Friday, December 2, 2011

Hurrican damage and climate change

Global climate change is not only supposed to bring higher average temperatures on earth but also more extreme weather. The latter is possibly the more important consequence, as it has an impact on agriculture and more generally can destroy property. One example is the incidence of hurricanes in the United States, with more and stronger hurricanes likely. What would be the economic impact of this?

Robert Mendelsohn, Kerry Emanuel and Shun Chonabayashi study this using historical data from hurricanes and estimating a damage function. Then they use this function to estimate damages from two scenarios, with and without climate change, taking into account that various US states will have higher populations and incomes in the following decades. In the end, some of the increase in damages is due to this growth, but climate change would have twice that impact. Yet, at $40 billion a year, it still proves to be relatively affordable compared to US GDP. But it is concentrated around the Gulf of Mexico, which shall become even less hospitable with higher temperatures anyway. The outlook for Florida is not too good...

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