The cost of climate change
Stadler Rail, the Swiss-based rail vehicle manufacturer, has been severely affected by the recent floods in Valencia. The production chain was interrupted by destroyed suppliers – and it will take years to get them back to normal. This is an intriguing case that shows the challenge of calculating the cost of climate change, and how science, politics and the corporate world are probably still grossly underestimating them.
Stadler Rail, a stock exchange traded train manufacturer, has repeatedly been hit by floods since June this year, in Switzerland, Austria and at the end of October badly by the tremendous floods in the Valencia region. Stadler Rail plants and component suppliers in these regions were severely affected by the floods, resulting in various types of losses or costs. The loss of income just due to the floods around Valencia and paralyzed production are indicated with about USD 200 million. But the problem is much bigger than that. Financial analysts believe it could take 2 years to get all the supply chains back to normal, implying massive but difficult to calculate additional costs which are not covered by insurance.
And finally, a quick calculation of the loss in value: on the stock exchange, the shares of Stadler Rail have lost about 5 USD in value over the past couple of weeks which I understand can mainly be attributed to the above-mentioned flood disasters. This is a total loss in share value of around USD 500 million.
Exact numbers are difficult but we’re talking here about an order of magnitude of billion USD, just for one company, one sector, one series of heavy rainfall and flood events.
On the attribution of the extreme rainfall and flood events to anthropogenic climate change, I’m referring to the World Weather Attribution.
As a conclusion, most of the numbers we currently have on the cost of climate change, including from the reports of the Intergovernmental Panel on Climate Change (IPCC), are most likely a strong underestimation. However, many of the findings we elaborated in the last IPCC report hold true, including:
– Risks become increasingly complex.
– Risks can disrupt supply chains with large impacts on population and trade markets.
– Risks are significantly more severe than thought so far.
Systems need greater resilience
The Stadler Rail case is an unpleasant foretaste of what awaits us, not in 10 or 20 years, but just around the corner. We urgently need to build more resilience into the systems, as the IPCC’s Sixth Assessment Report (AR6) urges.
In Switzerland, within the scope of the National Center for Climate Services Impacts Programme we’re currently doing the challenging effort to assess costs of climate change, together with our partners from EBP Schweiz, Sustainaccount and Ecoplan.
Unwetter trifft Stadler-Werk in Spanien – Erholung wird Jahre dauern
Tagesanzeiger, 14.11.2024 (in German)