SEAS Colloquium in Climate Science (SCiCS)
Thursday,
February 23, 2017
2:45 PM - 3:45 PM
Christian Otto
Potsdam Institute for Climate Impact Research
“Modeling the propagation of disaster-induced losses in the global economic network: The dynamic agent-based model acclimate”
Risks of extreme weather events like floods, heat-waves, and storms are likely to increase under global warming. Since world markets are highly interlinked and local economies extensively rely on global supply and value added chains, local extreme weather events can have global repercussions. Accordingly, comprehensive climate risk assessment and cost estimation should take these interactions into account. In this talk, I will present the dynamic agent-based loss propagation model acclimate, which is designed to describe the propagation of unpremeditated production losses in the global economic network. The model combines an adaptive production system with high regional, sectoral, and temporal resolution permitting to capture short-term market imperfections. The global economy is described as a complex network of production and consumption sites. These are modeled as bounded rational agents, which base their expectations on future market developments on past information, and adapt them successively according to their gain in information. In each timestep, they decide on their optimal production or consumption level by local utility maximization.
Potsdam Institute for Climate Impact Research
“Modeling the propagation of disaster-induced losses in the global economic network: The dynamic agent-based model acclimate”
Risks of extreme weather events like floods, heat-waves, and storms are likely to increase under global warming. Since world markets are highly interlinked and local economies extensively rely on global supply and value added chains, local extreme weather events can have global repercussions. Accordingly, comprehensive climate risk assessment and cost estimation should take these interactions into account. In this talk, I will present the dynamic agent-based loss propagation model acclimate, which is designed to describe the propagation of unpremeditated production losses in the global economic network. The model combines an adaptive production system with high regional, sectoral, and temporal resolution permitting to capture short-term market imperfections. The global economy is described as a complex network of production and consumption sites. These are modeled as bounded rational agents, which base their expectations on future market developments on past information, and adapt them successively according to their gain in information. In each timestep, they decide on their optimal production or consumption level by local utility maximization.
By studying stylized disasters, I will show that indirect - or higher-order - losses contribute significantly to the total losses of large scale disasters. On the one hand, these losses are enhanced by price effects such as demand surge in the disaster aftermath. On the other hand, flexibilities in the production system such as adaptation of production levels and storage inventories reveal to be vital strategies for loss mitigation. As an illustrative example, I will discuss the dynamic economic resilience, which is defined as the ratio of direct to total losses. This definition implies that the resilience of the economy to unpremeditated production outages is low if indirect losses are high. A nonlinear dependence of this resilience on disaster size is observed, which can be explained by the interplay of price effects and warehousing.
Eventually, as a first application of the model, heat-stress induced production losses in the tropics are discussed. It is shown that since the beginning of the 21st century, the structural evolution of the global economic network has fostered an increase of climate-related production losses. The influence of this structural change has dominated over the effect of the comparably weak climate warming during the last decade. C. Otto, S. N. Willner, L. Wenz, K. Frieler, and A. Levermann)
Eventually, as a first application of the model, heat-stress induced production losses in the tropics are discussed. It is shown that since the beginning of the 21st century, the structural evolution of the global economic network has fostered an increase of climate-related production losses. The influence of this structural change has dominated over the effect of the comparably weak climate warming during the last decade. C. Otto, S. N. Willner, L. Wenz, K. Frieler, and A. Levermann)
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