IT IS hard to keep up. First, Hurricane Harvey deluged Houston, then Irma left a trail of destruction through the Caribbean and Florida, followed by Maria. All the while, wildfires have been raging in California and elsewhere.
Things got even more extraordinary when Ophelia turned into a major hurricane further east in the Atlantic than any other storm on record has. As it hit Ireland, it blew smoke from wildfires in Portugal over the UK, turning the skies apocalyptic red.
And while these events dominated Western media, there is plenty going on elsewhere. In August, unprecedented flooding in India and Bangladesh affected 40 million people.
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“The impacts of climate change are no longer subtle,” says Michael Mann of Penn State University. “The last month and a half has been an exclamation point.”
These disasters are causing much suffering and misery. They are also hurting countries’ economies, which has an indirect effect on everyone, even those outside the disaster paths.
Almost every nation agrees that we can’t afford not to limit further warming. That’s why they signed up to the Paris climate agreement. But just how bad will the effect on the global economy be, and how much should countries spend now to limit the economic fallout? Some recent studies suggest we are wildly underestimating the long-term damage – perhaps by a factor of 100.
“It is estimated that hurricanes Harvey, Irma and Maria could cost the US over $400 billion”
The headline figures are bad enough. It is estimated that hurricanes Harvey, Irma and Maria could cost the US alone over $400 billion. Globally, this could be the .
Those are the estimates – the actual costs could be much higher. In 2013, Solomon Hsiang at the University of California, Berkeley, and his colleagues used detailed data from the Philippines to find out how families coped in the two years after a typhoon. They found that the actual economic costs were about 17 times as much as estimates made at the time of the disaster. What’s more, there was also a big rise in infant mortality, presumably because families were struggling.
But this doesn’t give the full picture. “The flip side of cost is investment,” says economist Gernot Wagner of Harvard University. “Hurricane clean-up may even add to GDP in some circumstances.”
In other words, if lots of money is poured into recovery efforts, a region could bounce back from a damaging storm and end up better off (see Economic theories vs reality). “The strong idea that disasters should be good for growth stopped people looking into this,” says Amir Jina at the University of Chicago.
The few studies that have looked at the evidence concluded that tropical storms don’t affect economic growth. Today, the most widely used economic models used to forecast the effects of climate change all assume that extreme weather events have no long-term effect on growth.
But when, in 2014, Jina and Hsiang took a more detailed look at the growth of countries hit by the nearly 7000 tropical storms since 1950, they did find an effect: were lower for the next 15 years.
This is crucial, because anything that affects growth rates can have a massive impact over the long term. Twenty years after a severe storm hits, for instance, a country’s per capita incomes may be 7 per cent lower. That’s comparable to the losses from a banking crisis.
No sign of bounceback
“Looking at the relationship empirically shows that we might be underestimating the climate effects by a potentially large degree,” says Jina. Previous studies missed this because they were too simplistic, he says. For instance, they just looked at whether or not countries were hit by storms, but not exactly where they were hit. Jina and Hsiang modelled the storms’ tracks to work out how many people were affected and how severely.
“They show conclusively that there is no bounceback effect,” says Bob Kopp of Rutgers University in New Jersey, who studies the impact of climate change.
Take Puerto Rico. The immediate damage from Hurricane Maria has been estimated to be up to $90 billion. But according to Hsiang, over the next 15 years – which adds up to another $180 billion. It could take 26 years for earnings to reach their pre-Maria level.
So tropical cyclones are already slowing global growth, and if we don’t slash greenhouse emissions soon, the impact will rise dramatically as storms become more severe. Jina says tropical cyclones alone could do twice as much economic damage as some studies predict will result from all the effects of climate change.
And if other extreme weather – floods, extratropical storms and sea level rise – have a similar effect on growth rates, the overall economic impact of global warming could be even greater. “It makes sense that what happens after hurricanes happens after other disasters,” says Kopp. Jina’s team is studying these issues, but the work is still at an early stage.
There may be another problem with the standard models used to predict the economic impacts: the assumptions about the number and intensity of extreme weather events in the future could be wrong. In particular, says Mann, there is growing evidence that warming is changing the behaviour of the northern jetstream – the high-level river of air that drives much of the northern hemisphere’s weather – making it likely that weather systems will get “stuck”.
This can hugely amplify, say, rainfall events if a low-pressure system gets stuck in one place. Recent studies also suggest sea level could rise much faster than thought, with a .
Yet the biggest hit to growth could come not from extreme weather, but simply from the gradual rise in temperature. In a 2015 study, Hsiang and his colleagues showed that the economic productivity of countries peaks at an average annual temperature of 13°C, and falls sharply at higher temperatures. An using a larger data set came to the same conclusion this month.
“In the worst case, nearly half the countries in the world could become poorer”
The reasons? People can’t work as hard when it is hot, and crop yields start to fall. This could lead to a as the world warms further, as well as widening inequality. In the worst case, nearly half the countries in the world could become poorer (see Too hot to work).
If this is right, rising heat alone could hit the economy far harder than the standard models predict for all the effects of climate change. In fact, it could be between 2.5 and 100 times as bad.
And there is no evidence that technology can prevent this. The heat-productivity relationship is true of both rich and poor countries, and hasn’t changed since the 1960s. This may be because many places – farms, building sites – cannot be air-conditioned, and cooling those that can be is expensive.
It is also not clear how to prevent tropical storms from cutting growth, says Jina. Even rich countries that put money into rebuilding take a hit, perhaps because this money is diverted from elsewhere.
This suggests the focus should be on preventing disasters. But protecting buildings and cities from extreme weather and sea level rise is expensive. “I’m not sure Japan can build something like this again,” the head of Tokyo’s massive underground flood defence system , referring to the country’s current economic woes.
But if cities like Tokyo don’t spend ever more on protection, they will suffer catastrophic losses when their defences are overwhelmed, as happened to New Orleans. There could come a beyond which even big countries can’t afford to rebuild after disasters – like some Caribbean islands today – and go into decline. “Such socio-economic tipping points may be worse than climatic ones,” says Wagner.
Critics argue that future economic growth will be large enough to more than compensate for the impacts of warming. Maybe. But economics is not a science, and there were many predictions of further growth before the 2007 financial crisis. Pinning all hopes on growth is like betting our future on a single spin of the roulette wheel – yes, we might win big, but is it worth the risk?
This article appeared in print under the headline “Hidden cost of disaster”
