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My work covering climate change has taken me to various communities globally impacted by climate-related disasters, including drought-stricken Costa Rica.
Recently, I returned to Los Angeles, where my family lost our home and a significant portion of our community was destroyed by wildfires. As a climate journalist, I emphasize that these are not isolated incidents; climate change’s effects will eventually impact everyone. For my community, that “eventually” arrived last week.
While still processing the loss, I plan to share more personal reflections on the fires in the coming weeks. This week, I’ll focus on the wildfires’ intersection with business and climate. This event vividly illustrates the multifaceted ways climate change will affect American businesses and the U.S. economy.
Initial estimates of the damage and economic costs reach approximately $250 billion, potentially making it the costliest U.S. disaster. This includes the value of lost Los Angeles real estate and secondary impacts on employment and health.
While $250 billion is substantial, it might seem a minor setback in a $30 trillion U.S. economy. Goldman Sachs analysts predict a mere 0.2 percentage point reduction in first-quarter U.S. growth. The wildfires will likely cause inflation due to increased demand for various goods, but economists anticipate these national effects will be relatively small.
However, these headline figures mask far-reaching and unexpected consequences for specific companies and industries. While communities directly affected will bear the brunt, events like the California wildfires can raise costs nationwide.
Consider the utility sector. Edison International’s stock price, the utility servicing much of Southern California, plummeted nearly 30% due to fears of liability for the Eaton Fire. Nationwide, investors are assessing the risk to the entire sector.
A study in the journal Nature Sustainability analyzed the economic effects of 2018 California wildfires. It revealed that most economic impacts stemmed from indirect losses, often in locations and industries seemingly distant from the fires. These losses include air pollution’s health effects and disruptions to California’s chemical manufacturing industry. Over half of the “indirect losses” from over a dozen wildfires that year occurred outside California.
The widespread nature of climate-related events will intensify with increasing frequency and severity. While a 0.2 percentage point growth impact might seem insignificant, what happens with multiple such events annually? More importantly, what happens when these events directly affect your home or business?
Throughout my career covering climate change, I’ve heard politicians claim that catastrophic climate-related events will finally spur policy action and public awareness. Observing the varied responses to these wildfires, I’m skeptical, but hopeful that recognizing the far-reaching impacts will at least foster a shift in perspective.