Economic losses from hurricanes may become too big to be offset by the US if warming continues

Economic losses from hurricanes become too big to be offset by the US if warming continues
Global production anomaly distribution for the unscaled Hurricane Harvey. Net regional gains or losses as percentage share of global total gains or losses, respectively, for (a) an all industry aggregate without the mining and quarrying sector and (b) only the mining and quarrying sector. Production anomaly is calculated as a region’s difference in production quantity during the first year after the hurricane to baseline production. Orange colors indicate production gains, purple colors indicate losses. Gray regions without significant production. Note the different scales of gains and losses for better visibility. All region shape files retrieved from GADM. Credit: Environmental Research Letters (2022). DOI: 10.1088/1748-9326/ac90d8

Hurricane damages can increase due to increasing global temperatures, caused by greenhouse gas emissions from fossil fuels. Computer simulations of regional economic sectors and supply chains in the US now show that the resulting economic losses can at some point not be nationally offset under unabated warming. If too many factories and the like are hit by the hurricane and stop working, other countries will have to step in to provide the supply of goods, according to the scientists who did the study. The hurricane impacts under global warming could thus put the U.S. at an economic disadvantage.

“Tropical cyclones draw their energy from ocean surface heat. Also, warmer air can hold more water which eventually can get released in heavy rains and flooding that often occur when a hurricane makes landfall,” says Robin Middelanis from the Potsdam Institute for Climate Impact Research (PIK) and Potsdam University, lead author of the study. “It’s thus clear … that hurricane damages will become bigger if we continue to heat up our Earth system.” While we might not have more hurricanes in the future, the strongest among them could get more devastating.

“Now, one of the important questions is: can we deal with that, economically? The answer is: not like this, we can’t,” says Middelanis. “Our calculations show, for the first time, that the U.S. economy as one of the strongest on our planet, will eventually not be able to offset the losses in their supply chains on their own. Increasing hurricane damages will exceed the coping capacities of this economic super-power.”

Local production losses propagate throughout supply chain networks

The scientists looked at the 2017 hurricane Harvey that hit Texas and Louisiana and already then cost the enormous sum of 125 billion U.S. dollars in direct damages alone, and computed what its impacts would be like under different levels of warming. Importantly, losses from local business interruption propagate through the national and global supply chain network, leading to additional indirect economic effects. In their simulations of more than 7,000 regional economic sectors with more than 1.8 million supply chain connections, the scientists find that the U.S. national economy’s supply chains cannot compensate future local production losses from hurricanes if climate change continues.

“We investigated global warming levels of up to 5°C—which unfortunately might be reached by the end of our century if climate policy fails us,” says Anders Levermann, head of complexity science at PIK and scientist at New York’s Columbia University, a co-author of the study published in Environmental Research Letters.

“We do not want to quantify temperature thresholds for the limit of adaptation of the U.S. economy’s national supply chains, since we feel there’s too much uncertainty involved. Yet we are certain that eventually the U.S. economy’s supply chain capacities as they are now will not be enough if global warming continues. There is a limit of how much the U.S. economy can take, we just don’t know exactly where it is.”

‘Bad for people’

Ironically, in the case of hurricane Harvey, it is in the oil and gas industry in Texas that suffers from the impacts of hurricanes driven by global warming—while global warming is in turn driven by the emissions from burning oil and gas, plus of course coal. The fossil fuel extraction sector is big in that region of the U.S., and it is vulnerable to cyclone damages. The computer simulations show that production losses in the fuel sector will be amongst those which will be most strongly compensated by countries like Canada and Norway, but also Venezuela and Indonesia, at the expense of the U.S. economy.

“When things break and production fails locally, there’s always someone in the world who is happy to make money by selling the replacement goods,” says Levermann.

“So why worry? Well, reduced production means increasing prices, and even if that means it’s good for some economies, it is generally bad for the consumers—the people. Also from a global economic perspective, shifts due to disrupted supply chains can mean that less efficient producers step in. It’s a pragmatic, straightforward conclusion that we need to avoid increasing greenhouse gas emissions which amplify this kind of disruptions.”

The ripple factor: Economic losses from weather extremes can amplify each other across the world

More information:
Robin Middelanis et al, Economic losses from hurricanes cannot be nationally offset under unabated warming, Environmental Research Letters (2022). DOI: 10.1088/1748-9326/ac90d8

Economic losses from hurricanes may become too big to be offset by the US if warming continues (2022, October 17)
retrieved 17 October 2022

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