Wildfires in Canada have burned 20 million acres, blanketed cities in Canada and the United States in smoke, raised health concerns on both sides of the border, and have no end in sight. The blow to Canada’s economy is only beginning to spread.
The fires have disrupted oil and gas operations, reduced available timber yields, slumped the tourism industry and imposed immeasurable costs on the nation’s health care system.
These losses represent the pressures more widely felt as countries around the world experience disaster after disaster from extreme weather, and the losses will increase as the climate warms.
As smoke fills vast swaths of North America, floods wash away neighborhoods, and heatwaves strain power grids, problems that have long seemed distant have suddenly come to the fore in recent years. Became. This will cost billions of dollars and can have long-lasting consequences, such as insurers pulling out of hurricane- and fire-prone markets.
In some early studies of the economic impact of rising temperatures, Canada appeared to be in a better position than countries closer to the equator. Warmer temperatures will lengthen the growing season, potentially making more livable places as winters become less severe. But it is becoming clear that increased volatility (ice storms followed by fires, followed by heavy rains, and a rare Atlantic hurricane to the north) will wipe out any potential uplift.
“It even informed people sooner than we thought,” said Dave Sawyer, chief economist at the Canadian Climate Institute. “Trying to model this is impossible.
Nevertheless, Mr. Sawyer and his colleagues tried to model it. Last year’s report estimated that climate-related costs could rise to C$25 billion in 2025, cutting economic growth in half. They project that half a million jobs will be lost by mid-century. The main cause is excessive heat, which reduces labor productivity and causes premature death. There is also an increased strain on household budgets, especially in the north where thawing permafrost is cracking roads and buildings, and tax increases needed to support government spending to repair the damage.
It’s too early to know the cost of the current fires, and there are still months of fire season left. However, consulting firm Oxford Economics forecasts that Canada’s economic growth could fall by 0.3 to 0.6 percentage points in the third quarter. This will hit hard, especially given that domestic employment is already slowing and households are highly indebted and have less savings than their households. neighbors in the south.
“We think we are already heading into recession and this will only make things worse,” said Tony Stilo, director of Canadian economics at the University of Oxford. “When you see these fires actually disrupting transportation routes and disrupting the power supply to large population centers, you’re talking about worse consequences.”
Estimates of overall economic impact are based on damage to specific industries, which varies from disaster to disaster.
Recent fires, for example, have shut down some sawmills as workers evacuated. It is not clear how widespread the damage to forest resources will be, but according to Derek Nyver, chief executive of the Canadian Forest Products Association, provincial governments have reduced the amount of timber allowed to be harvested after the large fires. It tends to decrease. Warmer winter temperatures have failed to control the pests, causing a resurgence of pinworm infestations and reducing logging in British Columbia.
Rising interest rates have weighed on housing construction and timber prices have slumped in recent months, but Canada faces a housing shortage to accommodate millions of new immigrants. Solving the housing problem will become more difficult if the availability of timber decreases. “As we deal with this problem, there will definitely be a supply shortage in Canada,” Mr. Navar said.
The tourism industry has also been hit by fires that broke out as tour operators entered the critical summer season, and in some cases far from where the fires occurred. In the peninsular town of Tofino, a popular whale-watching destination off Vancouver Island, business plummeted after a fire cut off access to its only highway two hours away. The road has since reopened, but only one lane is allowed at a time, and drivers have to wait up to an hour to get through.
Sabrina Donovan is the general manager of Pacific Sands Beach Resorts and president of Tofino’s local tourism promotion organization. She said the hotel’s occupancy rate has dropped to around 20% from 85% in June, with few bookings for the rest of the year. Employers typically house their employees at home during the summer, but when customers stop coming for weeks, many leave to find work elsewhere, maintaining full service for the next few months. became difficult.
“This recent fire was pretty devastating for the majority of the area,” Donovan said, marking the first time in her career that the coast has had to deal with wildfires. pointed out. “This is something we have to think about in the future.”
Regardless of the severity of a particular episode, costs increase as the disaster approaches critical infrastructure and populated areas. The two deadliest in recent history were 2013, when massive flooding hit Calgary, and the Fort McMurray fire, which destroyed 2,400 homes and businesses and is a major economic engine in the region. That’s why 2016 was such a disruptive year for oil and gas production.
Most of the fires this year occurred in rural areas. Although some oil drilling was halted, the damage to the oil industry as a whole was minor. A greater long-term threat to the industry is declining demand for fossil fuels, which could put 312,000 to 450,000 workers out of work over the next 30 years, according to TD Bank analysis.
However, the summer is still long and hot. And the insurance industry is watching the growing number of losses in recent years with vigilance. Prior to 2009, insured losses in Canada averaged approximately C$450 million annually, and now he routinely exceeds $2 billion. Large reinsurers pulled out of the Canadian market after several devastating payouts, driving up prices for homeowners and businesses. This does not include life insurance costs that may be caused by excessive heat or smoke related respiratory illnesses.
Craig Stewart, vice president for federal affairs at the Canadian Insurance Agency, said climate issues have been the group’s top concern over the past decade.
“In 2015 we sent our CEOs across the country to talk about the need to prepare for a different climate future,” Stewart said. “At the time, I was looking in the rearview mirror at the Calgary floods from two years ago. I couldn’t imagine that there are now two or three catastrophes a year in this country. “
That is why the industry has urged the Canadian government to develop a comprehensive adaptation strategy, which was announced at the end of June. The report recommends investing in urban forests to reduce the health impacts of heatwaves and creating better flood maps to keep people from building in vulnerable areas. and other measures are recommended. Firefighting and forestry experts are calling for a restoration of forest services devastated by years of austerity and an increase in the scale of burning, all of which is costly.
Halifax Mayor Mike Savage needn’t be convinced the spending is necessary. His city was the worst hit by fires this spring, with 151 homes destroyed. The disaster came on the heels of last year’s Hurricane Fiona, which submerged much of the coastline. Savage worries about the fate of the isthmus that connects Nova Scotia and New Brunswick, and an electricity system that peaks in hot summers rather than frigid winters.
“I certainly believe that if you invest in mitigation, you will get a dramatic positive effect from that investment,” Savage said. “It’s going to be a tough time ahead. It’s a bit naive to come through this fire and say, ‘Okay, good, I’m done.'”
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