Informing climate adaptation: A review of the economic costs of natural disasters

a r t i c l e i n f o This paper reviews the empirical literature on the economic impacts of natural disasters to inform both the modeling of potential future climate damages and climate adaptation policy related to extreme events. It covers papers that estimate the short-and/or long-run economic impacts of weather-related extreme events as well as studies identifying the determinants of the magnitude of those damages (including fatalities). The paper also reviews the small number of empirical papers on the potential extent of adaptation in response to changing extreme events. A growing consensus in the scientific community holds that climate change could be worsening certain natural disasters. The Intergovernmental Panel on Climate Change (IPCC) released a special report in early 2012, which notes that climate change could be altering the frequency, intensity, spatial extent, duration, and/or timing of many weather-related extreme events (IPCC, 2012). Even nonexperts are perceiving a trend toward more or worse extreme events: a 2012 poll of US residents found that, by a margin of 2:1, people believe that the weather is getting worse, and a large majority believe that climate change contributed to the severity of several recent natural disasters (Leiserowitz et al., 2012). This paper reviews what we know about the economic impacts of natural disasters to inform both the estimation of potential climate damages using integrated assessment models and the potential extent of climate adaptation to extreme events. The paper limits focus to empirical estimates of the economic costs of natural disasters and findings on the determinants of economic damages and fatalities. The paper then also provides an overview of the handful of empirical papers to date on the likely extent of adaptation in response to changes in extreme events. Given the focus on informing climate scholarship and policy, the paper looks specifically at hydrometeorological (or weather-related) disasters and not geophysical disasters, since confidence in the impact of climate change on hydrometeorological events is greater. 1 The review is focused on the empirical literature; it does not cover the theoretical literature on the economic impacts of disasters or simulation-and modeling-based studies. The focus of this review is also limited to economic impacts. While natural disasters can have profound social and political impacts (e.g., Lindell and Prater, 2003), those are not covered here. 2 Finally, as a further limit to the scope, this review is largely focused on literature published within the …