Extreme weather events are on the rise.
The frequencies of droughts, extreme temperatures, floods, and wildfires have increased over the last 60 years, which can be seen in this chart shared by HSBC’s climate change strategist Ashim Paun:
Scientists have studied the influence of human behaviour on these kinds of extreme events. The HSBC analysts cited a paper from the American Meteorological Society that found that half of the 36 extreme weather events from 2014 analysed in the study increased in likelihood due to anthropogenic influence.
Still, there remain uncertainties about human influence on some natural events. For example, there appears to be a correlation between the increase in the number of floods and the rise in temperatures — but the AMS found that anthropogenic influence on the strength and likelihood of floods is unclear.
Extreme weather events can have significant economic effects. They can cause damage to infrastructure, residential areas, and the assets and activities of companies, which can hamper economic growth and development, especially if there is no prepared response plan.
The HSBC team estimates the cumulative damage from events relating to climate change from 2005-2014 cost the G20 countries $309 billion. 39% of costs were incurred by China, followed by the US (22%) and India (11%).
Damage costs totaled $44 billion in 2014 alone. $11 billion of those costs came from droughts and a whopping $31 billion from floods, according to HSBC.
“The dominance of floods and droughts added together, amongst categories of extreme events, illustrates how changing rainfall patterns are currently the driver for a major component of total extreme weather events and associated costs suffered. We expect flooding to become more common as climate impacts increase,” HSBC analysts noted.
Notably, although some of these natural disasters may not affect the US directly, they may end up hitting the US economy indirectly.
For example, the rise in major natural disasters can put supply chains at risk, as was the case in 2011 when heavy rain forced many factories in Thailand — a major hub for hard disk drives — to close down. That led worldwide hard drive production to drop by 28% and the production of notebooks, digital video recorders, and other devices to stall. Intel’s profits fell by $1 billion in Q4 2011.
In short, extreme weather is on the rise — and it could hit the economy.