The ambiguity of the costs of extreme climate events

Estimating the costs of extreme climate events attributed to climate change is a challenging task. This is because costs can be attributed in two different ways: considering whether the event could not have occurred (change in frequency) or whether it could have been less intense (change in intensity). These approaches can produce very different estimates of the costs associated with climate change. For example, Hurricane Harvey in 2017 caused about $90 billion in damages. A change in frequency approach estimated that 75% of these costs could be associated with climate change, while a change in intensity approach estimated only 15% ^1,2.

Differences in approaches

The difference between the change in frequency and intensity approaches lies in how they assess the impacts of extreme climate events. The change in frequency approach focuses on how much more likely an event has become due to climate change. The change in intensity approach, on the other hand, assesses how much more damaging an event has become because of climate change. Both approaches can be valid, but their estimates can vary significantly ^1,2.

To determine the theoretical validity of a method, researchers introduced the concept of consistency. A method is considered consistent if, when applied to a group of events over time, the total costs attributed to climate change match the actual costs incurred. Both methods, change in frequency and intensity, can be consistent, but only under specific conditions ^1,2.

The inherent ambiguity in the costs of extreme climate events can limit the ability to inform adaptation, recovery, or litigation. This is because, even with perfect knowledge of the climate and society, the ambiguity cannot be eliminated. Therefore, the technical choices made in the analysis of costs can have significant implications for their interpretation and use ^1,2.