Future Fire Financials

Wading into the cost-benefit conversation for fire and fire management

No intro for today’s post, just an (almost) random walk through some costs associated with wildfire and fire management.

Mathematician and ‘Father of Accounting’ Luca Pacioli, by Jacopo de’ Barbari (Source: Wikimedia Commons)

AU$1.95 billion

Smoke-related health costs of the 2019-20 fire season in Australia, per Johnston et al. 2020. This was based largely on an estimated 429 premature deaths, along with just over 3,000 thousand cardiovascular and respiratory disorder-related hospital admissions and about half as many emergency presentations for asthma. A Canadian study (Matz et al. 2020) found that the mortality-related costs of wildfire smoke there ranged from about $400m to $1.8b per year for the 2013, 2015, 2017 and 2018 fire seasons. This figure was for acute impacts only (attributable to short-term exposure); the figure was ten times higher per year for chronic impacts. A 2021 report from the Bay Area Council Economic Institute put the health costs from the 2018 Californian season at almost $8b (for the Bay Area alone), along with $4b in capital losses and $17b in indirect economic losses. Wildfire cost reports love putting the word ‘true’ in the title.

AU$430 million

The amount spent by the Victorian Environment Department on fire management in the 2018-19 financial year, per the Victorian Auditor General’s Office report in 2020. $122m of this was spent on fuel management. Also mentioned in the report is a ten year $750m program of electrical safety upgrades to reduce ignition risk from powerlines, chosen as an alternative to insulating the state’s powerlines (estimated price tag $20b) or burying them ($40b). The audit itself cost $1.25m.

AU$800 million

The average annual costs of wildfire losses in Australia, per a cost-benefit analysis of the new Australian Fire Danger Rating System conducted by Inform Economics back in 2018. They put the fire management costs of the lead agencies at $1.5b per year, noting that costs associated with the 200,000 volunteers in the system were an extra $3.6b. The CBA put the AFDRS-driven reduction in bushfire losses over 20 years, including reduced suppression costs, at about $250m, or twenty times the the combined capital costs of Phase 3 of the AFDRS rollout plus 20 years of operating costs ($13m).

AU$2.2 billion

The annual economic costs of wildfire in Australia by 2060 under a high emissions scenario, per a Deloitte report for the (knights of the) Australian Business Roundtable. Moving to a low emissions scenario would shave almost a billion dollars from this figure. Wildfire costs were estimated to be about double the costs of coastal inundation, half the costs of earthquakes, one tenth of the costs of severe storms including hail ($20b), a slightly smaller fraction of tropical cyclone costs ($18-27b, depending on how much fossil fuel we burn) and a cool (hot?) 5% of estimated flood costs, which are projected to be around $30-40 billion per year by 2060. A 2020 report from ANU’s Centre for Social and Research Methods came up with similar figures for costs per year - up to $2.2b by 2050, or $1.2b in net present value. The same report claims a benefit of $8b in net present value for improved early detection of fires.

0.1%

The dent that the Black Summer fires put on the gross state product in Victoria in 2019-20, per a report from Victoria’s Economic Bulletin. I’m struggling to find the actual GSP figure from 2019-20, but it was $515b in 2021-2022 so presumably not that different in 2019-20, which would mean 0.1% equals about $500m. The report quotes Insurance Council of Australia figures from May 2020 (i.e. only a few months after the fires stopped) putting the total insurance loss from the fires at $2.3b nationwide, across 38,000 claims. Also in the report were figures for the overall welfare losses to Victoria for the ten years after the fires, estimated at $2.1b and based largely on tourism losses.

US$1 billion

The 2020-21 request for the US Department of the Interior’s Wildland Fire Management program. The rough breakdown here is preparation ($370m), suppression ($380m), fuel management ($230m), burned area rehabilitation ($20m) and the Joint Fire Science Program ($3m). This figure was bumped up to $1.7b for the recent 2024 budget request.

US$285 billion

The upper estimate of the annualised economic losses from wildfire in the US, according to a report from the US Department of Commerce’s National Institute of Standards and Technology. The lower estimate was a measly $64b. The annualised costs of fire management were put at $8-63b. The combined costs for the 2018-2021 seasons were almost $80b according to a recently published risk assessment for the US, with the report’s source for that claim (the National Centers for Environmental Information) stating that there have been 21 separate billion-dollar wildfire disasters since 1980.

AU$2 billion

The total smoke health costs of fire in NSW over a twenty year period (2000-2020), according to a paper I appeared on (led ably by Nico Borchers-Arriagada). Of these costs, $1.6b were from wildfire smoke and $360m were from prescribed fire smoke. For years without major wildfires, it is common for the majority of the smoke health burden to come from planned rather than unplanned burns. The two billion dollar figure summarises a wide confidence interval: $700m to $3.3b. The same study estimated the health costs of smoke in NSW to be about $100 per hectare for wildfires and $500 per hectare for prescribed fire, albeit with significant regional variation.

Currency ready reckoner

As at 26 June 2023, an Australian dollar is worth:

• 0.67 US dollars

• 0.88 Canadian dollars

• 0.61 Euros

• 0.53 British pounds

• 4.83 Chinese yuan

• 54.82 Indian rupees

• 1.08 New Zealand dollars