Global heating has massive economic consequences to go with its deadly human ones

Feature | Gregory Beatty | Dec. 16, 2021

Flooding near Abbotsford BC. Photo courtesy government of British Columbia.

“We’ve had lots of flooded basements, downed trees and power outages, but nothing like the devastation suffered by some communities up island and on the mainland. We did have a few days where there was virtually no gas to be had due to fuel trucks not being able to get through, which made for a pretty surreal scene with vehicles that had run out of gas abandoned everywhere.”

That’s a first-hand account from my sister in Victoria as a series of “atmospheric rivers” drenched B.C. in late November, leading to widespread flooding, landslides and other destruction.

Thousands had to be evacuated, including the entire town of Merritt in south-central B.C. (population 7,100). Several people died.

The damage is still being tallied, but it might well end up being Canada’s costliest disaster — eclipsing Fort McMurray’s 2016 wildfire which had $3.7 billion in insured losses and an estimated $9.9 billion in total damage.

What’s worse, the disaster came on the heels of a 50-degree Celsius heat dome this summer that killed nearly 600 people, seared high-value fruit crops in the Okanogan Valley, and sparked a vicious wildfire season that, with U.S. wildfires, left skies across North America hazy with smoke.

Vivid images of death and destruction from severe weather events are nothing new, of course. But lately, something’s changed, says Peter Prebble of Saskatchewan Environmental Society.

“Until relatively recently, it’s been the developing world that’s been impacted most from climate change,” he says. “But in the last few years, the developed world has really felt the impact with all the floods, wildfires, extreme heat, storms and drought in Canada, the U.S., Europe, Australia, Russia, China and more.

“There’s really no place in the world that is safe from climate change.”

The human toll is devastating, but the economic cost is massive as well. And with the fossil fuel industry and its backers always touting the supposed financial benefits of fossil fuels, it’s worth doing the math.

Supply Chains, Shortages & Inflation

Who’s to blame for the rocky path consumers suddenly find themselves on with prices spiking and shortages of goods and services everywhere? Covid is one obvious culprit. The pandemic has been hugely disruptive to the regular production and distribution of goods and services, and as month 22 looms it’s definitely catching up to us.

Another baddie, at least in the minds of craven conservative politicians, are progressive governments who are too “woke” and “green” to run a proper economy. Since the problem is world-wide, it’s an easy argument to refute.

But what about climate change?

As Prebble notes, over the last few years there’s been a string of weather disasters across the developed world. And given the integrated nature of the global economy, says University of Regina economist Brett Dolter, when disaster strikes somewhere, the effects can be felt far beyond the area.

“We saw that with the giant container ship that got stuck in the Suez canal last March,” says Dolter. “That led to a huge backlog of ships at the canal. There are pinch points that can disrupt the supply chain.”

The Suez situation wasn’t weather-related, but during B.C.’s recent disaster the main supply routes linking the province with the rest of Canada (including highways #1, 3 and 7, along with the CP and CN rail lines) were blocked for several days. And the main north/south highway in the B.C. interior, the Coquihalla, is still closed and isn’t expected to reopen until early January.

“We do rely on and trade for so much of our goods and services these days, plus also getting our goods and services to markets,” says Dolter. “That’s especially true in Saskatchewan, because we are an export economy.

“But it does expose us to vulnerabilities. And now we’re starting to see the impacts that climate change can have,” he says.

Supply chains aren’t the only thing being disrupted. Again, with the B.C. disaster, some of the worst flooding was in the Abbottsford area, home to the province’s most productive farmland. That land is slowly draining, and farmers face a massive clean-up of debris and possible contaminants before they can plant again.

On the livestock side, an estimated 628,000 chickens, 420 dairy cows, 12,000 hogs and 110 beehives drowned.

That’s a lot of agricultural capital (and future food) to lose. Remember, too, that drought this summer caused widespread crop failure across western North America. Grains, oilseeds, fruit and vegetables were all hurt, and livestock producers face a severe feed shortage that may force them to cull their herds.

What happens next is basic Econ 101, says Dolter.

“As droughts and floods occur, we will see agricultural output diminish which will lead to a rise in food prices.”

Every time a weather disaster occurs, it inevitably throws a wrench into the economy, whether it’s a prolonged power outage, damaged infrastructure, operational shutdowns for safety reasons, transportation bottlenecks and more.   

“Climate change destroys our capital investments. It destroys our wealth,” says Dolter. “A lot of thinking on climate change doesn’t account for that. People still talk about environment versus economy. ‘Oh, we’d like to address climate change and improve the environment. But it will cost too much and slow down our economy, so we won’t be able to grow as quickly.’

“That misses the bigger picture,” Dolter insists. “If climate change is destroying our wealth, it’s going to lead to less well-being for people, which is the supposed goal of the economy. It could even lead to lower growth.”

Disaster Capitalism

When a weather disaster strikes, the true cost isn’t limited to the immediate damage. There’s also a follow-on effect as scarce materials, machinery, labour and other resources are marshaled to respond to the crisis.

What that does, says Dolter, is divert those resources from other potentially productive uses.

“Economists call that ‘opportunity cost’,” says Dolter “If you lose infrastructure, buildings, equipment and whatnot, you have to spend money to restore or replace it. That’s money that could’ve been used for other things people value such as housing, social programs or greater capacity in healthcare. We’re diverting precious resources to cope with these climate disasters, and it’s going to happen more and more.”

In 2006, says Peter Prebble, the British government commissioned economist Nicholas Stern to study the economics of climate change. His report had a stark message.

“The figures were updated in 2008, and he essentially argued that if climate change wasn’t constrained it could cost the global economy between five and 20 per cent of GDP annually,” says Prebble. “At the same time, it would cost about two per cent of GDP to hold the temperature increase to two degrees C.

“It’s a hallmark analysis, and it really changed economists’ thinking on the costs of climate change and how much better it is to invest in mitigation,” says Prebble. “We’re still going to have to invest in adaptation, but mitigation is absolutely crucial.”

Like weather disasters, climate denial has its own opportunity cost. And that’s true even in fossil fuel loving Saskatchewan.

First off, by clinging to fossil fuels, we’re fumbling the opportunity to become a world leader in green energy. [see sidebar]

Dalhousie University food economist Sylvan Charlebois has argued too that if the world moves to price carbon (as Canada has done) it will open up opportunities in Saskatchewan for more local processing of bulk commodities such as grains and oilseeds to account for the higher transportation costs.

Sounds like a win/win, doesn’t it? Avert climate disaster, while growing the economy in a more sustainable way.

“Unfortunately, it still seems in Saskatchewan we don’t have a universal understanding and acceptance of climate science,” says Dolter. “I think it’s getting stronger, as more people realize climate change is happening, it’s caused by human pollution, and it’s having these really bad impacts on our lives and economy, so we should do something about it. And I hope more people awaken to that reality.” 


Big Trouble In Little Saskatchewan

When it comes to climate change, Saskatchewan is small but mighty. At 1.18 million, we have a small population. But we’re a mighty emitter of greenhouse gases.

Per capita, Saskatchewan’s GHG emissions are nine times the global average and three times the Canadian average. Even in non-per capita terms Saskatchewan is “mighty”. In 2019, we emitted a whopping 75 million tonnes of GHGs — more than Sweden and Denmark (total population: 16.1 million) combined.

In early November, the Saskatchewan Environmental Society released a 25-point plan that co-author Peter Prebble describes as a “roadmap” to help Saskatchewan slash its GHG emissions — which must happen if Canada is to meet its global commitment to reduce GHGs by 40 to 45-per cent by 2030.

Under its Prairie Resilience climate plan, the Saskatchewan Party government is committed to a 16 per cent reduction in GHGs by 2030. Unlike previous targets, the government might actually meet this one, says Prebble.

“My guess is they will, as they are planning at least some coal phase-out at Boundary Dam. In conversations I’ve had with Energy & Resources officials, they’re making significant headway on methane reduction in the oil and gas sector too. They may have more trouble reducing industrial emissions, but it was never really ambitious. So those things, plus policy changes at the federal level, will probably get Saskatchewan to its target.”

But 16 per cent is a long way from 40 to 45 per cent.

Saskatchewan needs to do much more, which is where the SES report comes in.

The recommendations are divided into eight areas: Electricity Generation, Transportation, Protected Areas, Rural Initiatives, Buildings, Heavy Industry, Oil & Gas and Collaboration With Regina and Saskatoon.

They’re not necessarily ranked in order of importance, but electricity generation is definitely number one. It’s a focus economist Brett Dolter endorses.

“The strategy I usually talk about is we clean up electricity to become zero emissions, and then electrify everything including vehicles, heat in buildings, manufacturing and mining as much as we can,” he says. “But that means we really rely on the energy system, so we want to make sure it’s resilient.”

SES’s recommendations there include expanding investment in solar and wind power, purchasing 1,000 megawatts of hydropower from Manitoba and partnering with Ottawa to build the needed transmission lines.

“What we do in oil and gas is also key because the industry is 30 per cent of emissions,” says Prebble. “Cutting methane emissions is a big part of that, and the government also needs to abandon its plan to increase oil production by 25 per cent by 2030. That runs counter to all the advice the International Energy Agency and United Nations are giving as to what needs to happen if we’re going to move towards net zero by 2050.”

Greater cooperation between the government and Saskatchewan’s two largest cities is also needed, says Prebble. “I think the province is not really providing Saskatoon and Regina with the support they need to achieve the goals they set.”

One example Prebble cites is the conundrum Saskatoon’s municipal electrical utility finds itself in. It would like to shift to more wind and solar, but under the arrangement the utility has with the province it’s limited to Saskatoon’s 1958 boundaries (which is when SaskPower stepped in to service the growing suburbs).

“The province has said anything that’s built has to be inside the 1958 boundaries so that means they can’t establish a wind or solar farm in an appropriate spot outside the city and transmit the electricity into the city,” says Prebble. “So that’s pretty limiting.

“The province doesn’t help the cities with urban transit either,” Prebble notes. “It does provide general transfers, but most provinces have dedicated transfers for transit. It would be great to have that, along with money to develop cycling networks.

“There are just so many things the province could do to help cities reduce GHG emissions and improve quality of life,” he says.

For more on SES’s report see