Is El Nino's economic risk too hot to handle?

Strengths, weaknesses

As climate risks become more synchronized across regions, globalization has created new vulnerabilities, Wagner, the climate economist at Columbia Business School, said.

"The more globalized — and hence specialized — our supply chains become, the higher the vulnerability of such extreme events, whether heat, droughts, floods, or other weather extremes that, due to climate change, are increasingly correlated," he said.

That growing correlation, he said, is changing the economics of risk itself.

"Single extreme events are costly. Correlation due to climate change makes them all the more costly," he said.

He compared the problem to insurance.

"The way to ensure against individual extreme events is by hedging — one flood or wildfire in one region may be bad, but others will be fine.

"With climate change, that is increasingly no longer the case — droughts and floods and other extremes the world over are suddenly connected, correlated with each other. Hedging away from extremes in one place is increasingly no longer possible," he said.

The solution, Wagner argued, lies in both adaptation and emissions reductions.

"Invest, invest, invest — in resiliency measures, of course, but also in cutting greenhouse gas pollution in the first place. Only by cutting additional carbon dioxide going into the atmosphere to zero will we be able to stabilize global climate over the long term," he said.

While many economists warn that El Nino could contribute to higher food prices, agricultural scientist Walter Baethgen argues it should not be seen solely through the lens of a possible disaster.

"My view of El Nino is different from the most popular one," said Baethgen, a senior research scientist at Columbia University's International Research Institute for Climate and Society. "I see El Nino as an opportunity."

The weather event is valuable because it is one of the few major climate phenomena that can be forecast months in advance, giving governments, humanitarian agencies and farmers time to prepare, he said.

Baethgen said seasonal forecasts allow farmers to make informed adjustments that reduce risk instead of radically changing production.

"It's a smart way of using this information," he said, describing how producers may shift part of their acreage toward crops favored by expected weather conditions without abandoning diversification altogether.

He also challenged the widespread perception that El Nino necessarily leads to global food shortages.

Wetter conditions often improve crop production in parts of the US and southeastern South America, while drier weather can reduce harvests in regions such as southern Africa, Australia and parts of Asia.

"It's not bad everywhere. For some things, it's very good," he said, adding that "the negative impacts … are typically compensated by positive impacts in other regions."

Because agricultural gains and losses often occur simultaneously across different agricultural production regions, Baethgen said the relationship between El Nino and global food prices is far more complicated than many assume.

"El Nino is one of many factors affecting world food prices," he said. Geopolitical events, energy prices and fertilizer costs can sometimes have an even greater influence on global markets than climate alone, he added.

gaoyang@chinadailyusa.com