How will central banks view natural disasters?

Views From the Marsh - David Owen

Many of our posts on Substack revolve around the UK and the BoE, or the ECB. However, most of our focus in terms of the more substantive research is on climate change economics, building out an extensive data base on the subject and developing proprietary indicators, ranking countries/sovereigns by emissions, their exposure to more extreme climate related events, and their ability to adapt.

We were recently delighted to announce that Saltmarsh Economics won Nationwide Environmental Impact Consultancy of the Year 2024, for our work on climate change economics in SME’s News 2024 Greater London Enterprise Awards (see here).

This post looks at how central banks may view natural disasters be it the flooding in Central and Eastern Europe of a couple of weeks ago, Hurricane Helene in the US, or the much less severe, but still significant, flooding seen again in the UK of the last few days.

Unfortunately, such natural disasters are becoming something of a regular occurrence for some parts of the world (see chart), against the backdrop of still rising CO₂ emissions, globally.

Real time indicators suggest that CO₂ emissions rose by almost 1% in the year to the end of August, led by India (emissions up almost 7% on year) and the US (up over 2% on year), both regions of the world relatively very exposed to more extreme climate related events.

Falling emissions in Europe are still hardly moving the dial, at a global level.

In a research note last week we did a deep dive of the estimated costs of natural disasters and emissions, importantly at a state level in the US. Again we found a huge divergence.

In cash terms, Florida is estimated to have incurred the biggest economic costs from natural disasters in recent years, despite ranking well down the list on emissions (41st), but then is a very wealthy state with a GDP of almost $1.6 trillion in 2023 (bigger than many countries).

However, expressed as a share of its GDP, the economic costs of natural disasters has been put as much higher in Louisiana (which ranks the fifth highest in terms of emissions of all states in the US).

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