Acclimate—a model for economic damage propagation. Part 1: basic formulation of damage transfer within a global supply network and damage conserving dynamics

Abstract

Climate extremes are expected to become more frequent and intense under future warming. In a globalized economy, outages of productive capital and infrastructure have the potential to spread around the world. In order to address those repercussions in the framework of a risk analysis or a resilience strategy, a disaster’s indirect consequences on the economic supply network need to be understood. We developed a numerical model to simulate these indirect effects along global supply chains for time scales of days to months. This article is the first in a series of four, which describes the damage-propagation model. In this first paper, we describe the pure damage propagation within the network and focus on the fundamental propagation of supply failure between production sites including their input and output storages and transport-related time delay. Idealized examples are presented to illustrate the dynamic damage propagation. Further articles will extend the dynamics to include demand changes due to the perturbation in the supply, the possibility to extend production to compensate for production failure, price responses and adaptive changes in the economic supply network. The underlying global supply network is based on data from multi-regional input–output tables. Transportation times are derived from geographic distances. In the initial model version presented here, indirect production losses are caused by cascading effects. They are propagated within the network without significant reduction in loss (damage conservation). They can thus be observed within the different storages or they “leak out” of the system through reduced consumption of the final consumer. As an example, we investigate the cascading behavior of losses for the machinery sector in Japan.

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    Code is available upon request.

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Acknowledgments

This research was supported by the Heinrich-Böll Foundation and the German Environmental Foundation (DBU). 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.

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Correspondence to Anders Levermann.

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Bierkandt, R., Wenz, L., Willner, S.N. et al. 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 34, 507–524 (2014). https://doi.org/10.1007/s10669-014-9523-4

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Keywords

  • Climate change
  • Disaster risk
  • Extreme events
  • Economic networks
  • Damage propagations
  • Supply chain disruption