Economic Costs of Extreme Weather Events Due to Global Warming

Labels. global warming,climate change,greenhouse gases,carbon dioxide,CO2, extreme weather,heat wave,drought,flooding,Pakistani floods,Russian wheat,crop loss,wildfires,bark beetles,economic costs,econometrics

Summary.  Global warming is predicted to increase the probability of extreme weather events that have the potential of harming human livelihood.  This post summarizes three extreme events whose occurrence is consistent with predicted effects of global warming: the massive flooding in Pakistan in 2010, the severe drought and failure of the wheat crop in Russia in 2010, and increased numbers and severity of wildfires in recent years in the American west.  Each of these is associated with very large economic and societal costs.  To date we have paid these costs only in a reaction to the event, after the fact.  An alternative strategy is to invest in measures, and undertake policies, that reduce greenhouse gas emissions, so that the increase in global warming is minimized.

Introduction. Climate change relates to long-term trends in temperature, moisture and precipitation, and wind speeds, for example, that are averaged over many observation points, over periods of years.  Weather, on the other hand, relates to localized trends in these variables on the scale of days.  Thus changes such as global warming depend on observations involving recording and evaluating both routine weather patterns, which constitute the vast majority of the data, as well as the quite rare extreme events that appear in news headlines.  In this post, we discuss recent extreme weather events as examples for a discussion of economic effects.  Their occurrence is consistent with trends predicted by climate models for global warming.

Floods in Pakistan, August 2010.  The Indian subcontinent, including Pakistan, experiences monsoons every summer.  Monsoons are regular patterns of relatively heavy rainfall generally lasting, in this area, from June through September.  The monsoon of 2010 brought exceptionally heavy rainfall during July and August, indeed lasting into September, including the Indus River region.  The flooding began in the northern and western mountainous regions, and grew in amplitude and volume as the flood moved downstream.  The floods were the worst since 1929.  Losses included 1,980 deaths and over 100,000 farm animals killed.  The flooded area totaled more than 100,000 square km (38,600 sq. mi.), which, if a square, would be almost 200 mi. per side.  The flood impacted the lives of more than 20 million people, which is about 10% of the nation’s population.  1.6 million homes were lost, and agricultural lands were under water, much of which lasted several months, and included serious erosion of agricultural soil.  At least one season’s worth of seed (i.e. that already planted) was destroyed.

The World Bank participated with the Asian Development bank in preparing a Damage and Needs Assessment for Pakistan.  The Assessment included factors such as  near-term relief of displaced populations, and early and long-term recovery and reconstruction, including homes, schools and infrastructure, rehabilitation of agricultural needs.  It estimated that the damage totaled US$10 billion, and that total relief, recovery, and reconstruction costs could reach as high as US$10.9 billion.  A similar cost assessment was reached by the Humanitarian Information Unit (HIU) of the U. S. Department of State.  These cost estimates most likely need to be enhanced by a large factor in view of the low standard of living in Pakistan.  According to The Economist’s Pocket World in Figures, 2011 Ed. (Profile Books, Ltd., London), the GDP per head in purchasing power parity in Pakistan, on a scale for which the U. S. is 100, is 5.5.  In other words, items and services valued by the World Bank and the HIU at about US$10.9 billion in Pakistan would require up to 18 times higher expenditure, or almost US$200 billion to accomplish the same relief, recovery and reconstruction in the U. S.

A comment in the scientific journal Nature as the flood was occurring did not unequivocally associate this flooding event with global warming.  A meteorologist described an unusual jet stream event as an immediate factor in generating the rainfall that led to the flood.  The article also points to large growth in the population and its strains on land use.  The comment does indicate more generally that, as the global temperature continues to rise, the capacity of the air to contain water vapor also increases (see this post), thus increasing rainfall.  Already the Indian subcontinent is experiencing heavier rainfall than earlier in the past.  As quoted in the comment, Jeff Knight, a climate expert at the UK Met Office Hadley Centre said "climate change will be a small but steady contributor to rainfall in the region". Indian climate scientists have documented an increasing frequency of extreme rainfall events, and a decreasing frequency of moderate events over India between 1951 and 2000, as the global temperature has been increasing (Science, 2006, Vol. 314, pp. 1442-1445).

Drought in Russia, Summer 2010.  A large area of Russia east and west of the Ural mountains experienced extreme heat in the summer of 2010.  According to Barriopedro and coworkers (Science 2011, Vol. 332, pp. 220-224; see Note 1) a zone north of the Black and Caspian seas experienced 7 day temperatures higher than the average for the period 1970-1999 by about 10-12ºC (18-22ºF) with a probability more than 99.99% (4σ), and a larger zone, extending from France well into Siberia was about 6-7ºC (11-13ºF) higher with a probability more than 95% (2σ) (the temperatures given are my readings of a color scale shown over a map of Europe and so may not be fully accurate).  Similar deviations from average are mapped for 15, 31 and 81 day periods, all centered over the same region of Russia.  The heat wave of 2010 probably broke 500 year temperature behavior.  By use of climate model computations that incorporate various assumptions for the amount of greenhouse gases added to the atmosphere, the authors predict that “mega-heatwaves” are 5 to 10 times more probable than in the past over the coming 40 years.

Lobell and coworkers published a study of worldwide crop yields for the major staple crops corn, rice, soybeans and wheat in Science online on May 5, 2011     

(10.1126/science.1204531; see also this post).  In general, crop yields decreased during recent times.  Specifically for the present topic, compared to 1960-2000, results for the wheat crop in Russia for 1980-2008 declined on average about 13%.  ­­­Over this interval the atmospheric content of the greenhouse gas carbon dioxide was increasing, and global temperature was also increasing.  The authors correlated the decreasing yield with warming climate trends.

The extreme temperature trend across Russia caused a drought that severely decreased its wheat crop during 2010.  According to the New York Times in August 2010 the 2010 harvest was projected at about 70 million metric tons (1,000 kilograms per metric ton, about 2,200 pounds).  More recently, Bloomberg News reported that the crop failure amounted to one-third of the normal harvest.  (World-Grain.com places the wheat harvest the previous year at 61 million metric tons, and the 2010 harvest was 41 million metric tons, or a drop of one-third of the crop.  Harvests of all grains, wheat and barley fell 40%.) The preceding year’s harvest, in contrast, was 97 million metric tons.  Before the 2010 drought, Russia exported 21.4 million metric tons of wheat in 2009, about 17% of global exports.  But Russian President Putin stopped all exports in 2010, in order to conserve his nation’s supply. 

The economic costs of this crop failure are very high.  To begin with, the lost value from the lower yield, estimated using the November 2010 price of $270/metric ton and an estimated loss of 30 million tons gives $8.1 billion.  This represents the direct loss to Russian agriculture.  In addition, this crop loss as well as others elsewhere in the world for wheat and other staples, has constrained supply in the face of increasing demand worldwide, leading to sharp price increases. 

The sudden disruption in world wheat supply by Russia caused an increase in the price of wheat of US$100 per metric ton.  According to World-Grain.com as of April 5, 2011, Russia extended its export ban to July 1, 2011.  Ukraine has also imposed export restrictions.  Since world markets are connected, one cannot ascribe increases in prices for wheat and other staples only to the Russian crop failure of 2010.  Nevertheless, any persistent shortfalls in the supply of wheat and other grains worldwide have a serious socioeconomic impact, especially in poorer countries of the world.  In them, of necessity a significant proportion of a family’s available cash is needed for purchasing food.  According to the Food and Agricultural Organization, a United Nations agency, as reported by Hürriyet Daily News in May 2011, the Cereal Price Index for April 2011 was 5.5 % higher than in March, and 71% higher than in April 2010.  Price increases limit the ability to feed a family, and potentially lead to social and political unrest.

Costs of U. S. Wildfires.  Our previous post presents data that from the mid-1980’s the frequency of wildfires in the American west has increased almost four times over the average frequency from 1970 to 1986.  The increase occurred as an abrupt change from the earlier pattern in the mid 1980’s.  The total forest area consumed was more than 6 ½ times greater than before.  Higher temperatures during spring and summer correlated highly with the frequency increase, and the season for reported fires also grew longer by more than 2 months.

Expenditures by the U. S. Forest Service for fighting wildfires grew from a range of $100 million to $300 million per year in the 1970’s to over $2 billion per year by 2008, with a sharp increase in expenditures beginning in about 2000.

Forest fires in Alaska have become more damaging recently, and result in more CO₂ being released into the atmosphere by the combustion than is stored by forest growth.  This contributes to the worsening of global warming, turning forests into sources of greenhouse gases rather than a “sink”, or storage mechanism.

Fighting wildfires incurs considerable costs (suppression costs), which are documented by the U. S. Forest Service.  But once a fire is extinguished, further direct, indirect and societal losses continue to accumulate.  These have been identified by Zybach and coworkers in an econometric analysis characterized as LCD (least cost plus damage) or C+NVC (costs plus net value change).  These may grow to many times the immediate suppression costs. 

Details.  The authors characterize the following factors to be included in a calculation of costs plus losses.

1.     Suppression costs include immediate firefighting expenses, home and property losses, evacuation and emergency operations, preparative measures, training, supplies and equipment.

2.     Property costs from damage or destruction of public and private property.  This includes utilities damage, damage or loss of timber as an asset, agricultural crop and livestock losses.  Certain expenses after the wildfire include salvage and cleanup, devaluation of property, and others.

3.     Public health factors include diseases brought on by smoke inhalation.  These may be acute at the time of the wildfire, or longer lasting effects.

4.     Vegetation losses include not only destroyed standing timber, but longer lasting damage that hinders restorative growth, grazing and foraging lands, and loss of wildlife habitat.

5.     Wildlife is damaged by death, loss of range, expenses related to restoring habitat, and possibly loss of range for endangered species.

6.     Water losses arise from use of water in fighting a wildfire, loss of drinking water and irrigation sources, and degradation of water quality after the event.

7.     Air and atmospheric effects include emissions of particulates and noxious gases, greenhouse gas emissions.

8.     Soil erosion arises because the wildfire area can no longer hold rainfall or resist wind.  Soil becomes less fertile and productive and there may be need for relieving sediment formation.

9.     Recreation and esthetics losses include loss of natural areas for recreational activities, scenery and loss of hunting opportunities.  These losses contribute to a decrease in economic activity.

10. Energy losses arise from destruction of utility transmission lines and the resulting interruption of rate-paying power service, as well as loss of consequential future sales.

11. Heritage losses arise by damage to or destruction of historical and archeological sites.

When all these factors are included in a cost-plus-loss analysis, the total may mount to as high as 10 to 30 times the direct cost of the suppression effort.  The Forest Service cost estimates cited above represent only suppression costs.  Thus the comprehensive reckoning of the cost of wildfire activity could reach $20 to $60 billion per year, as of 2008.  Examples of cost analyses for six fires between 2000 and 2003 are shown below.

Source: The True Cost of Wildfire in the Western U.S. , Western Forestry Leadership Coalition, April 2009 (updated April 2010). http://www.wflccenter.org/news_pdf/324_pdf.pdf

The last column in the table shows the fraction of the total cost of the wildfire devoted to direct firefighting activity, expressed as a percent.  It is seen that the fraction varies widely, ranging from 3% to 53%. 

The previous post, entitled “Extreme Wildfire Events and Global Warming”, pointed out that higher temperatures and aridity over the western United States stresses its forests, so that they are less resistant to pests, including bark beetles.  In recent years loss of forested areas to bark beetle infestations has been three times as great as losses to wildfires, for a total loss estimate that is four times larger than for wildfires alone.  Most of the loss factors identified above in the econometric analysis for wildfires are also valid for forest death due to beetles.  This leads to a total economic cost from loss of forests from all sources in the American west of $80 to $240 billion per year, as of 2008.

Conclusions.

Global warming leads to climatic changes that, depending on geography and climate patterns, can increase precipitation to produce extreme rates of rainfall and consequent flooding in some regions.  In other regions elevated temperatures may be accompanied by extreme aridity producing drought conditions.

This post presents three anecdotal examples of consequences of extreme weather events which are, or may be considered to be, due to global warming.  The extreme flooding in Pakistan in 2010, the drought and wheat crop loss in Russia, Ukraine and Siberia, and increased incidence and severity of wildfires in the American west, are likely correlated with global warming.  It is important to emphasize the point made in the introduction that weather patterns over weeks or months are not directly ascribable to global warming.  Global warming is a change in climate which is described over years and over large regions of the globe, if not the entire planet.  Nevertheless, single extreme events are considered consistent with the predictions of models for global warming that lead to the phenomena experienced in these anecdotal examples.

The anecdotes presented here make clear that global warming brings with it enormous economic and societal costs.  Many of these costs can be quantified, as has been done here.  Since floods, droughts and wildfires occurred before recent decades, we cannot say that the financial costs mentioned here are fully due to global warming, but rather that a fraction of them are.  Such fractions, for sake of argument but which cannot be justified in this post, may range from, say, 20% to 50% of the total costs given.  These fractional costs represent the incremental cost that may be directly correlated with the effects arising from global warming.

As pointed out in each section, the effects of the Russian drought, the Pakistani floods, and American wildfires, each in their own way bring enormous economic costs, humanitarian distress, and long-lasting effects.  We, as citizens of the affected regions and as citizens of the world, to date have only reacted after the fact, responding to the disaster in question.  But we have the option of taking measures commensurate to the task of reducing emissions of greenhouse gases with the objective of limiting the extent of global warming.  These measures likewise involve expenditures of large sums of money, and must be undertaken as soon as possible in order to avert even more, and more severe, extreme weather events. 

Note 1. Abstract available online free, or the full article for a fee or through personal or institutional subscription.  Many public libraries, and university libraries open to the public, receive the journal.

© 2011 Henry Auer