Canada offers a lesson in the economic cost of climate change

Fires in Canada have burned 20 million acres, blanketed Canadian and US cities in smoke and raised health concerns on both sides of the border, with no end in sight. The balance of Canada’s economy is only starting to take its toll.

The fires have disrupted oil and gas operations, reduced available timber crops, dampened the tourism industry and forced costs not counted on the national health system.

These losses are emblematic of the pressure being felt more widely as countries around the world experience disaster after disaster caused by extreme weather and will only increase as the climate warms.

What long seemed like a distant concern has come into sharp relief in recent years, as billowing smoke has suffused large swathes of North America, floods have wiped out neighborhoods, and heat waves have strained power grids. This costs billions of dollars and also has long-term consequences, such as pulling insurers out of markets prone to hurricanes and wildfires.

In some early Education of the economic impact of rising temperatures, Canada appeared to be better positioned than countries closer to the Equator; warming could allow for longer farming seasons and make places to live more attractive as winters become less harsh. But it’s becoming clear that growing volatility – ice storms followed by wildfires followed by heavy rains and now hurricanes on the Atlantic coast, rare up north so far – erases any potential gains.

“It’s come faster than we thought, even knowledgeable people,” said Dave Sawyer, principal economist at the Canadian Climate Institute. “You couldn’t model this if you tried. We have always been concerned about this escalation of damages, but to see it happening is so bad.”

However, Mr. Sawyer and his colleagues have tried to model it. In a report last year, calculated that climate-related costs would rise to C$25 billion in 2025, halving economic growth. By mid-century, they predict 500,000 job losses, mostly due to excessive heat lower labor productivity and causes premature death. Then there are the higher costs for families and the higher taxes needed to support public spending repair the damage – particularly Northwhere thawing permafrost is splitting streets and buildings apart.

It is too early to know the cost of the current wildfires, and there are several months of wildfire season left. But consultancy firm Oxford Economics does prediction which could knock Canada’s economic growth by 0.3 to 0.6 percentage points in the third quarter – a big hit, especially since hiring in the country has been already slow and households have more debt and fewer savings than their southern neighbors.

“We already think we are poised for a recessionand that would only make matters worse,” said Tony Stillo, director of economics for Canada at Oxford. talking about even worse consequences.”

Estimates of overall economic strength are based on damage to particular industries, which varies depending on the disaster.

Recent fires have left some sawmills idle, for example, as workers have been evacuated. It’s unclear how widespread the damage to forest reserves will be, but provincial governments tend to reduce the amount of timber they allow for harvesting after large fires, according to Derek Nighbor, chief executive officer of the Forest Products Association of Canada. Pine beetle infestations, which flared up when milder winter temperatures failed to kill the pests, have curtailed logging in British Columbia.

Although timber prices have been depressed in recent months as higher interest rates have weighed on home construction, Canada is facing a housing shortage as it works to bring in millions of new immigrants. The reduced availability of timber will make his housing problem more difficult to solve. “It’s safe to say there will be a supply crisis in Canada as we work through this,” Mr. Nighbor said.

The tourism industry has also been affected, as fires broke out just as operators were entering the crucial summer season, sometimes away from the fires. Business plummeted in the Peninsula town of Tofino, a popular whale-watching destination off Vancouver Island, when its only freeway access was disrupted by a fire two hours away. The road has since reopened, but only one lane at a time, and motorists have to wait up to an hour to pass.

Sabrina Donovan is the general manager of Pacific Sands Beach Resort and president of the local Tofino tourism promotion organization. She said occupancy at her hotel fell to about 20 percent from 85 percent during June and few bookings were coming in for the rest of the year. Employers usually host their staff over the summer, but after weeks without customers, many workers have left to work elsewhere, making it difficult to maintain a full service over the next few months.

“This most recent fire has been pretty devastating to most of the community,” Ms. Donovan said, noting that Coast had never dealt with fires in her career. “This is something we need to think about now in the future.”

Regardless of the severity of a particular incident, costs mount as disasters approach critical infrastructure and population centers. That’s why the two most expensive years in recent history were 2013, when major floods hit Calgaryand 2016, when the Fort McMurray fire it wiped out 2,400 homes and businesses and hampered oil and gas production, the area’s main economic driver.

This year, most of the fires took place in rural areas. While some oil drilling was stopped, the overall damage to the oil industry was minor. The biggest long-term threat to the industry is falling demand for fossil fuels, which could displace 312,000 to 450,000 workers over the next three decades, according to a analysis of TD Bank.

But it’s still there a long, hot summer ahead. And the insurance industry is on high alert, having watched with alarm the increase in claims in recent years. Prior to 2009, insured losses in Canada averaged about C$450 million annually and now routinely exceed C$2 billion. Big reinsurers withdrew from the Canadian market after several crippling payments, driving up prices for homeowners and businesses. That’s not even counting the life insurance costs that could be incurred by excessive heat and smoking-related respiratory ailments.

Craig Stewart, vice president of federal affairs for the Insurance Bureau of Canada, said climate issues have become a primary concern for the organization over the past decade.

“In 2015, we sent our CEO across the country to talk about the need to prepare for a different climate future,” Stewart said. “At the time, we had the Calgary floods two years earlier in the rearview mirror. We thought, ‘Oh, we’re going to have another event in two or three years.’ We could never have imagined seeing two or three catastrophic events in the country a year.”

That’s why the industry insisted that the Canadian government submit a global adaptation strategy, which was released in late June. It recommends measures such as investing in urban forests to reduce the health effects of heatwaves and developing better flood maps that help people avoid building in vulnerable areas. Fire and forestry experts have called for the restoration of the Forest Service, decimated by years of austerity, and an increase in prescribed burns, which costs a lot of money.

Mike Savage, the mayor of Halifax, must not be convinced the spending is necessary. The town of him was the largest to suffer fire damage this spring, with 151 homes burned. That calamity came in the wake of Hurricane Fiona last year, which submerged much of the coast. Mr. Savage is concerned about the fate of the isthmus connecting Nova Scotia to New Brunswick and the energy systems now peaking in the hot summer instead of the freezing winter.

“I certainly believe that when you invest in mitigation there is a dramatic positive impact from those investments,” Savage said. “It will be a difficult time. To think we made it through this fire and say, ‘OK, fine, we’re done,’ would be a bit naïve.”