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Floods, droughts and major storms that wash out highways, damage buildings and affect power grids could cost Canada’s economy $139 billion over the next 30 years, a new climate-based analysis predicts.
The report, titled Aquanomicsis published today by GHD, a global engineering and architectural services firm.
GHD’s Canadian water lead, Don Holland, said there are many reports tallying insured losses and physical damage after major events such as last fall’s atmospheric river in British Columbia.
“What this report does is actually take into account the loss of economic productivity, the shocks to the system when it comes to supply chain pricing, and all of that,” Holland said in an interview.
He pointed to the 2021 BC floods, which for a time cut rail and highway connections between the country’s largest port in Vancouver and the rest of Canada. The disruption has stressed supply chains already hampered by COVID-19, raising prices, slowing production at factories that have been unable to get parts, and leaving some shelves in grocery stores and other retailers empty.
“It had a big effect,” Holland said.
The report predicts manufacturing and distribution will take the biggest hit from water-related climate disasters between now and 2050 — an estimated $64 billion in losses, or about 0.2 percent of the total manufacturing economy per year.
While droughts can limit industrial production, floods and storms cause direct damage to buildings and machinery, or take out power supplies, forcing factories to shut down.
The derecho windstorm that swept across southern and eastern Ontario in May damaged the power grid in Ottawa so badly that parts of the city were without electricity for more than two weeks.
Roy Brouwer, the executive director of the Water Institute and a professor of economics at the University of Waterloo, said the report is a call to action. He added that he did not work with the economic model that GHD used in their methodology and was not familiar with it.
Much of Canadian industry depends on water, he said.
“It’s not just primary agricultural production like in the Western part of the country. It’s a whole series of economic activities from the chemical industry to the food processing industry, the textile industry that depends on the availability of water,” said Brouwer.
“If that availability of water is reduced due to increase [extended] periods of drought, then it is expected to have a significant impact.”
“It is very important to understand that there are both direct and indirect economic impacts,” he added. “It is often these indirect impacts that we deal with. We don’t always calculate from them.”
Retail, banking, energy, agriculture among the most affected sectors
Drought is often thought of as only a real risk to agriculture, but extreme drought can be much more widespread. In Europe, near-record lows on the Rhine River could halt marine traffic along Europe’s main shipping lane, which connects major ports in Belgium and the Netherlands with Germany and Switzerland.
Last week in China, a massive heat wave prompted the government to force some factories to near ration power as low river levels reduced power output at hydroelectric dams.
Governments in California, Nevada, Utah and other parts of the western United States are enforcing water rationing amid what some are calling the worst drought in more than a millennium.
Lake Mead, the largest reservoir in the United States, is up to a quarter of its capacity, with macabre results: at least five bodies were found as the water receded, some of them presumed drowned or killed and left in. the more decades ago.
Retail and fast-moving consumer goods – heavily dependent on water-related infrastructure, and highly exposed in the event of damage to supply routes – will be the second most affected economic sector, with losses estimated to be around $26 billion between 2022 and 2050. .
Water risk in the banking and insurance sectors follows with $21 billion in estimated losses, mainly due to disruptions in productivity and economic activity, as well as increased insurance payouts.
Energy and utilities will face an estimated $14 billion in losses, either through direct damage to power grids and generation plants, or reductions in power output at hydro dams and nuclear plants due to low water levels.
Agriculture is the fifth sector analyzed, which in Canada is estimated to lose about $4 billion over the next 28 years, also threatening food security.
Impact of water disasters on global economies
The report also looked at the economic impact of water disasters in seven other countries, including Australia, China and the United States.
GHD says expensive and massive infrastructure projects to protect against storms and floods are no longer the answer to making the economy more resilient, because time is of the essence.
Smaller projects that can be done quickly, often using nature itself, are probably the best choice, the report says.
The average temperature on Earth is already more than 1 C above pre-industrial times and the climate has already changed, leading to more frequent and severe storms and floods and wider and longer droughts.
The cost of those opportunities is high.
The emergency events database compiled by the Belgium-based Center for Research on the Epidemiology of Disasters said economic losses from droughts, floods and storms worldwide in 2021 totaled $291 billion, compared to an average of $153 billion between 2001 and 2020.
GHD’s report says taking advantage of data systems and sensors to help predict problems before they arise can make a big difference.
For example, Holland said that using sensors to look for signs of an impending water main break in a city can prevent major losses of water, reduce damage and ensure that the pipes reach their maximum lifespan.
Holland told him the report’s biggest message was “the magnitude of what we face if we don’t become more resilient, if we don’t make our communities more resilient.”
“It really drives home how water … touches every aspect of our lives and communities. It truly does in ways we don’t know about.”