Vulnerability of London’s Economy to Climate Change: Sensitivity to Production Loss

Douglas Crawford-Brown, Mark Syddall, Dabo Guan, Jim Hall, Jun Li, Katie Jenkins, Rachel Beaven

Cambridge Centre for Climate Change Mitigation Research, University of Cambridge, Cambridge, UK.
Cambridge Econometrics, Cambridge, UK.
Environmental Change Institute, University of Oxford, Oxford, UK.
School of Earth and Environment, University of Leeds, Leeds, UK.

DOI: 10.4236/jep.2013.46064                

Abstract

A variant of the Adaptive Regional Input-Output model (ARIO) has been developed to explore the sensitivity of the London economy to loss of production capacity in sectors affected by climate change related damage. The model is designed for linking to an Event Accounting Matrix (EAM) produced by climate and engineering teams, and then follow this damage through direct and indirect losses in the economy during a recovery process that is either demand-led (in which recovery of production capacity takes place only as demand recovers) or investment-led (where recovery of production capacity can precede demand). Outputs from the model are used to assess the relative vulnerability of London’s economy to production capacity (Capital stock) loss in each of the 42 economic sectors, for purposes of identifying where to most effectively allocate resources to climate change adaptation strategies or to recovery operations when used in conjunction with an EAM. Measures of impact related to GDP loss, recovery time and the ratio of indirect to direct losses are developed for these scenarios. Results show that indirect losses are a significant component of total losses, with a multiplier of between 1.3 and 2 depending on the scale of initial damage.

Keywords

Climate Change; Vulnerability; Resilience; Indirect Losses; Economic Recovery

Conflicts of Interest

The authors declare no conflicts of interest.

References

[1]	J. Albala-Bertrand, “Political Economy of Large Natural Disasters,” Oxford University Press, Oxford, 1993.
[2]	S. Hallegatte, F. Henriet and J. Corfee-Morlot, “The Economics of Climate Change Impacts and Policy Benefits at City Scale: A Conceptual Framework,” Climatic Change, Vol. 104, No. 1, 2011, pp. 51-87. doi:10.1007/s10584-010-9976-5
[3]	I. Azis, “Exploring Economy-Wide Impacts of Climate Change in a Resource-Rich Country,” Annual International Seminar on Macroeconomic Impact of Climate Change: Opportunities and Challenges, Conference Paper, Bali, 1-2 August 2008.
[4]	R. Miller and P. Blair, “Input-Output Analysis: Foundations and Extensions,” Cambridge University Press, Cambridge, 2009. doi:10.1017/CBO9780511626982
[5]	O. Karkacier and Z. Goktolga, “Input-Output Analysis of Energy Use in Agriculture,” Energy Conversion and Management, Vol. 46, No. 9-10, 2005, pp. 1513-1521. doi:10.1016/j.enconman.2004.07.011
[6]	S. Cole, “Protection, Risk, and Disaster in Economic Networks,” In Search of a Common Methodology on Damage Estimation, Joint NEDIES and University of Twente Workshop Proceedings, Office for Official Publications of the European Communities, Delft, 2003.
[7]	A. Rose and S. Liao, “Modeling Regional Economic Resilience to Disasters: A Computable General Equilibrium Analysis of Water Service Disruptions,” Journal of Regional Science, Vol. 45, 2005, pp. 75-112. doi:10.1111/j.0022-4146.2005.00365.x
[8]	A. Rose, “Defining and Measuring Economic Resilience to Disasters,” Disaster Prevention and Management, Vol. 13, No. 4, 2004, pp. 307-314. doi:10.1108/09653560410556528
[9]	H. Cochrane, “Economic Loss: Myth and Measurement,” In Search of a Common Methodology on Damage Estimation, Joint NEDIES and University of Twente Workshop Proceedings, Office for Official Publications of the European Communities, Delft, 2003.
[10]	S. Hallegatte, J.-C. Hourcadec and P. Dumasc, “Why Economic Dynamics Matter in Assessing Climate Change Damages: Illustration on Extreme Events,” Ecological Economics, Vol. 62, No. 2, 2007, pp. 330-340. doi:10.1016/j.ecolecon.2006.06.006
[11]	S. Hallegatte, “An Adaptive Regional Input-Output Model and Its Application to the Assessment of the Economic Cost of Katrina,” Risk Analysis, Vol. 28, 2008, pp. 779-799. doi:10.1111/j.1539-6924.2008.01046.x
[12]	N. Yamano, Y. Kajitani and Y. Shumuta, “Modeling the Regional Economic Loss of Natural Disasters: The Search for Economic Hotspots,” Economic Systems Research, Vol. 19, No. 2, 2007, pp. 163-181. doi:10.1080/09535310701330191
[13]	W. Leontief, “Domestic Production and Foreign Trade: The American Capital Position Re-Examined,” Economica Internazionale, Vol. 7, 1953, p. 3.
[14]	W. Leontief and A. Strout, “Multi-Regional Input-Output Analysis,” In: T. Barna, Ed., Structural Interdependence and Economic Development, St Martins Press, London, 1963, pp. 243-259.
[15]	W. Leontief, “Environmental Repercussions and the Economic Structure: An Input-Output Approach,” Review of Economic Statistics, Vol. 52, No. 3, 1970, pp. 262-277. doi:10.2307/1926294
[16]	A. Idenburg and H. Wilting, “DIMITRI: A Dynamic Input-Output Model to Study the Impacts of Technology Related Innovations,” The WIII International Conference on Input-Output Techniques, University of Macerata, Italy, 21-25 August 2000.
[17]	A. Idenburg and H. Wilting, “DIMITRI: A Model for the Study of Policy Issues in Relation to the Economy, Technology and the Environment,” In: J. C. J. M. van den Bergh and M. A. Janssen, Eds., Economics of Industrial Ecology: Materials, Structural Change and Spatial Scales, MIT Press, Cambridge, 2004, pp. 223-252.
[18]	H. Wilting, A. Faber and A. Idenburg, “Exploring Technology Scenarios with an Input-Output Model,” The International Conference on Input-Output and General Equilibrium: Data, Modelling and Policy Analysis, Brussels, 2-4 September 2004.
[19]	C. Brink and A. Idenburg, “Cost-Effective Pollution Abatement in an Input-Output Model,” Netherlands Environmental Assessment Agency, Unpublished Report, 2007.
[20]	A. Van der Veen, “Disasters and Economic Damage: Macro, Meso and Micro Approaches,” Disaster Prevention and Management, Vol. 13, No. 4, 2004, pp. 274-279. doi:10.1108/09653560410556483
[21]	S. Cole, E. Pantoja and V. Razak, “Social Accounting for Disaster Preparedness and Recovery Planning,” NCEER, Buffalo, 1993.
[22]	S. Cole, “Lifeline and Lvelihood: A Social Accounting Matrix Approach to Calamity Preparedness,” Journal of Contingencies and Crisis Management, Vol. 3, No. 4, 1995, pp. 228-240. doi:10.1111/j.1468-5973.1995.tb00102.x
[23]	Y. Okuyama, “Measuring Economic Impacts of Natural Disasters: Application of Sequential Inter-Industry Model (SIM),” Regional Research Institute, West Virginia University, 2002.
[24]	N. Ranger, S. Hallegatte, S. Bhattacharya, M. Bachu, S. Priya, K. Dhore, F. Rafique, P. Mathur, N. Naville, F. Henriet, C. Herweijer, S. Pohit and J. Corfee-Morlot, “An Assessment of the Potential Impact of Climate Change on Flood Risk in Mumbai,” Climatic Change, Vol. 104, No. 1, 2011, pp. 139-167. doi:10.1007/s10584-010-9979-2
[25]	T. Barker, B. Fingleton, K. Homenidou and R. Lewney, “The Regional Cambridge Multi-Sectoral Dynamic Model of the UK Economy,” In: G. Clarke and M. Madden, Eds., Regional Science in Business, Springer-Verlag, Heidelberg, pp. 79-96, 2001.
[26]	Hallegatte, S., “A Dynamical Approach to the Macroeconomic Consequences of Extreme Events in a Climate Change Context,” Centre International de Researche sur L-Environnment et le Developpement, 2005.
[27]	A. Steenge and M. Bockarjova, “Thinking about Imbalances in Post-Catastrophe Economies: An Input-Output Based Proposition,” Economic Systems Research, Vol. 19, No. 2, 2007, pp. 205-223. doi:10.1080/09535310701330308
[28]	R. Dawson, J. Hall, S. Barr, M. Batty, A. Bristow, S. Carney, A. Dagoumas, S. Evans, A. C. Ford, J. Kohler, M. R. Tight, C. L. Walsh, H. Watters and A. Zanni, “A Blueprint for the Integrated Assessment of Climate Change in Cities,” In: K. Tang, Ed., Green Citynomics. The Urban War against Climate Change, Greenleaf Publishing, Sheffield, 2009, pp. 32-52. doi:10.9774/GLEAF.978-1-909493-88-9_4
[29]	J. Hall, R. Dawson, S. Barr, M. Batty, A. Bristow, S. Carney, A. Dagoumas, A. Ford, C. Harpham, M. Tight, C. Walsh, H. Watters and A. Zanni,” City-Scale Integrated Assessment of Climate Impacts, Adaptation and Mitigation,” In: R. K. Bose, Ed., Energy Efficient Cities: Assessment Tools and Benchmarking Practices, World Bank, Washington DC, 2010, pp. 43-64.
[30]	C. Walsh, R. Dawson, J. Hall, S. Barr, M. Batty, A. Bristow, S. Carney, A. Dagoumas, A. Alistair Ford, C. Harpham, M. Tight, H. Watters and A. Zanni, “Assessment of Climate Change Mitigation and Adaptation in Cities,” Urban Design and Planning, Vol. 164, No. 2, 2011, pp. 75-84. doi:10.1680/udap.2011.164.2.75