As global warming accelerates extreme weather events such as floods, droughts and storms are likely to increase in intensity and frequency. With regard to a highly globalized world economy built on complex supply and value-added chains, this trend will challenge societies locally and globally. Regional production disruptions might induce shock waves that propagate through the global supply network and evoke supra-regional shortages. While such cascading effects are promoted by forward linkages in the global economic network, the demand-induced backward dynamics respond in a more complex way. On the one hand, backward linkages may additionally spread economic losses and thus aggravate the disaster aftermath. On the other hand, the readdressing of demand enables a readjustment of production, which may weaken or even dissipate shock waves. Here, we analyze the backward effects of disaster-induced production breakdowns by complementing the numerical damage transfer model Acclimate by a demand side. Based on model simulations, we show that the possibility of production extension and demand readdressing may be crucial for mitigating economic losses in the course of an extreme event.
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An implementation of the basic and extended model set-up is available upon request.
Bierkandt R, Wenz L, Willner SN, Levermann A (2014) Acclimate—a model for economic damage propagation. Part 1: basic formulation of damage transfer within a global supply network and damage conserving dynamics. Environ Syst Decis. doi:10.1007/s10669-014-9523-4
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This research was supported by the German Environmental Foundation (DBU) and the Heinrich-Böll Foundation. It has received funding from the European Union Seventh Framework Programme FP7/2007–2013 under Grant Agreement No. 603864. We thank Christian Otto for fruitful discussions.
Appendix 1: Acclimate agents and parameter
See Table 1.
Appendix 2: Linkage between final demand, GDP and value added (including taxes)
In an MRIO table framework, the total value added of a certain region equals its GDP, i.e., the sum of all its final demand and export flows minus its import flows:
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Wenz, L., Willner, S.N., Bierkandt, R. et al. Acclimate—a model for economic damage propagation. Part II: a dynamic formulation of the backward effects of disaster-induced production failures in the global supply network. Environ Syst Decis 34, 525–539 (2014). https://doi.org/10.1007/s10669-014-9521-6
- Climate change
- Disaster impacts
- Higher-order effects