Global annual disaster costs

by Fran Sussman

A recent post on CD&S asked what we might learn from the economic impacts of disasters about ways to minimize the long term effects on the economy of these extreme weather events.

The post was a response to reading a recent article, “Global Cost Estimates from “Informing Climate Adaptation:  A Review of the Economic Costs of Natural Disasters,” by Carolyn Kousky, which appears in the journal, Energy Economics.  Although the focus in the article is on the conceptual basis of the estimates rather than the story told by the numbers, the author does pull together some estimates and the results are rather striking.  

Figure 1, “Annual Costs of Weather-Related Disaster Events Worldwide.” from the article depicts estimates of the global costs of weather-related disaster events between 2000 and 2012.  Graph

Three cost estimates rely on data from the reinsurance industry (generally proprietary) and so tend to focus more on insured and material losses. The fourth uses the publicly-available Emergency Events Database (EM-DAT), which is a global dataset incorporating data from the United Nations and various government sources, and is maintained by the Centre for Research on the Epidemiology of Disasters (CRED). [Note that a new report from the World Bank, Building Resilience, reports related global cost estimates.]

Across the four data sources, global average annual cost ranges from over $94 billion to over $130 billion, according to Kousky’s analysis. These estimates generally omit the multitude of smaller scale events, and so “total figures could be up to 50% higher than those reported.”  Estimates are also “not adjusted for differences in economic development,” and Kousky notes that losses tend to be dominated by damages in the US (perhaps around a third of the total, based on earlier analyses). And of course these disaster cost estimates—like other estimates of the economic damages of climate change—do not always take into account costs associated with health or unmanaged ecosystems, and other, less-material, losses, as well as uninsured losses.

Source:  Carolyn Kousky, Informing climate adaptation: A review of the economic costs of natural disasters, Energy Economics, Available online 10 October 2013, ISSN 0140-9883, http://dx.doi.org/10.1016/j.eneco.2013.09.029.

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