The cost of disaster: Putting a price tag on climate change

Ann Goodman in Green Biz: In this era of apparently mounting natural disasters worldwide—many, such as floods from hurricanes, likely related to changing weather patterns linked to climate change—one might ask: How much do such disasters cost? How are the costs calculated?

In fact, someone has asked—analyzing not just the cost of the event itself, but the larger economic costs linked to build-up and often long recovery.

“The public focus [of a disaster] is on the moment, the trauma of the extreme event,” says John Mutter, Professor of Earth and Environmental Sciences, as well as International Public Affairs, at Columbia University’s Earth Institute. “The economic loss focuses on that moment, too—what was actually lost at the time.”

However, that loss to the economy—the chain of production, consumption and everything that goes into it—doesn’t happen in a moment, but actually begins after, he says, “with losses that go beyond the value of the built structures trashed at the time, beyond the capital asset loss, to a deeper economic loss that happens over time.”

The theory of calculating disaster costs is just developing, as natural disasters become more prevalent; business can incorporate principles from a three-pronged process into new strategic thinking on what disaster is and how it might affect particular sectors or individual companies. In fact, a climate-related—or other--disaster is a process with three key parts: build-up, event and recovery....

Hurricane damage from Katrina to a mobile home in Florida, shot by FEMA