Commissioned report

Estimating financial costs of climate change in New Zealand - An estimate of climate change-related weather event costs

This report is an initial exploration of the scale of the economic impact of climate change-related floods and droughts in New Zealand over the ten years from mid-2007 to mid-2017. It uses two sets of inputs: estimates of economic impacts associated with floods and droughts, and estimates of the fraction of attributable risk (FAR) of weather events that are due to climate change.

The costs in this report are not a full assessment of the costs of climate change and, because the inputs are financial costs, do not include a discussion of potential benefits associated with climate change. The cost estimates for the two droughts represent economic losses; the costs associated with extreme rainfall events are insured damages, which represent a significant underestimate of the full financial and economic impact costs of these events.

The intention of the report is to provide an indicative assessment of some of the more readily-addressed costs associated with climate change, with a view towards creating a forward liability for climate that could for example be used in cost-benefit analysis of infrastructure resilience investments and other climate change-related policies. Note that the FARs in this report are not static: FARs in the next few decades are expected to change (usually to increase) because the climate continues to change in response to on-going emissions of greenhouse gases (and other factors). The economic inputs are diverse: estimates of the economic losses of droughts, and estimates of insurance damages due to floods. There is significant uncertainty around both types of cost estimates, and insured damages, in particular, very probably underestimate the full economic costs as they ignore any loss in economic activity in the aftermath of these events.


This paper was prepared Dave Frame, Suzanne Rosier, Trevor Carey-Smith, Luke Harrington, Sam Dean and Ilan Noy.