The Australia Institute has called for a special levy on coal and other fossil fuel companies to help pay for the rising cost of natural disasters, which climate scientists have warned will become more frequent and severe as global warming accelerates.

Forcing the fossil fuel industry to chip in is “consistent with the ‘polluter pays’ principle of internalising the negative impacts of economic activities,” the think tank says in a report released today.

The money collected from the proposed $1 levy per tonne of carbon pollution on fossil fuel production in Australia would go towards a National Climate Disaster Fund that is independently managed by a Commonwealth-legislated agency.

If adopted, the tax measure would raise more than $1.5 billion a year to supplement public funding for post-disaster recovery efforts. A Deloitte study calculates the annual economic toll from natural disasters will rise from $13 billion now to $39 billion by 2050.

But the Deloitte projection, according to the Australia Institute, significantly underestimates future disaster costs as it excludes the impact of slow onset events like droughts and heatwaves.

“A levy on fossil fuel production is an appropriate contribution from the companies making the single largest contribution of any activity in Australia to global warming,” the report says.

“While Australia’s fossil fuel resources are owned by Australians, they are extracted and exported mostly by large global coal and oil and gas companies.

“These companies make virtually no contribution to paying the costs of increasing climate-related disasters that are a direct consequence of the increasing concentration of greenhouse gases in the atmosphere.”

According to the report, the proposed levy could also help address the problem of rising insurance premiums in areas most prone to natural disasters. For residents in these areas, such as cyclone-prone north Queensland, premiums are already at unaffordable levels, the report noted.

“Climate change is already driving up the cost of insurance,” the report says

“If people are unable to insure their properties and the property values fall, they can be forced into a position of being unable to sell out of increasingly disaster-prone areas.

“This is not only inequitable but creates perverse incentives for maladaptation where residents pressure councils to build sea walls and other infrastructure when retreat would be a better outcome.

“The Climate Disaster Fund could be used to allow people in disaster prone areas the option for relocation when appropriate.”

Insurance Council of Australia (ICA) spokesman Campbell Fuller says the think tank’s report will encourage debate on measures to tackle climate change.

ICA, for its part, has set up a committee to help the insurance industry address the global warming challenge.

“The role of general insurance is to assist policyholders to recover from losses, such as those caused by extreme weather events,” he told insuranceNEWS.com.au.

“The industry works alongside the community, governments and other stakeholders to help ensure insurance remains affordable and accessible through adaptation and increased community resilience.”

Meanwhile, a national bushfire and emergency summit will be held early next year. Organised by the Emergency Leaders for Climate Action, the meeting aims to find a united response to deal with global warming-fuelled extreme weather events.

Click here for the Australia Institute report.