New climate change modelling study could help Canada plan for economic disruptions

As countries plan for all climate change eventualities, a new study from the University of Alberta and Royal Bank of Canada (RBC) could be used to help policy makers lessen the impacts that rising global temperatures might have on the Canadian economy. The authors created a new method that can be used to understand how climate change may impact the stability of global economies.

“Shifts in temperature and precipitation patterns and extreme weather events will drive projected economic damages and create risks to infrastructure and financial stability,” said Arturo Sanchez-Azofeifa, a co-author, professor in the Department of Earth and Atmospheric Sciences and an affiliate of the U of A Sustainability Council.

“Understanding which areas will be most affected is important to be able to start to tackle these problems up front instead of playing catch-up, which is often what we do with environmental crises.”

Kayla Stan, a post-doctoral researcher in the Department of Earth and Atmospheric Sciences and co-author on the study, explained that previous modelling on how Canada’s economy will respond to climate change tended to focus only on average increases in temperature. For this study, the team wanted to incorporate not just temperature but projected weather patterns, snowfall, rain, minimum temperatures, and extremes in heat and cold — all of which helped improve the model’s accuracy by 20 per cent. The significance of these variables suggests existing economic forecasts in climate scenarios should be revisited.

The results from the new modelling suggest that climate change may create varying economic outlooks across the country. For instance, expected precipitation and maximum temperatures in Quebec and Ontario could lead to some growth in those regions, while increased temperatures could constrain economies on the Prairies and the Maritimes.

Graham Watt, co-author of the paper and senior director and head of climate technology at RBC, explained that realizing potential gains and losses depends on the strength of the underlying economic infrastructure. For example, increased profitability from improved seasonal yields on a farm might only be realized if the distribution and supply of fertilizer can scale accordingly. 

Since the interdependencies among regions are also critical considerations in climate impact modelling, Watt added that this study can help Canada prepare for the many economic disruptions that lie ahead if climate change is not halted.

“By quantifying shifts in economic cycles, we highlight where to focus adaptation finance to help economies become more resilient in the face of climate change, which is a critical global imperative,” explained Watt.

Through the sponsorship of research and innovation, RBC continues to dispassionately support efforts that drive a more sustainable future. “We need to continue to advance our understanding of the impacts of climate change to inform decision making,” said Watt. 

Sanchez-Azofeifa cautioned that the study does not account for how volatility itself will affect economic disparities in specific parts of the country, and that modelling is limited when making forecasts for short time frames.

“Canada has a global responsibility not to follow but to lead, and for many years we were leaders,” he said. “Instead of falling behind, this could be a good opportunity for Canada to lead again.”

The study, “Financial stability in response to climate change in a northern temperate economy,” was published in Nature Communications and funded by RBC and the nonprofit research organization Mitacs.