Recycling changed dramatically in 2018, when China went from
accepting 45% of the world’s plastic waste to almost none. As a result, by
2030, up to 111 million metric tons of plastic could be displaced.[1]
All that extra plastic, as well as the paper and other
materials China is refusing, has significant and far-reaching effects. It
impacts waste management systems and the economics of recycling, and it may
also force people to re-evaluate their behavior.
Every so often, I get requests to do an economic impact analysis of a local tourism event, or a new business that’s recently opened in the area. The person that is asking usually knows enough about an economic analysis to know that they need one (or think they do), but not always enough to make sure that it’s done right, or that the results will be helpful. In this blog post, I’ll discuss what an economic impact analysis is, how one is conducted, and some questions your organization should ask to make sure that it is done appropriately.
There is a fair degree of confusion about what an economic impact analysis is – and what it is not. One of the best ways I’ve found to describe it is to tell a story.
Suppose that a new minor league baseball stadium was proposed to be built in your town. There are proponents and detractors of the idea, and they both have numbers to back up their position. For sure, the minor league stadium will attract visitors, create jobs, and bring in revenue; proponents of the stadium point to all of those good things. But detractors of the stadium point to the fact that even if the stadium were not built, something else would be built in its place. The proper comparison, then, is not the stadium versus nothing, but the stadium versus the next best alternative. Who’s right?
The answer, of course, is that they’re both right, and that it depends upon the situation. It’s important to understand the types of economic analyses that are out there, both when your organization wants to undertake one and when you’re trying to interpret one.
Here are five questions to consider:
1. Economic contribution or economic impact analysis?
While the two phrases may sound the same, they are in fact quite different, and may lead to some very different results. An economic contribution analysis looks at gross changes to the local economy as a result of the activity being studied. In other words, an economic contribution analysis considers the revenue associated with an event, but it does not take into account any “crowding out” of other activity that might otherwise have occurred.
For example, I’ve recently been asked how I would measure the economic impact of a large sporting event that takes place annually in southern Maine and draws people from all over the country, and some from abroad. Hotels and motels are full at that time, and anyone wishing to book a vacation in the area may be out of luck. Where do those “discouraged visitors” go? If they rebook their southern Maine vacation for another time, then those visitors are not “lost” to the region- but if they go elsewhere due to no vacancy, then that should be counted as an economic cost of the event.
While the above example shows the “crowding out” due to an activity, it is sometimes hard to distinguish new economic activity versus just “reshuffled” economic activity.
Another example: the conference I recently analysed used local caterers for its food. Is the money paid to those vendors directly attributable to the conference? Yes, but in the absence of that particular conference, would those vendors have taken other jobs? If yes, then the money paid to those vendors may be a gross contribution to the economic activity in the area, but cannot be considered a net contribution -and therefore could not be considered part of its net economic impact.
Another recent example has to do with a proposed whitewater kayaking park in southern Maine. We could estimate the number of kayakers who might come to such a park, and the amount of money they might spend in the local economy – but would those kayakers have gone to another whitewater kayaking park in its absence? In other words, how much of that economic activity is new, rather than just reshuffled?
2. At what scale should you measure your impacts?
Most economic impact analyses can be done at the State, county, or regional level, depending on the type of event and the data that are available. For example, I was recently asked to do an economic analysis of a conference that occurred in Portland, Maine, but for which the attendees came mainly from elsewhere in Maine. In that case, it wouldn’t make sense to do an analysis at the state level, since only a small percentage of the economic activity attributed to the conference came from outside the state. In that case, it was more appropriate to consider the county as the reference region. We then needed to determine how many of the participants came from Cumberland county versus outside the county.
This question is important to answer beforehand, because it may determine the type of data you need to collect from your conference attendees.
3. Should you consider effects on prices?
Yet another way in which an economic impact analysis differs from an economic contribution analysis is through the former’s emphasis on resulting factor price changes. For example, it might be tempting to measure the economic contribution of a new manufacturing plant moving to town. But if the local economy is already at full employment, and the plant brings in workers from elsewhere, those workers will need a place to live. That may actually increase housing prices in the area, leading to the displacement of local workers. It is perfectly plausible to have a positive economic contribution, and yet have a negative economic impact.
It might be easiest to see this point if you visualize a new business that happens to use a lot of water (think a craft brewery) proposing to locate in a water-scarce region. It could be that that new demand for water could raise rates for everyone. If that negative economic impact is not considered, then the proposed project would look better for the area than it may actually be.
4. Economic impact or net economic benefit?
It’s important to remember that an economic impact is not the same as a net economic benefit. The net economic benefit of an activity is the degree to which that activity enhances social well-being in an area – and that well being is not always easily measurable in monetary terms. For example, suppose a factory moved into a neighborhood. The economic impact could easily be measured in monetary terms – number of jobs created, amount of revenue generated, etc., but if the pollution from the factory negatively affected people’s health, the net benefit could actually be negative. Environmental economists have ways of accounting for externalities such as pollution and natural resource degradation.
5. Economic benefit for whom?
This is one of the trickiest questions to answer. Let’s consider the manufacturing plant mentioned earlier. Yes, it might create a number of jobs, but if there is a mismatch between the skills needed at the plant and the skills of the local labor force, those jobs might not benefit the local population. Social impact analysis, whereby the distribution of benefits and costs among different sub- groups of the population are considered, could help answer that question.
Conclusion
There are many questions to consider when either undertaking or interpreting an economic analysis. These are only a few. If your organization is considering one, please give us a call. We’d be happy to help.
As an environmental
economist, I am in favor of increased wind power in the state. Renewable energy sources, such as wind,
solar, and in certain circumstances, hydropower, will help with our much needed transition away from fossil-fuel
based energy.. Furthermore, wind power provides
well-paying jobs in construction in primarily rural areas of the state, as well
as property taxes, the potential for income for rural landowners, and other
tangible benefits to host communities.
However, concerns
about large-scale wind farm development include potential negative impacts on
nearby residents, tourism, and wildlife.
Questions include:
Do wind farms enhance
or detract from tourism? Answer: it depends on the context. Some studies have found that proposed wind
farms affect potential demand for tourism, but those studies are hypothetical,
not actual. A recent
study in Scotland found that there was no correlation between existing
windfarms and tourism-related employment. Other case
studies have shown that wind farms can actually be a boon to tourism, if
local tourism agencies market them as a tourist attraction . More work needs to be done on looking at the
effect of actual, operating wind farms on tourism in different contexts. In any case, the concern about conflicts
between wind farms and tourism can be mitigated by proper planning and siting.
Do wind farms have a
significant impact on migratory birds?
The answer here depends on what you consider significant, and again, it
depends on the context. Wind turbines
located in migratory corridors have been linked to avian mortality, and those
deaths are increasing as wind power generation itself increases. Still, some studies suggest that wind-power related
avian deaths are less than those associated with other forms of energy, and
much less than those associated with the average housecat. However, that does not mean we should brush
those concerns away lightly. New technologies in turbine and blade design, as
well as proper modeling and siting procedures – as well as simply shutting down
generation during peak migration – should
mitigate this concern.
Do wind farms increase
or decrease property values or property taxes? Evidence shows that large-scale
wind development in residential areas does have a negative impact on homes in
direct proximity (much like any other energy-related infrastructure), and that
this effect
declines as distance to the wind farm increase. However, properties in rural areas that are
host to a turbine can see an increase, as the potential for income from the
land is realized https://www.cfra.org/news/180719/are-property-values-affected-wind-farms. There also is evidence that the added property
tax revenue from a wind farm can reduce a town’s overall mil
rate. Again, these concerns can be
mitigated by proper planning and siting.
In other words, evidence
abounds on both sides of the debate, and is context-specific. We do need to be
cautious about where these facilities are located, from an environmental and
aesthetic context. But in the words of Governor Mills: “It is time for Maine to
send a positive signal to renewable energy investors and innovators.”
Note: This blog post is based on a “Maine Voices” column written by Dr. Bouvier
and published in February of 2018
\lsdpri
January 8: Crafting an Economically Sustainable Working Waterfront
Location: Gulf of Maine Research Institute, 350 Commercial Street, Portland
Dr. Rachel Bouvier will be the featured presenter at the next Waterfront Alliance Meeting on Tuesday, January 9th. She will be joined by other community members as part of a discussion on the topic: Crafting an Economically Sustainable Working Waterfront.
In February, Maine’s Governor LePage proposed implementing a fee on the owners of electric and hybrid vehicles.[1] He is not alone – 17 other states have already implemented similar fees[2]). It may seem, at first glance, to be yet another slap in the faces of “liberal-minded environmentalists.” But giving the Governor the benefit of the doubt, it’s actually attempting to solve a problem that’s been seemingly intractable for years: that the state highway trust fund is overextended, at a time when the state’s infrastructure is badly in need of investment.
Maine, of course, is not alone. The Federal Highway Trust fund, which is primarily funded by federal taxes on gasoline, is also underfunded and over-extended. Much like other issues in Congress, though, potential solutions seem to be few and far between, and no politician wants to propose anything as unpalatable as a tax increase.
So, what’s the problem? The highway funds at both the federal and the state level are funded primarily through taxes on gasoline. In Maine, slightly less than 70% of revenues earmarked for the State Highway Fund are from gasoline taxes. Another 27% come from vehicle registrations and fees, leaving the remaining 3% to come from various other sources[3]. In 1991, the first year for which revenue for the highway fund is reported on the legislature’s web site[4] , the highway fund received approximately $197 million (or approximately $363 million in today’s dollars). In 2015, the fund received approximately $308.5 million (or $327 million in today’s dollars). That’s a decrease of about 10% in real terms, despite the fact that the Association of Civil Engineers has given Maine a D on roads, essentially unchanged since 2008.[5]
Moreover, whereas the federal government has supplemented its declining revenues with other sources (with questionable legality), Maine cannot do the same. So how did we get in this mess?
The answer is that the tax is poorly targeted and creates perverse incentives. Let’s start with the targeting question. Taxes are supposed to do several things, from an economic viewpoint: raise revenue and change behavior. In this case, the tax is primarily to raise revenue for the highway system. Some environmentalists would also like to see the gasoline tax used to reduce the demand for and usage of gasoline, as one of the culprits in climate change, but the two objectives are fundamentally at odds, for several reasons.
First, if the revenue from a tax is used to fund a particular program, then the tax should be designed to bring in a sustainable amount of revenue year after year. In this case, the revenue from the gasoline tax has been declining year after year. This decline is due to both technological advances and changes in demand. Average fuel economy for passenger cars has been generally rising since 2000, and the trend has been similar for trucks since about 2004. Average fuel economy for both cars now stands at about double what it was in the 1970s, meaning today’s cars can travel twice the mileage on a tank of gas than they could back in the 70s[6]. That’s great news for the environment, but not great news for those who depend upon the revenue from the gas tax.
Second, even as the Maine population increases, the number of miles driven has not increased. In fact, whereas you normally might expect to see people driving more miles as it becomes cheaper to do so, we aren’t seeing such a trend. In fact, while Mainers drove about 14,925 in 2005, that number actually dropped to 14,838 in 2016[7]. So, the revenue from the gas tax has been hit doubly hard: the average miles per gallon has increased, while the number of miles driven per year has decreased. We could of course increase the gasoline tax (it hasn’t been increased since 2011), but that is likely to further dampen the demand for purchases of gasoline.
So, what to do? We could, of course, follow Governor LePage’s recommendation and impose a surcharge on hybrid and electric vehicles. In one way, that would address the “free rider” problem that some analysts have pointed out: that owners of hybrid and other fuel-efficient vehicles use the highways as much as others, but don’t pay their “fair share” to the highway fund.[8]
Ultimately, though, that would not solve the problem, because the gas tax is poorly targeted in the first place. The wear and tear on our infrastructure is tied to the usage of the highway, which is only imperfectly proxied by gallons of gasoline purchased. A better targeted tax would be to impose a tax on vehicle miles driven, like the one currently being studied by the Colorado Department of Transportation. [9] Of course, such a system would require some method of tracking number of miles driven, either through electronic monitoring such as those already in place on tolled highways, or through some other system.
Such a tax would not, of course, create an incentive for individuals to buy more fuel-efficient vehicles, which is one of the reasons why environmentalists like the gas tax. The gas tax, in their mind, is akin to a cigarette tax, which aims to curb smoking by increasing the price. But if the goal there is to reduce carbon emissions, a tax on the carbon content of fuel, not the gasoline itself, would be a more efficiently targeted tax. But that’s a different blog post, for a different day. (You may view my blog posts on the carbon tax, here and here.)
The hurricane season of 2017 has been a severely damaging one. Hurricane Harvey devastated parts of Texas, Maria savaged Puerto Rico, and Hurricane Irma dealt a punishing blow to an already-reeling Florida (not to mention Nate and Jose). As I write this, Hurricane Ophelia – the tenth named storm in a season that was predicted to be “less active than usual” – is brewing in the eastern Atlantic. Whatever the cause of this increase in hurricane frequency, though climate change is a likely culprit, no one can deny that these storms are growing more costly
The World Health Organization estimates that the global cost of hurricane damage per season is rising by 6% a year. (That’s in real dollars, not nominal, by the way, so inflation doesn’t factor into it.) If storms are increasing in strength and frequency, why is more not being to mitigate the costs?
Two words: incentives and avoidance.
Economists believe that people respond to incentives. Make an activity less expensive, and more people will engage in it. Make an activity more expensive, and the level of activity will drop off. Why is that important here?
It turns out that if policy makers make it relatively inexpensive to build your house in a floodzone, lo and behold, more people are going to build their houses in floodzones. Houses that are built in floodzones are, no big surprise, more prone to flooding. According to the Economist magazine’s recent article, Harris County, Houston’s home, has allowed 8,600 homes to go up in the 100-year floodplain. (The 100 year floodplain is not, despite its name, an area where a flood is expected to occur every 100 years. A 100 year floodplain is an area that has a 1 percent chance of being flooded in any given year. That means, over the life of a 30-year mortgage, the change of a such a flood occurring is just about 26 percent.) The more houses located in a floodplain, the greater the expected cost of such a flood. Simple math.
Not only that, but by developing in the floodplain, much of that land was converted from prairie land to impermeable surfaces, like roads, driveways, and sidewalks. Coastal prairie land can absorb large amounts of rainfall. Concrete and asphalt cannot, leading to more flooding and more runoff, and more erosion of existing soil, as the velocity of the water is increased by those impermeable surfaces. The act of putting more development in vulnerable areas is a double whammy – you’re putting more homes in harm’s way, and you’re taking away the natural infrastructure that helps protect against flooding in the first place.
I also mentioned “avoidance” as one of the reasons why hurricane costs have been increasing. It’s no surprise that most people tend to avoid thinking about negative information, and that applies to getting insurance. According to the Insurance Information Institute, only 12 percent of American homeowners had flood insurance in 2016. While most banks and mortgage companies require flood insurance if your home is in a high-risk area, federal law does not require coverage in a moderate to low risk area and almost 25% of all flood-related claims come from those areas. Why is that? Maybe they see it as too expensive, or they’re putting it off. Maybe they’ve simply made a bad bet. Or perhaps they expect the federal government to foot the bill. Even if the government does cover some of the damage (and the federal government did cover about 80% of Hurricane Katrina’s damages), that still means that taxpayers may be subsidizing an increasingly risky bet.
And those bets are becoming riskier. What was once considered a 100-year storm – that is, where the probability of one occurring is one percent annually – is now occurring more frequently. Scientists estimate the likelihood of a storm of a certain size occurring based on historical figures – and we know that more intense storms are happening more often. (For a great discussion of how the US Geological Survey draws the “flood maps,” see this piece from Five Thirty Eight.)
It’s not only the insurance companies, the homeowners, or the federal government who shoulders the increasing costs of hurricanes and other natural disasters. Municipalities can see a blow to their tax base, a rise in the cost of borrowing, and even the possibility of litigation if it’s found that the municipality issued building permits or approving subdivisions that increase the potential of flooding.
What can be done to stop these costs from continuing to increase? Well, for a starter, communities need to take a good long look at their land use regulations. We need to stop subsidizing bad risks. It should be more, not less, costly to build in flood plains. We need to stop subsidizing the conversion of wetlands and other buffer zones to development. We need to preserve our natural infrastructure. And, we need to implement more resiliency efforts.
Municipalities should also make sure that businesses and homeowners fully understand the potential costs of not having flood insurance We need to make sure that the people involved in these kinds of decisions have a clear understanding of the full social and environmental costs of their actions. These moves make economic sense as well as environmental sense.
rbouvier consulting’s mission is to promote a more transparent economy by making sure that social and environmental costs are included in economic decisions. Visit our website to find out more.
Waters of the United States: What’s economics got to do with it?
On June 27, 2017, the Environmental Protection Agency proposed a rule that would change the definition of the Waters of the United States (WOTUS). On whose advice did they do this? Why, economists’, of course!
Huh?
Let me back up. In 2015, then-President Obama issued a document redefining which rivers, streams, lakes and marshes fell under the jurisdiction of the EPA and the Army Corps of Engineers. This rule has come to be known as the Waters of the United States rule.
Non-policy wonks can be forgiven for wondering: 1. how a government can redefine what comprises that waters of the US, and 2. why the move would be so controversial.
The 2015 rule (which was never actually implemented, as it was stayed by the U.S. Court of Appeals for the 6th Circuit) was called by then-speaker of the House of Representatives John Boehner as “a raw and tyrannical power grab that will crush jobs… and places landowners, small business, farmers, and manufacturers on a road to a regulatory and economic hell.” A pretty strong statement.
What the 2015 rule would have done was to clarify (or extend, depending upon your point of view) exactly which waterways the EPA and the Corps can oversee under the Clean Water Act. Prior to 2015, the Clean Water Act covered only “navigable waters,” such as large lakes and rivers but did not necessarily include tributaries, wetlands, or smaller streams. The rule of 2015 expanded that definition to include protections for tributaries that may or may not run all year round, such as small streams and wetlands.
But why did economists get involved? Every proposed rule by the Executive Office must undergo a benefit-cost analysis, demonstrating that the benefits of the proposed rule outweighs the costs. Bill Clinton first imposed this test in the 1990s, to protect against overbearing regulations. Leaving aside the merits and drawbacks of imposing such a test, let’s look at what that would involve in this instance.
First, we would need to look determine which bodies of water would now be included under the 2015 definition.
Second, we would need to examine the costs needed to comply with the rules for these newly regulated waters and the potential economic effects of imposing these costs (loss of profitability, job losses, etc).
Next, we would need to investigate the benefits of including the new waters under the regulatory umbrella. And finally, we would have to compare the benefits and the costs – not as easy as it sounds, especially if the benefits and the costs occur at different times.
As with many environmental regulatory cost-benefit analyses, the costs of imposing a new regulation are relatively easy to calculate. In this case, they include permitting costs, administrative costs, associated environmental compliance costs, and wetland and stream mitigation costs. They may also include project relocation costs, if a proposed development were to be located in one of these newly-regulated areas. These are measurable and concrete costs, and they are not insubstantial. The new definition could have potentially affected municipalities, ranchers, farmers, golf courses, and home owners, among others – anyone with a stream or a wetland on their property (of course, assuming that those waters aren’t already regulated by the state, as they are in Maine).
Benefits are more difficult. What would have been the benefits of including tributaries, transitory stream, and wetlands under the federal regulatory umbrella? According to supporters of the 2015 rule, benefits would have included the increased health of larger bodies of water (and by extension, improved human health as well as ecosystem health). In order to protect a lake or a river, the argument goes, you can’t just regulate what goes into the mainstem of the river – you have to monitor what gets into the tributaries as well. But making that link from reduced pollution to improved aquatic health to ecosystem benefits is anything but straightforward. That’s what many environmental and resource economists spend their careers doing.
Benefits could include the avoided costs of drinking water filtration, better flood control, avoided risks of cleanups from spills or other damage, and increased health of fish and shellfish populations. To estimate these benefits, economists at the EPA used “ecosystem services” (see my blog post here). They identified peer-reviewed economic literature that estimated the value of protecting, preserving, replacing, and increasing the size of wetlands. Then, from that literature, they arrived at a per-acre value and multiplied that by the number of acres projected to come under the enlarged jurisdiction.
Crude? No doubt. Developing a country-wide estimate on the value of protecting wetlands is not a pretty process. But at least it gives a number, an estimate of value. If we consider wetlands to be assets, then protecting more of those assets against harm should have some sort of value. The Obama EPA found that the benefits of expanding the definition of the waters of the United States exceeded the costs by a ratio of at least 1.3:1 (under the most conservative assumptions) to as much as 3:1.
When the Trump Environmental Protection Agency proposed rescinding the 2015 rule (thus reverting to the “state of the world” before the 2015 rule), they needed to show that the benefits of rescinding the rule exceeded the costs. They couldn’t accept the Obama EPA’s numbers, because what was previously a benefit would now become a cost, and vice versa. So what did they do? They cast doubt upon the Obama EPA’s estimate of the benefits of protecting ecosystem services, in part by saying that some of the studies were too old and out-of-date, and in part by questioning the methodology. That’s fine – economists regularly squabble about methodology.
Here’s the kicker, though. Rather than try to improve the methodology, or arrive at a “better” number somehow, they did not include the benefits of protecting ecosystem services at all. Because the number was “uncertain,” they literally wrote “uncertain” in the column for ecosystem services, and then proceeded to add up the numbers anyway. In other words, they assigned protecting wetlands and tributaries a value of 0. ZERO. Anyone looking at the “bottom line” and not bothering to read the entire document would not have caught the error.
Estimating the benefits of environmental protection and conservation is not an easy job. And many environmental advocates feel a little queasy at the prospect of assigning a “value” to ecosystems. However, by not assigning a value to them we are allowing others to do so – and the value that they choose could be zero. If we’re serious about protecting our valuable ecosystems from increasing threats, then we need to demonstrate that environmental protection has an economic value – and that it’s not zero. Only once we can talk about regulations confidently in terms of benefits and costs, can we hope to adequately measure the impact of our (in)actions.
What do you think? Do you have any experience with WOTUS – good or bad?
“Custom House Wharf Flooding at High Tide” by Corey Templeton is licensed under CC BY-NC-ND 2.0.
Climate change is expected to have a number of effects in Maine, including coastal flooding, sea level rise, and changing precipitation patterns, among others. Many efforts are already underway to help protect communities from those effects, including zoning changes, new building requirements, armoring or elevating critical infrastructure, and the like. These efforts all fall under the heading “climate resiliency planning,” as they make a community more resilient to the disruptions wrought by changing weather patterns.
Ensuring that a local economy is resilient to climate disruption is nearly as important as physical resiliency. The local economy is a complex web of interactions between customers, workers, businesses, non-profits, and government agencies within the region. Economic resiliency planning can help to make sure that that web does not break – or, at least, is easily rebuilt – after a disaster.
Current approaches to assessing the impact of climate change too often ignore economic changes that are likely to occur. Climate change poses physical threats to current businesses, true, but it also poses economic ones, as supply chains dry up, input prices rise, or competitive advantages shift. Focusing on preserving the economic status quo will do little good if advancing sea level rise and increasingly variable weather patterns result in a markedly changed economic landscape.
The first step in developing an economic resiliency plan for a local economy is to anticipate the likely physical changes that will accompany climate change, by taking a look at what areas of a particular municipality are likely to be impacted by certain events. If you’re located on the coast, or if your town center is situated near a river, as is the case for many Maine towns, flooding from hurricanes or other large storms might be a priority. Or, access may be more of an issue. If your town has one or two main routes in and out of town, how likely are these routes to be block by high water, or by downed trees from wind damage? Many communities have already begun this work, through projections from the National Oceanic and Atmospheric Administration (NOAA) or from the United States Environmental Protection Agency. Through this work, communities can get an idea of what physical assets are at risk from climate-related events.
Next, establish a baseline. What are the largest employers in the municipality? What are the largest sources of tax revenue? What are the key industries, and what is the sectoral composition of the economic base? Where do most of the non-resident employers live, and what routes are they likely to take to work? This will create a starting point to assess the local economy’s vulnerability to climate-related disruption. The results may not always be what you think.
For example, many of Maine’s historically most important industries – agriculture, forestry, fishing, and tourism – depend heavily on the climate. The output from these industries is likely to be directly impacted by any climate disruptions. Agriculture, for example, could be both positively and negatively affected by climate change, as higher temperatures lead to a longer growing season, but also to increased need for irrigation. These are the industries that are deemed “climate-sensitive in supply” by economists.
But there are also industries that are “climate-sensitive in demand” – where consumer demand for goods and services is likely to be affected by changing weather patterns or the physical effects that come with them. Tourism, certainly, is one of these (both positively and negatively). Energy is another.
Less obvious, perhaps, are the effects of underlying price changes and linkages between industries. Let’s give an example. Suppose that an increase in hot, humid weather in the northeast leads to increased demand for air-conditioning. (Most areas in Maine now see fewer than four days a year when the heat index rises above 95 F, but that is predicted to change under most projections.) The increased demand for air-conditioning will likely lead to increased electricity prices. Those higher prices will ripple through the economy, affecting everything from family’s budgets to food prices to costs to businesses.
Finally, labor productivity might be affected by climate change. Why? For those of us who have jobs in air-conditioned buildings, and as such are relatively shielded from the climate, the outdoor temperature might not affect our productivity. But for the proportion of Maine workers who work outside, or do not have access to air conditioning, heat-related stress can be a factor, much as it is for livestock in Maine. Moreover, the effect of warmer temperatures on growing seasons works for pollen-producing plants as well, leading to increased rates of asthma and allergies. The spread of insect-borne diseases, such as Lyme, may affect productivity as well (not to mention impacting the health care sector).
Once the likely changes to the local economy are anticipated, policies can be put in place to help reduce risks. Some of these policies might include encouraging local businesses to engage in disaster preparedness with others rather than in isolation, developing a directory of local businesses that can assist in rebuilding after a disaster, and identifying alternative procurement routes in case of a disruption in transportation infrastructure.
Planning for economic resiliency is less about rebuilding the day after a disaster, and more about planning so that economic disruptions are minimized should a disaster occur. And it doesn’t have to be a stand-alone process. In fact, it shouldn’t be. Planning for economic resiliency should be integrated into planning efforts at all levels, from economic development to housing and infrastructure planning. While a disaster almost by definition is unpredictable, we do have the ability to anticipate the changes that will come with a changing climate. We should take the time now to ensure that those changes don’t derail the local economy.
