The tourism industry in Australia suffered significant losses due to the devastating bushfires during the black summer. Is the increasing impact of natural disasters a result of global warming?
Heading into the summer of late 2019, Craig Wickham’s tour company, Exceptional Kangaroo Island, was experiencing unprecedented success in Australia.
Established in 1990, it was making progress towards reaching an annual revenue of $3 million for the first time.
Wickham declares that the business was at its peak and they were thriving.
Instead, before the start of 2020, over 33% of Kangaroo Island, located off the coast of South Australia, was engulfed in flames as a result of the devastating bushfires that ravaged forests across Australia during what is now known as the black summer.
Wickham, who volunteers as a firefighter, shut down his business for a period of eight days. He began receiving cancellations from Europe, the United States, and Canada.
According to Wickham, we incurred a loss of approximately $500,000 in the initial week. While certain areas of the beautiful island remained untouched, numerous visitors still canceled their reservations several months beforehand.
The effects of the fires on Australia’s tourism sector will soon fade into memory. On March 20th of that same year, the country’s borders were shut in an attempt to mitigate the spread of a worldwide pandemic.
A recent report released by the University of Sydney reveals that the black summer bushfires caused a sudden loss of $2.8 billion in the Australian economy, particularly in the tourism sector.
According to a study published in the journal Economics of Disasters and Climate Change, the researchers analyzed government tourism data from the previous year and compared it to the revenue generated in January, February, and March 2020 during the time when the fires were still active.
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The research also considered the indirect impacts on the economy caused by the disruption of the tourism supply chain, rather than solely focusing on revenue loss.
For instance, Wickham’s enterprise makes payments to approximately 200 distinct corporations or individuals who work independently in a span of 12 months.
Vivienne Reiner, a researcher at the Integrated Sustainability Analysis centre at the university, emphasizes the significance of examining the complete supply chain in her study.
Reiner reports that the effects on tourism were extensive, even in regions that were not heavily affected by the wildfires. The study’s results only reflect the financial impact on a single sector of the Australian economy.
A recent study showed that the agricultural industry in the country suffered losses of $4-5 billion due to the devastating black summer bushfires. These losses mainly consisted of direct damages to crops and livestock.
The frequency of high fire risk days in Australia has increased and there are more widespread fires. Climate models predict that this trend will continue as global warming persists.
The rise in global temperatures is causing an increase in extreme weather events, such as heavy rainfall that can lead to sudden flooding. This is worsened by the rising sea levels along the coast.
A report commissioned by the Insurance Council of Australia in 2022 revealed that the cost of extreme weather events has significantly increased. It was found that the annual insurance claims have doubled since the years of 1986 to 2005.
The report noted that from 2005 to 2022, the federal government’s budget allocation for disasters was unevenly divided, with a large portion going towards responding to events. Specifically, $24 billion was spent on providing relief for disasters, while only $0.5 billion was allocated for preventative measures and building resilience against future disasters.
Since the black summer, the council reports that insurers have disbursed $16 billion for 13 declared insurance catastrophes or significant events.
According to the insurance council report, expenses do not accurately represent the complete extent of personal financial harm. Additionally, as the occurrence and intensity of extreme events continues to increase, the report stated that government expenses will also rise in correlation with insurance claims.
According to Prof Manfred Lenzen, a contributor to the University of Sydney’s research on tourism, there are multiple approaches to determining the expense of extreme occurrences. These methods may involve solely considering direct expenses or incorporating indirect expenses as well.
According to him, as disasters worsen, the impact of various methods ultimately results in a higher percentage of industries and their supply chains being disrupted.
According to Lenzen, the government’s cost estimation models rely on previous occurrences. However, this becomes an issue when present and future events are unprecedented.
Since we are facing a world heavily impacted by climate change, there is a lack of previous data to fully understand how individuals and companies will react.
According to Dr. Karl Mallon, the CEO of Climate Risk Group, which evaluates the financial and risk implications of global warming, natural disasters are becoming more costly due to global heating. He highlights the additional expenses from health issues caused by breathing in bushfire smoke, the impact on mental health, the rise in reconstruction costs due to high demand for labor and materials, and the ripple effect on employment when businesses shut down permanently.
He mentions that although some of the expenses are difficult to pinpoint, we are aware of them.
Mallon is worried about the possibility of Australian insurers following the example of American insurers, who are no longer offering policies in California due to the increasing risk of wildfires and rising costs of rebuilding.
Mallon suggests that if homeowners were required to have home insurance for their mortgages, the impact of a decrease in property value would be significant.
In the first quarter of this year, the federal government will release the initial of two reports that together will create a national assessment of climate risk. This assessment aims to identify potential risks to the economy caused by climate change.
According to Senator Jenny McAllister, the assistant minister for climate change and energy, Australians facing severe weather may suffer from long-term and devastating consequences.
“We are aware that last year was the warmest year ever recorded, and despite global efforts to decrease emissions, there are some effects of climate change that cannot be avoided.”
Returning to Kangaroo Island, Wickham explains that his personal enterprise has successfully weathered the fires and pandemic, unlike many other tourism companies that have closed or been bought out. However, he also acknowledges a conflict within his field.
“In terms of global travel, there is a conflict between long-distance flights and their impact on carbon emissions. Therefore, we must seek solutions to modify our actions.”
If we achieve success on an international level, we may face more challenges unless we can reduce carbon emissions.