Probabilistic Risk Assessment of the Economy‐Wide Impacts From a Changing Wildfire Climate on a Regional Rural Landscape.

A warmer and drier future combined with rising population trends will result in increased wildfire risk. The design of robust mitigation/adaptation strategies requires the assessment of the economy‐wide risks from potentially more frequent large wildfire events under different futures. This study uses a novel interdisciplinary approach by integrating wildfire climate and land‐use forecasts into probabilistic and simulation models of wildfires to estimate direct impacts using damage curves and indirect impacts as lost Gross Domestic Product (GDP) using a computable general equilibrium model. Based on the financial concept of Value at Risk, a probabilistic measure of extreme economy‐wide impacts was developed using GDP as the representative metric, namely "GDP at Risk (G@R)," under various climatic and socio‐economic scenarios. Using the new metric in the Waikato, New Zealand as a case study, due its primary industries' national relevance, it was identified that there is a 5% probability that the region will experience GDP losses greater or equal to NZ$0.1–1.2 billion (similar to the regional GDP growth in 2021) over a 48‐year period from future potential large wildfires affecting vulnerable primary industries. The regional impacts result in larger national GDP losses by a factor of 5 due to the high dependence of downstream sectors on the regional primary industries. While "G@R" estimates are similar across socio‐economic scenarios, there are no discernible patterns when compared across midcentury climate scenarios. The approach developed could be used to assess the consequences from afforestation projects, driven by mitigation policies, and adaptation strategies to reduce wildfire risk. Plain Language Summary: The risk posed by wildfires will increase under a warmer and drier future. Previous studies have estimated the economic risk from wildfires on the sectors that would likely be physically and directly impacted. However, to design inclusive and enduring strategies to reduce or adapt to wildfires; the potential impacts from wildfires should be assessed for entire national economic networks under many different social and climatic scenarios—including sectors that demand products from, or supply to, the ones directly affected. This study uses an interdisciplinary approach by combining computational models to estimate the potential economic impacts from wildfires on multiple sectors of the economy under various relevant scenarios. Rather than focusing on expected impacts, this study focuses on the potentially large impacts from rare, large wildfires on the Waikato region—economically important to New Zealand. The economic impacts from potentially more frequent large wildfires in the region are modest when compared to a scenario without large wildfires. However, the nationwide impacts are substantially larger than the regional ones when considering the dependent sectors outside of the affected region. The approach developed could be used to jointly assess mitigation (e.g., afforestation) and adaptation policies to reduce the risk from wildfires. Key Points: There is a 5% chance that the studied region will lose 0.008%–0.06% or more of the base Gross Domestic Product (GDP) from potentially more frequent large wildfiresThe regional impacts result in larger national GDP losses by a factor of 5 when considering the downstream sectors outside of the regionWhile the GDP loss estimates are similar across socio‐economic scenarios, there are no discernible patterns across climate scenarios [ABSTRACT FROM AUTHOR]