035, due in part to a 6% increase in electricity prices by 2035.
In the near term, there’s likely not much policymakers can do about electricity prices, and therefore utility bills going up. Renewables are almost certainly the fastest way to get new electrons on the grid, but the completion of even existing projects could be thrown into doubt by the House bill’s strict “foreign entity of concern” rules, which try to extricate the renewables industry from its relationship with China.
“We’re running into a set of cost-push dynamics. It’s a hairy problem that no one is really wrapping their heads around,” Amarnath said. “It’s not really mainstream yet. It’s going to be.”
In some relief to American consumers, if not the planet, while it may be more expensive for them to cool their homes, it will be less expensive to get out of them: Gasoline prices fell 2.5% in May, according to the BLS, and are down 12% on the year.
Six months in, federal agencies are still refusing to grant crucial permits to wind developers.
Federal agencies are still refusing to process permit applications for onshore wind energy facilities nearly six months into the Trump administration, putting billions in energy infrastructure investments at risk.
On Trump’s first day in office, he issued two executive orders threatening the wind energy industry – one halting solar and wind approvals for 60 days and another commanding agencies to “not issue new or renewed approvals, rights of way, permits, leases or loans” for all wind projects until the completion of a new governmental review of the entire industry. As we were first to report, the solar pause was lifted in March and multiple solar projects have since been approved by the Bureau of Land Management. In addition, I learned in March that at least some transmission for wind farms sited on private lands may have a shot at getting federal permits, so it was unclear if some arms of the government might let wind projects proceed.
However, I have learned that the wind industry’s worst fears are indeed coming to pass. The Fish and Wildlife Service, which is responsible for approving any activity impacting endangered birds, and the U.S. Army Corps of Engineers, tasked with greenlighting construction in federal wetlands, have simply stopped processing wind project permit applications after Trump’s orders – and the freeze appears immovable, unless something changes.
According to filings submitted to federal court Monday under penalty of perjury by Alliance for Clean Energy New York, at least three wind projects in the Empire State – Terra-Gen’s Prattsburgh Wind, Invenergy’s Canisteo Wind, and Apex’s Heritage Wind – have been unable to get the Army Corps or Fish and Wildlife Service to continue processing their permitting applications. In the filings, ACE NY states that land-based wind projects “cannot simply be put on a shelf for a few years until such time as the federal government may choose to resume permit review and issuance,” because “land leases expire, local permits and agreements expire, and as a result, the project must be terminated.”
While ACE NY’s filings discuss only these projects in New York, they describe the impacts as indicative of the national industry’s experience, and ACE NY’s executive director Marguerite Wells told me it is her understanding “that this is happening nationwide.”
“I can confirm that developers have conveyed to me that [the] Army Corps has stopped processing their applications specifically citing the wind ban,” Wells wrote in an email. “As I have understood it, the initial freeze covered both wind and solar projects, but the freeze was lifted for solar projects and not for wind projects.”
Lots of attention has been paid to Trump’s attacks on offshore wind, because those projects are sited entirely in federal waters. But while wind projects sited on private lands can hypothetically escape a federal review and keep sailing on through to operation, wind turbines are just so large in size that it’s hard to imagine that bird protection laws can’t apply to most of them. And that doesn’t account for wetlands, which seem to be now bedeviling multiple wind developers.
This means there’s an enormous economic risk in a six-month permitting pause, beyond impacts to future energy generation. The ACE NY filings state the impacts to New York alone represent more than $2 billion in capital investments, just in the land-based wind project pipeline, and there’s significant reason to believe other states are also experiencing similar risks. In a legal filing submitted by Democratic states challenging the executive order targeting wind, attorneys general listed at least three wind projects in Arizona – RWE’s Forged Ethic, AES’s West Camp, and Repsol’s Lava Run – as examples that may require approval from the federal government under the Bald and Golden Eagle Protection Act. As I’ve previously written, this is the same law that bird conservation advocates in Wyoming want Trump to use to reject wind proposals in their state, too.
The Fish and Wildlife Service and Army Corps of Engineers declined to comment after this story’s publication due to litigation on the matter. I also reached out to the developers involved in these projects to inquire about their commitments to these projects in light of the permitting pause. We’ll let you know if we hear back from them.