Canada Offers Lesson in the Economic Toll of Climate Change

Canada Offers Lesson in the Economic Toll of Climate Change

Wildfires are hurting many industries and could strain households across Canada, one of many countries reckoning with the impact of extreme weather.

Canada’s wildfires have burned 20 million acresblanketed Canadian and U.S. cities 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 uncounted costs 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 washed away neighborhoods and heat waves have strained power grids. That incurs billions of dollars in costs, and has longer-reverberating consequences, such as insurers withdrawing from markets prone to hurricanes and fires.

In some early studies 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 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.

“It’s come on faster than we thought, even informed people,” said Dave Sawyer, principal economist at the Canadian Climate Institute. “You couldn’t model this out if you tried. We’ve 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 report last year, 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 lowers labor productivity and causes premature death. Then there are the increased costs to households and higher taxes required to support government spending to repair the damage — especially in the north, 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 forecast that it could knock between 0.3 and 0.6 percentage points off Canada’s economic growth in the third quarter — a big hit, especially since hiring in the country has already slowed and households have more debt and less savings than their neighbors to the south.

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