The climate is changing and the tourism industry must be prepared. But who pays for the impacts of climate change? Last week the Australia Institute published a report that outlines its response to this question – arguing the need for a National Climate Disaster Fund.
Transcript
Australia and New Zealand are no strangers to natural hazards and the need to anticipate and proactively plan to safeguard against natural disasters. This reality is most vividly illustrated in the case of New Zealand’s exposure to seismic risks. It is no coincide that New Zealand’s most stunning tourism attractions exist in its most geographically active regions. From the fiords of the Te Wahipounamu World Heritage Area and the glaciers of Te Tai Poutini and Aoraki, to the volcanic fields of Rotorua and Whaakari White Island – New Zealand’s premier tourism attractions are very geologically and climatically active.
Following several destructive earthquakes in Murchison in 1929 and Wairarapa in 1942, the New Zealand government established a statutory scheme of disaster insurance under the Earthquake and War Damage Act 1945 which created the Earthquake and War Damage Commission. New Zealand’s Earthquake Commission Act 1993 revised the legislation and created the Earthquake Commission. EQC provides insurance to cover for loss or damage from earthquakes, natural landslips, volcanic eruptions, hydrothermal activity and tsunamis. EQC’s core functions extend to research and public education. Its public education programme addresses how to prevent and reduce damage caused by natural disasters, including how to make homes ‘quake safe’. The EQC was and remains a response to the question: who pays for the risks of natural hazards in New Zealand?
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There is no escaping the fact that natural hazards – whether they pose risks to human health and safely or threaten natural environments of enormous importance to tourism – are now being magnified by climate change.
Three years ago we published a paper on the impacts of climate change on tourism in Australia and New Zealand. The concentration of Australia’s population and tourist destinations along its coastline exposes infrastructure and all forms of coastal tourism to the risk of coastal inundation, erosion and increased intensity of storms such as Cyclone Alfred which hit the Gold Coast particularly hard in April this year. The increasing incidence of extreme weather events is a feature of the region.
Longer term, increases in average temperatures have had and will continue to have wide-ranging implications for the Australian tourism industry. Desirable weather conditions for tourism activity are projected to decline, leaving the northern two-thirds of Australia with unfavourable summer conditions by 2080 and Australia’s urban tourism destinations vulnerable to extreme urban heat.
Temperature rise and drought are also drivers of increased risk and intensity of wildfires. While the risks associated with seasonal bushfires has a longstanding history in Australia, the increasing intensity and destructiveness of fires in recent years has been unprecedented, causing significant damage to many iconic tourist destinations such as Kangaroo Island and the Barossa Valley wineries.
Ecosystem health is critical to the delivery of nature-based tourism. Yet, a lack of understanding of climate-induced ecosystem change, how ecosystems recover from impacts, and how human intervention can support this process remains the case. Degraded reefs, for example, harm destination image, lead to reduced visitation and tourism expenditure and threaten up to 10,000 tourism jobs in Queensland alone.
While New Zealand is generally considered to be a safe destination it does also face a range of natural hazards that include seismic activity and periodic flooding which are being exacerbated by climate change. Climate impacts on the marine environment include intensification of wave action and coastal erosion, increase in ocean surface temperatures and the most severe ocean acidification rate of the past 25 million years.
In recent years, several flooding events caused by intense weather bursts have trapped tourists in Piopiotahi Milford Sound and on some of the ‘Great Walks’, and cut off road access to the West Coast glacier towns (Carroll, 2019). Very real consquences for tourism included business disruption, increasing insurance costs, visitor safety challenges and civil emergency response. Climate projections indicate the increase frequency of disruptive events, especially in winter.
Changes in snow cover and elevation and its impacts on the ski/snow sports sector in New Zealand are predicted to bring increased seasonal economic vulnerability to winter snow destinations such as the Central Otago alpine region. Record summer temperatures in recent years have been the cause of the greatest annual loss of glacier ice since 1962 with the iconic Fox and Franz Josef glaciers on the West Coast in dramatic retreat.
Given these changes, and the seriousness of the implications for tourism, it is important to ask – who pays for the risks of climate change?
This question has come into sharp focus in Australia in recent months due to South Australia’s algal bloom crisis. This climate-fuelled ecological crisis has presented a warning that can not be ignored.
According to the Australia Marine Conservation Society, the algal bloom that has been occurring along South Australia’s coastline over the course of most of this year is a stark warning of distress in our marine ecosystems. Stretching across 4,400 square kms and impacting marine life to depths of 30 metres, it has transformed once-thriving underwater ecosystems into barren seascapes.
While algal blooms can occur naturally, this crisis is fuelled by a combination of human-driven pressures; most notably a prolonged and continuing marine heatwave caused by climate change. Water temperatures that are 2.5°C warmer than usual have altered ocean conditions such as relatively calm marine conditions with little wind and small swells. Combined with nutrient-rich runoff from river catchments, these interacting forces are symptomatic of a marine ecosystem under enormous stress. These forces are driving algal blooms, mass fish mortalities, coral bleaching and ecosystem collapse in the Great Barrier Reef, Ningaloo and around the Australian continent and they are driven by warmer waters that are an outcome of continued high fossil fuel dependence.
The Australia Marine Conservation Society has called for a rapid phase-out of fossil fuels, including a ban on new coal, oil and gas projects that are warming our oceans and fuelling extreme events; strong national nature laws, capable of safeguarding marine life from compounding threats and delivering ecosystem resilience across Australia’s diverse seascapes; and sustained federal investment in marine science and conservation, including research and monitoring programs that can detect, understand and respond to crises like this in real time. It has also called for Australia to find new approaches to building a safer, cleaner and more resilient future.
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A recent report published this week by the Australia Institute addresses the critical question of who pays for climate change? Last week, the Australian Institute released a report titled ‘Costs of climate-driven disasters and local government revenue’. This report is a direct response to the economic costs of the algal bloom wreaking havoc on the South Australian coastline, noting its heavy impact on sea life, tourism, fishing, and other marine industries.
The report notes that climate change is making natural disasters more frequent and more intense, increasing costs for households, businesses, and governments. This includes local governments, which are responsible for infrastructure such as roads, footpaths, drainage, sewage, parks and community facilities. The costs of climate change are increasing rapidly, and are far outpacing local government revenues.
To demonstrate the disparity between the costs of climate related events and local government revenues, the Australia Institute compared the value of insured losses from natural catastrophes as estimated by the Insurance Council of Australia with Australian Bureau of Statistics data on local government revenues.
In doing so it does note that insured losses are an imperfect measure of the costs of climate change. This is because some climate-related disasters such as drought see far lower payouts by
insurers, despite the significant harm caused to people who experience droughts. Furthermore, not everyone has insurance, and many have non-comprehensive or partial insurance. For example, over 800,000 Australian households and over 2 million Australians do not have full home building insurance.
Insured losses are also inherently tied to existing economic wealth inequalities. So, for instance,
harm done to communities with less wealth and lower incomes will see lower insured losses, despite considerable harm often occurring disproportionately within these communities. And insured losses generally do not include public disaster response spending. Nevertheless, because these factors are known and reasonably consistent, insurance payout data does provide a reasonable estimation of trends in the costs of natural disasters over time.
From the analysis, the Australia Institute reports on trends in insured loses versus local government revenue, finding that local governments are incurring substantial costs from natural disasters and will need to make significant climate adaptation investments to help keep their constituents and communities safe. Local government cost pressures are growing quickly because the revenue available to local governments has grown much more slowly than the costs of natural disasters.
So what is the solution? Who should pay?
The report notes that the South Australian and federal governments have, so far, pledged $28 million of taxpayers’ money in response to the algal bloom. Consequently, the Australia Institute strongly recommends that a National Climate Disaster Fund be urgently established. It reports that a fund paid for by the big polluters responsible for climate change would save taxpayers tens of billions of dollars a year. To quote from the report, “As it stands, South Australian communities, families and business owners are being left to foot the bill for this crisis”.
It argues that the “State and federal governments have been caught flat-footed in their response to this algal bloom tragedy”. And that the need to be prepared for future climate-related events is an accepted inevitability. Being prepared really does now require that governments have immediate access to a National Climate Disaster Fund. This is needed to ensure the quick and efficient roll out of the level of support that is actually required to protect communities and support local businesses when these sorts of events arise.
“Making fossil fuel producers contribute to the cost of dealing with climate change makes sense. It is a fundamental economic principle that, if you cause the harm, you should pay for the repair.” According to the Australia Institute, a levy of $30 per tonne of carbon pollution caused by coal, oil and gas production would have raised $44 billion this year alone. This is urgently required because currently, Australians are paying for climate-related disasters through higher taxes, increased insurance premiums, and lost income.
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The costs of climate are increasing and will hit local governments hard. Local governments must be able to respond to climate disasters and will need to invest in climate adaptation infrastructure to resilience to climate disasters. Instead of taxing the Australian general public, the fossil fuel industry, which profits from exacerbating climate change, should be required to pay these costs. The Australia Institute recommendation makes good sense, although counter arguments will, of course, be argued by the strong lobbying activities of vested interests.
A National Climate Disaster Fund is needed to pay for the costs of natural disaster response and recovery for Australian households, businesses, and taxpayers. As in the case of the EQC in New Zealand, known and inevitable risks can not be ignored, but rather must be confronted and acted upon to ensure that governments, communities and businesses are fully prepared for a more uncertain climate future.
References
Australian Marine Conservation Society (2025). South Australia’s algal bloom crisis:
a warning we can’t ignore. (24 July 2025). https://www.marineconservation.org.au/south-australias-algal-bloom-crisis-a-warning-we-cant-ignore/
Australia Institute (2025). Costs of climate-driven disasters and local government revenue (10 September 2025). https://australiainstitute.org.au/report/costs-of-climate-driven-disasters-and-local-government-revenue/
Australia Institute (2025). SA algal bloom underlines urgent need for National Climate Disaster Fund (19 August 2025). https://australiainstitute.org.au/post/sa-algal-bloom-underlines-urgent-need-for-national-climate-disaster-fund/
Higham, J.E.S., Loehr, J., Hopkins, D., Becken, S. & Stovall, W. (2022). Climate science and tourism policy in Australasia: Deficiencies in science-policy translation. Journal of Sustainable Tourism 32(9), 1849-1875. http://dx.doi.org/10.1080/09669582.2022.2134882
