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Climate change and hailstorm damage: Empirical evidence and implications for agriculture and insurance

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Author Info

  • Botzen, W.J.W.
  • Bouwer, L.M.
  • van den Bergh, J.C.J.M.

Abstract

There is much uncertainty about the effects of anthropogenic climate change on the frequency and severity of extreme weather events like hailstorms, and subsequent economic losses, while this is also relevant information for the design of climate policy. Few studies conducted indicate that a strong positive relation exists between hailstorm activity and hailstorm damage, as predicted by minimum temperatures using simple correlations. This relation suggests that hailstorm damage may increase in the future if global warming leads to further temperature increase. This study estimates a range of Tobit models of relations between normalized insured hailstorm damage to agriculture and several temperature and precipitation indicators for the Netherlands. Temporal dynamics are explicitly modelled. A distinction is made between damage costs for greenhouse horticulture and outdoor farming, which appear to be differently affected by variability in weather. [`]Out of sample' forecast tests show that a combination of maximum temperatures and precipitation predicts hailstorm damage best. Extrapolations of the historical relations between hailstorm damage and weather indicators under climate change scenarios project a considerable increase in future hailstorm damage. Our estimates show that by 2050 annual hailstorm damage to outdoor farming could increase by between 25% and 50%, with considerably larger impacts on greenhouse horticulture in summer of more than 200%. The economic implications of more hailstorm damage for, and adaptation by, the agricultural and insurance sectors are discussed.

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Bibliographic Info

Article provided by Elsevier in its journal Resource and Energy Economics.

Volume (Year): 32 (2010)
Issue (Month): 3 (August)
Pages: 341-362

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Handle: RePEc:eee:resene:v:32:y:2010:i:3:p:341-362

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Web page: http://www.elsevier.com/locate/inca/505569

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Keywords: Adaptation Climate change impacts Global warming Hailstorm damage Insurance sector;

References

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  1. Richard Tol, 2002. "Estimates of the Damage Costs of Climate Change. Part 1: Benchmark Estimates," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 21(1), pages 47-73, January.
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  3. Richard Tol, 2002. "Estimates of the Damage Costs of Climate Change, Part II. Dynamic Estimates," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 21(2), pages 135-160, February.
  4. van den Bergh, Jeroen C. J. M., 2004. "Optimal climate policy is a utopia: from quantitative to qualitative cost-benefit analysis," Ecological Economics, Elsevier, vol. 48(4), pages 385-393, April.
  5. McDonald, John F & Moffitt, Robert A, 1980. "The Uses of Tobit Analysis," The Review of Economics and Statistics, MIT Press, vol. 62(2), pages 318-21, May.
  6. Howard C. Kunreuther & Erwann O. Michel-Kerjan, 2007. "Climate Change, Insurability of Large-scale Disasters and the Emerging Liability Challenge," NBER Working Papers 12821, National Bureau of Economic Research, Inc.
  7. Heather McMaster, 2001. "Hailstorm Risk Assessment in Rural New South Wales," Natural Hazards, International Society for the Prevention and Mitigation of Natural Hazards, International Society for the Prevention and Mitigation of Natural Hazards, vol. 24(2), pages 187-196, September.
  8. Heij, Christiaan & de Boer, Paul & Franses, Philip Hans & Kloek, Teun & van Dijk, Herman K., 2004. "Econometric Methods with Applications in Business and Economics," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780199268016, October.
  9. Jun Xu & J. Scott Long, 2005. "Confidence intervals for predicted outcomes in regression models for categorical outcomes," Stata Journal, StataCorp LP, StataCorp LP, vol. 5(4), pages 537-559, December.
  10. Wolfram Schlenker & Michael J. Roberts, 2008. "Estimating the Impact of Climate Change on Crop Yields: The Importance of Nonlinear Temperature Effects," NBER Working Papers 13799, National Bureau of Economic Research, Inc.
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Cited by:
  1. Kai A. Konrad & Marcel Thum, 2012. "The Role of Economic Policy in Climate Change Adaptation," CESifo Working Paper Series 3959, CESifo Group Munich.
  2. Markku Rummukainen, 2013. "Climate change: changing means and changing extremes," Climatic Change, Springer, Springer, vol. 121(1), pages 3-13, November.
  3. Jane Ebinger & Walter Vergara, 2011. "Climate Impacts on Energy Systems : Key Issues for Energy Sector Adaptation," World Bank Publications, The World Bank, number 2271, October.
  4. Jeannette Sieber, 2013. "Impacts of, and adaptation options to, extreme weather events and climate change concerning thermal power plants," Climatic Change, Springer, Springer, vol. 121(1), pages 55-66, November.
  5. Fabian Barthel & Eric Neumayer, 2012. "A trend analysis of normalized insured damage from natural disasters," Climatic Change, Springer, Springer, vol. 113(2), pages 215-237, July.
  6. Lee, Sangjun & Zhao, Jinhua & Thornsbury, Suzanne, 2013. "Extreme Events and Land Use Decisions under Climate Change in Tart Cherry Industry in Michigan," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C., Agricultural and Applied Economics Association 150568, Agricultural and Applied Economics Association.

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