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

Date:
October 27, 2021
Source:
Potsdam Institute for Climate Impact Research (PIK)
Summary:
Weather extremes can cause economic ripples along our supply
chains. If they occur at roughly the same time the ripples start
interacting and can amplify even if they occur at completely
different places around the world, a new study shows. The resulting
economic losses are greater than the sum of the initial events,
the researchers find in computer simulations of the global economic
network. Rich economies are affected much more strongly than poor
ones, according to the calculations.

Currently, weather extremes around the world are increasing due to
greenhouse gas emissions from burning fossil fuels. If they happen
simultaneously or in quick succession even at different places on
the planet, their economic repercussions can become much bigger
than previously thought.



FULL STORY ========================================================================== "Ripple resonance, as we call it, might become key in assessing economic climate impacts especially in the future," says Kilian Kuhla from the
Potsdam Institute for Climate Impact Research, first author of the
study. "The effect of weather extremes in our globalized economy yield
losses in some regions that face supply shortages and gains in others
that see increased demand and thereby higher prices. But when extremes
overlap economic losses in the entire global supply network are on
average 20 percent higher. This is what we see in our simulations of
heat stress events, river floodings, and tropical cyclones; and it is
a most worrying insight."

========================================================================== Generally, extreme weather leading to, for example, the flooding of a
factory does lead not only to direct local output losses. It is known
that the economic shocks also propagate in the global trade network. Now
the researchers find that these propagated effects do not just add up but
can in fact amplify each other. The researchers modelled the response of
the global network, calculating 1.8 Million economic relations between
more than 7000 regional economic sectors.

Richer economies are hit harder While not all countries suffer from the
ripple resonance effect, most countries which are economically relevant
do. Specifically China, due to its prominent position in the world
economy, shows an above-average effect of more than 27% of extra losses
when extreme events overlap compared to when they hit independently from
each other.

"The phenomenon of economic ripple resonance means that two separate
incidents send shock waves through the world economy, and those waves
build up -- like a tidal wave," says Anders Levermann department head
at Potsdam Institute and scientist at Columbia University in New York,
who led the author team. "Supply shortages increase the demand and
that increases the prices. Firms have to pay more for their production
goods. In most cases, this will get passed down to the consumer. Since
weather extremes happen abruptly, there's no smooth adaptation of
capacities and prices at least for a short period of time. If other
suppliers fail, due to economic repercussions of another weather
extreme elsewhere, the interfering price shocks are intensified."
Overlap makes total losses larger than the sum of two events'
damages "If something gets rare, it gets expensive, and if it gets
rare worldwide it gets very expensive -- clearly, that's not new,"
says Levermann. "The new thing is the overlap. So far, people mostly
looked at the local damage or at most the economic repercussions of
one disaster at a time. Now we find that a second disaster happening at
about the same time, even if it's in a different corner of the world,
can lead to higher worldwide economic losses." This holds true not
just for simultaneous but also for consecutive disasters, if the
economic effects of the different disasters overlap. "By allowing
climate change run wild, we add climate-induced economic losses
on top of everything else. If we do not rapidly reduce greenhouse
gases, this will cost us -- even more than we've expected so far." ========================================================================== Story Source: Materials provided by Potsdam_Institute_for_Climate_Impact_Research_(PIK).

Note: Content may be edited for style and length.


========================================================================== Journal Reference:
1. Kilian Kuhla, Sven Norman Willner, Christian Otto, Tobias Geiger,
Anders
Levermann. Ripple resonance amplifies economic welfare loss from
weather extremes. Environmental Research Letters, 2021; 16 (11):
114010 DOI: 10.1088/1748-9326/ac2932 ==========================================================================

Link to news story: https://www.sciencedaily.com/releases/2021/10/211027085322.htm

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