ARCADIA and economic vulnerability

The impacts of extreme weather events – heat waves, flooding, droughts, etc – are both direct and indirect. Direct effects are produced through damages to health, crops and assets from the weather event itself. Indirect effects are essentially “echoes” through the social system following after the direct effects. An example is indirect economic losses as direct damage to production capacity in one sector of the economy leads to a change in the ability of other sectors to operate. This change may be either to decrease or enhance production in that sector of indirect effect.

Above: A representative result from the I-O analysis of the ARCADIA project. This result shows the estimated change in London’s GDP over the period of recovery when the same percentage loss of production capacity is produced by an extreme weather event, with backward and forward linkages in the economy. Such vulnerability analysis will be used in future phases of ARCADIA to identify where resources might most effectively be allocated to reduce climate impacts on the economy.

 

The ARCADIA project, led by Jim Hall at the University of Oxford, is developing a suite of models and decision support tools to understand the probabilistic nature of extreme weather events under climate change, and using that knowledge to further understand the direct and indirect effects. The economic analysis, led through 4CMR, is rooted in input-output analysis using the structure of the UK economy as developed by Cambridge Econometrics now and in the future. Such an analysis allows for estimates of the indirect effects of climate-related damage to the economic sectors of a city; the project is using London as the test case. As described in the journal articles stemming from this work, the economic vulnerability analysis focuses to date on how a given percentage loss in production capacity in any one sector contributes to overall loss or gain in London’s economy, and how different strategies of recovery from this initial loss affect the economic impacts. The modelling does not try to estimate how such events might change the structure of the economy or alter prices, but rather assumes that structure and pricing remains in place after an event as the economy returns to the pre-damage conditions. Future development of the project may remove this assumption, but at present removing it is too uncertain to justify inclusion of the more dynamic economic approaches offered by models such as those developed elsewhere in 4CMR and Cambridge Econometrics.

 

Outputs: J. Li, D. Crawford-Brown, M. Syddall and D. Guan, Modelling Economic Recovery Following a Natural Disaster using Input-Output Analysis, International Journal of Risk Analysis, to appear in 2013. D. Crawford-Brown, M. Syddall, D. Guan, J. Li, K. Jenkins, J. Hall, and R. Beaven, Exploring the Vulnerability of London’s Economy to Climate Change Impacts, Environmental Policy and Planning, to appear in 2013.

Funding: EPSRC

Project Partners: The partners of the ARCADIA project (see www.4cmr.group.cam.ac.uk/arcadia)

Duration: January 2010 to June 2013

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