2016

The cost of disaster

September 15, 2016

Economics profs assess the impact of the Fort McMurray fire

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Just days after more than 80,000 people fled Fort McMurray in one of the largest evacuations in Canadian history, questions about the economic implications of the fire-fueled disaster were already in the headlines.

Months later, hard numbers attached to the disaster are emerging—the Insurance Bureau of Canada is calling it the costliest for insurers in Canadian history—but the full picture of the fire’s economic impact remains to be seen. Calculating that exact impact on all levels—financial, physical, social, health and environmental—could take years, even decades, to determine. But two MacEwan University economics professors are trying to come up with a full estimate now.

“Our objective is to gather a comprehensive assessment of the total damage,” says Shahidul Islam, associate professor. “There have been more and more fire incidents happening in Canada and throughout North America, and the analysis we do for Fort McMurray could inform the management of future fires.”


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Once the full economic impact of the disaster is known, that information could help inform decisions about where to invest when it comes to planning for future disasters. Does it make more sense to invest in protective measures or to spend in ways that enhance emergency preparedness to manage the aftermath?

“What we find in this one case can be generalized to other situations,” says Rafat Alam, assistant professor. “The emergency preparedness and response implications would be similar for fire, flood and other disasters.”

The two faculty researchers along with MacEwan alumni researchers Dawn Doell and Eric Mosley, and current students Virginia Dowdell and Sean Thomas, will finish collecting secondary data on tangible losses by the end of July—damage to physical properties, business operations and income—as well as impacts that are more difficult to quantify, such as the impact of the fire on air quality, water quality, soil and the generation of waste.

“This is a team effort and our students will also be our co-authors,” says Rafat. “Each researcher is using their expertise in particular areas—biology, sociology and economics—to collect the data.”

And in spite of the massive destruction disasters like the Fort McMurray fire leave in their wake, when it comes to economics, not all of the data is negative.

“Donations, grants and the activity of rebuilding all have a positive impact on the Alberta economy,” says Rafat. “The literature shows that disasters have an immediate negative impact for at least the first few months, of course, but in the long term there can also be some degree of positive economic impact from those financial gains and development attached to construction and clean-up activities.”

The research team, which is receiving support from the Institute for Catastrophic Loss Reduction, plans to wrap up data collection by the end of July and then move onto analysis in August.


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