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  1. Catastrophic fat tails and non-smooth damage functions-fire economics and climate change adaptation for public policy

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    Author(s): Adriana Keeting; John Handmer
    Date: 2013
    Source: In: González-Cabán, Armando, tech. coord. Proceedings of the fourth international symposium on fire economics, planning, and policy: climate change and wildfires. Gen. Tech. Rep. PSW-GTR-245 (English). Albany, CA: U.S. Department of Agriculture, Forest Service, Pacific Southwest Research Station: 147-151
    Publication Series: General Technical Report (GTR)
    Station: Pacific Southwest Research Station
    PDF: Download Publication  (322.09 KB)
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    Description

    South-eastern Australia is one of the most fire prone environments on earth. Devastating fires in February 2009 appear to have been off the charts climatically and economically, they led to a new category of fire danger aptly called 'catastrophic'. Almost all wildfire losses have been associated with these extreme conditions and climate change will see an increase in these catastrophic fire danger days. Estimating the economic impacts of these fires is a key input into climate change adaptation decision-making for three key reasons: 1) a fattening of the tail of the fire disaster probability distribution, is widely held to be a significant climate change impact; 2) extrapolating current bushfire costs assumed to be a convenient and straightforward starting point for adaptation cost estimation, however a paucity of data means this assumption is over ambitious; and 3) fire disaster risk reduction is a low-regrets climate change adaptation policy, meaning it is believed to have a positive net benefits regardless of the actual future climate scenario, thereby bypassing the risks associated with uncertainty regarding future climate. This focus poses key challenges for fire economics in regards to full valuation of disaster impacts, particularly in regard to indirect and intangible impacts. Furthermore, extrapolating current impact estimates under future climatic and sociodemographic conditions is complicated by nonlinearity in the damage function with the majority of damages occurring during extreme conditions, changes to which are less certain than projections regarding means.

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    Citation

    Keeting, Adriana; Handmer, John. 2013. Catastrophic fat tails and non-smooth damage functions-fire economics and climate change adaptation for public policy. In: González-Cabán, Armando, tech. coord. Proceedings of the fourth international symposium on fire economics, planning, and policy: climate change and wildfires. Gen. Tech. Rep. PSW-GTR-245 (English). Albany, CA: U.S. Department of Agriculture, Forest Service, Pacific Southwest Research Station: 147-151.

    Keywords

    adaptation, bushfire, climate change, damage function, extremes, wildfire

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