Canada Offers Lesson in the Economic Toll of Climate Change
Canadas wildfires have , with smoke and raised health concerns on both sides of the border, with no end in sight. The toll on the Canadian economy is only beginning to sink in. The fires have upended oil and gas operations, reduced available timber harvests, dampened the tourism industry and imposed on the national health system. Those losses are emblematic of the pressure being felt more widely as countries around the world experience disaster after disaster caused by extreme weather, and they will only increase as the climate warms. What long seemed a faraway concern has snapped into sharp relief in recent years, as billowing smoke has suffused vast areas of North America, floods have neighborhoods and heat waves have strained power grids. That incurs billions of dollars in costs, and has longer-reverberating consequences, such as insurers from markets prone to hurricanes and fires. In some early of the of rising temperatures, Canada appeared to be better positioned than countries closer to the Equator; warming could allow for longer farming seasons and make more places attractive to live in as winters grow less harsh. But it is becoming clear that increasing volatility ice storms followed by fires followed by intense rains and now hurricanes on the Atlantic coast, uncommon so far north wipes out any potential gains. Its come on faster than we thought, even informed people, said Dave Sawyer, principal economist at the Canadian Climate Institute. You couldnt model this out if you tried. Weve always been concerned about this escalation of damages, but seeing it happen is so stark. Nonetheless, Mr. Sawyer and his colleagues did try to model it out. In a , they calculated that climate-related costs would mount to 25 billion Canadian dollars in 2025, cutting economic growth in half. By midcentury, they forecast a loss of 500,000 jobs, mostly from excessive heat that and causes premature death. Then there are the increased costs to households and higher taxes required to support government spending to especially , where thawing permafrost is cracking roads and buildings. It is too early to know the cost for the current fires, and several months of fire season remain. But the consulting firm Oxford Economics has that it could knock between 0.3 and 0.6 percentage points off Canadas economic growth in the third quarter a big hit, especially since hiring in the country has and households have more debt and less savings than their neighbors to the south. We already think were , and this would just make things worse, said Tony Stillo, director of economics for Canada at Oxford. If we were to see these fires really disrupt transportation corridors, disrupting power supply to large population centers, then youre talking about even worse consequences. Estimates of the overall economic drag are built on damage to particular industries, which vary with each disaster. The recent fires have , for example, as workers have been evacuated. Its not clear how widespread the damage will be to forest stocks, but provincial governments tend to reduce the amount of timber they allow to be harvested after large blazes, according to Derek Nighbor, chief executive of the Forest Products Association of Canada. Infestations of pine beetles, which have flared up as milder winter temperatures fail to kill off the pests, have curtailed logging in British Columbia. Although lumber prices have been depressed in recent months as higher interest rates have weighed on home construction, Canada is confronting a as it works to bring in . Reduced availability of wood will make its housing problem more difficult to solve. Its safe to say theres going to be a supply crunch in Canada as we work through this, Mr. Nighbor said. The tourism industry is also being hit, as the fires erupted just as operators were going into the crucial summer season sometimes far from the fires. Business plunged in the peninsula town of Tofino, a popular destination for whale watching off Vancouver Island, when its only highway access was cut off by a fire two hours away. The road has since reopened, but only one lane at a time, and drivers need to wait up to an hour to get through. Sabrina Donovan is the general manager of the Pacific Sands Beach Resort and the chair of Tofinos local tourism promotion organization. She said that her hotels occupancy sank to about 20 percent from 85 percent in the course of June, and that few bookings were coming through for the rest of the year. Employers commonly house their staff during the summer, but after weeks without customers, many workers left for jobs elsewhere, making it difficult to maintain full service in the coming months. This most recent fire has been pretty devastating for the majority of the community, Ms. Donovan said, noting that the coast had never in her career had to deal with wildfires. This is something we now have to be thinking about in the future. Regardless of the severity of any particular episode, the costs mount as disasters get closer to critical infrastructure and population centers. That is why the two most expensive years in recent history were 2013, when , and 2016, when the wiped out 2,400 homes and businesses and hamstrung oil and gas production, the areas main economic driver. This year, most of the burning has been in rural areas. While some oil drilling has been disrupted, the damage overall to the oil industry has been minor. The greater long-term threat to the industry is falling demand for fossil fuels, which could displace 312,000 to 450,000 workers in the next three decades, according to an . But there is still . And the insurance industry is on alert, having watched the increasing damage in recent years with alarm. Before 2009, insured losses in Canada averaged around 450 million Canadian dollars a year, and now they routinely exceed $2 billion. Large reinsurers pulled back from the Canadian market after several crippling payouts, increasing prices for homeowners and businesses. That is not even counting the life insurance costs likely to be incurred by excessive heat and smoke-related respiratory ailments. Craig Stewart, vice president of federal affairs for the Insurance Bureau of Canada, said climate issues had become a primary concern for the organization over the past decade. Payouts including adjustment expenses by property and casualty insurers for disasters that total more than $30 million, in 2021 Canadian dollars. Source: Insurance Bureau of Canada By The New York Times Back in 2015, we sent our C.E.O. across the country to talk about the need to prepare for a different climate future, Mr. Stewart said. At the time, we had the Calgary floods two years before in the rearview mirror. We thought, Oh, well get another event in two to three years. We never couldve imagined that were now seeing two or three catastrophic events in the country per year. Thats why the industry pushed hard for the Canadian government to come up with a , which was released in late June. It recommends measures like investing in urban forests to reduce the health effects of heat waves and developing better flood maps that help people avoid building in vulnerable areas. Fire and forestry experts have called for the forest service, , to be restored, and prescribed burns to be scaled up all of which costs a lot of money. Mike Savage, the mayor of Halifax, doesnt have to be convinced that the spending is necessary. His city was the largest to sustain fire losses this spring, with 151 homes burned. That calamity came on the heels of , which submerged much of the coastline. Mr. Savage worries about the fate of the isthmus that connects Nova Scotia to New Brunswick, and the power systems that now peak in the hot summer instead of the frigid winter. I certainly believe that when you invest in mitigation theres a dramatic positive impact from those investments, Mr. Savage said. Its going to be a challenging time. To think we got through this fire and say, OK, thats good, were done, that would be a little bit naive. is a reporter on the Business desk who covers the changing American economy and what it means for peoples lives.