Damage Estimates For Hurricanes Like Dorian Don't Capture The Full Cost Of Climate Change-fueled Disasters
Cars sit submerged in water from Hurricane Dorian in Freeport, Bahamas. AP Photo/Ramon Espinosa
Scientists say climate change is causing powerful hurricanes like Dorian to increasingly stall over coastal areas, which leads to heavy flooding. Officials in the Bahamas feared “unprecedented” devastation after Dorian hovered over the islands for two days, pummeling it with rain.
But beyond more intense and slow-moving hurricanes, the warming climate has been blamed for causing a sharp uptick in all types of extreme weather events across the country, from explosive wildfires in California to severe flooding across the U.S. and extensive drought in the Southwest.
Late last year, the media blared that these and other consequences of climate change could cut U.S. GDP by 10% by the end of the century – “more than double the losses of the Great Depression,” as The New York Times intoned. That figure was drawn from a single figure in the U.S. government’s Fourth National Climate Assessment. (Disclosure: I reviewed that report and was the vice chair on the third one, released in 2014.)
If that sounds scary, I have good news and bad news. The good news is that that figure was drawn incorrectly from a significant misreading of the report – which actually offered a range of a loss of GDP from as low as 6% to as high as 14% by 2090.
The bad news, however, is that a more meaningful assessment of the costs of climate change – using basic economic principles I teach to undergrads – is a hell of a lot scarier.
Tallying the costs
First, let’s look at how government agencies, insurance companies and the media calculate and report on the economic costs of disasters.
According to the National Oceanic and Atmospheric Administration, in 2018 Hurricanes Michael and Florence each caused about US$25 billion in damages, contributing to a total toll of $91 billion from that year’s weather and climate disasters. In 2017, the NOAA’s total was even bigger: $306 billion, due to the massive destruction from Hurricanes Harvey, Irma and Maria.
But these tallies are not really valid measures of economic damage. Instead, they simply reflect estimates of what people think will need to be invested to rebuild what was damaged or destroyed in the storms, floods or fires.
To really understand the economic costs of an extreme weather event, it’s important to consider all the investment that is being “crowded out” or lost to cover those rebuilding costs. Put another way, there’s only so much money to go around. And that $25 billion being used to rebuild means $25 billion is not being used for other public and private investment opportunities that are more forward-looking or more likely to promote growth.
Accounting for growth
Instead, I believe a fundamentally more sound way to do this is to use something called “growth accounting.”
Growth accounting incorporates the productive use of capital and innovation into the equation. The question we want to ask is what happens to GDP growth when recovery efforts from extreme events crowd out productive investments, like building new factories or roads and bridges.
Returning to NOAA’s estimated losses for 2017 and 2018, productive investment fell about $400 billion in total in those years as a result. That is, had those disasters not happened, investment would have been that much higher. And that diminished investment translates into less growth in gross domestic product – a measure of all an economy produces in a given period.
If similar experiences in extreme events occur for the next 10 years – which is not a bad assumption given that four of the most expensive years in history have occurred in the last five – U.S. GDP in 2029 would be about 3.6% lower than it would have been otherwise, based on my calculations using growth accounting.
That amounts to an economy that’s $1 trillion poorer as result of these extreme weather events crowding out productive investment.
This is the real cost of a world in which these types of massively destructive disasters happen more frequently.
Sooner and scarier
Returning to our 10% figure, 3.6% is comparatively smaller, of course, but it’s much sooner, which makes it much scarier.
Because the number of extreme events and their destructive power keeps increasing at an accelerating rate. If we can expect to take a $1 trillion hit over just the next decade, the costs by the end of the century are hardly fathomable.
So while I may disagree with the numbers The New York Times and others use in tallying disasters, they are right to try to spur readers to action.
The situation is just a lot more dire then anyone realizes. With any luck, the size of the figure will frighten us to do more to stave off the worst.
About The Author
Gary W. Yohe, Huffington Foundation Professor of Economics and Environmental Studies, Wesleyan University
Life After Carbon: The Next Global Transformation of Cities
by Peter Plastrik , John Cleveland
The future of our cities is not what it used to be. The modern-city model that took hold globally in the twentieth century has outlived its usefulness. It cannot solve the problems it helped to create—especially global warming. Fortunately, a new model for urban development is emerging in cities to aggressively tackle the realities of climate change. It transforms the way cities design and use physical space, generate economic wealth, consume and dispose of resources, exploit and sustain the natural ecosystems, and prepare for the future. Available On Amazon
by Elizabeth Kolbert
Over the last half-billion years, there have been Five mass extinctions, when the diversity of life on earth suddenly and dramatically contracted. Scientists around the world are currently monitoring the sixth extinction, predicted to be the most devastating extinction event since the asteroid impact that wiped out the dinosaurs. This time around, the cataclysm is us. In prose that is at once frank, entertaining, and deeply informed, New Yorker writer Elizabeth Kolbert tells us why and how human beings have altered life on the planet in a way no species has before. Interweaving research in half a dozen disciplines, descriptions of the fascinating species that have already been lost, and the history of extinction as a concept, Kolbert provides a moving and comprehensive account of the disappearances occurring before our very eyes. She shows that the sixth extinction is likely to be mankind's most lasting legacy, compelling us to rethink the fundamental question of what it means to be human. Available On Amazon
Climate Wars: The Fight for Survival as the World Overheats
by Gwynne Dyer
Waves of climate refugees. Dozens of failed states. All-out war. From one of the world’s great geopolitical analysts comes a terrifying glimpse of the strategic realities of the near future, when climate change drives the world’s powers towards the cut-throat politics of survival. Prescient and unflinching, Climate Wars will be one of the most important books of the coming years. Read it and find out what we’re heading for. Available On Amazon
From The Publisher:
Purchases on Amazon go to defray the cost of bringing you InnerSelf.comelf.com, MightyNatural.com, and ClimateImpactNews.com at no cost and without advertisers that track your browsing habits. Even if you click on a link but don't buy these selected products, anything else you buy in that same visit on Amazon pays us a small commission. There is no additional cost to you, so please contribute to the effort. You can also use this link to use to Amazon at any time so you can help support our efforts.