Floods and economics considered

The recent monsoonal rainfall event in North Queensland has certainly been devastating to the cattle industry:

The latest estimate is that 500,000 cattle have perished in the floods. That is a death toll of biblical proportions.

At a value of $1000 a head, that’s $500 million worth of livestock gone.

But this is about more than the dollars.

Many of these cattle have been kept alive by desperate farmers who have battled seven years of drought — drought that continues despite one dump of rain. They have spent thousands of dollars on fodder they can no longer remember once growing themselves.

The toll on those farmers is enormous. Unthinkable even.

Agforce chief executive Michael Guerin rightly described it as a “massive humanitarian crisis”.
“The loss of hundreds of thousands of cattle after five, six, seven years of drought is a debilitating blow, not just to individual farmers, but to rural communities,” said Mr Guerin, whose organisation is the state farming association.

Looking to the future, the CSIRO openly admits that it is very difficult to be sure of the long term rainfall effects of climate change in Australia.   I thought they generally expected North Australia to get wetter, but Southern Australia to dry out, but the Climate Change in Australia website says this about the Monsoonal North:

Providing confident rainfall projections for the Monsoonal North cluster is difficult because global climate models offer diverse results, and models have shortcomings in resolving some tropical processes. Natural climate variability is projected to remain the major driver of rainfall changes in the next few decades.

By late in the century, rainfall projections have low confidence. Potential summer rainfall changes are approximately -15 to +10 per cent under an intermediate emission scenario (RCP4.5) and approximately -25 to +20 per cent under a high scenario (RCP8.5). Per cent changes are much larger in winter in some models, but these changes are less reliable because average winter rainfall is very low.

Impact assessment in this region should consider the risk of both a drier and wetter climate.

They do, however, expect extreme rainfall events to increase:

Despite uncertainty in future projections of total rainfall for the Monsoonal North cluster, an understanding of the physical processes that cause extreme rainfall, coupled with modelled projections, indicate with high confidence a future increase in the intensity of extreme rainfall events. However, the magnitude of the increases cannot be confidently projected.

Drought will continue to be a feature of the regional climate variability, but projected changes are uncertain.

In terms of risk, let me muse this:   the problem is surely with the frequency with which extremes occur - if a flood of this kind that formerly happened only once in (say) 100 - 300 years starts to occur 2 to 3 times within a lifetime (say, every 20 - 30 years), you can readily imagine that certain agricultural enterprises will just abandon that form of land use due to the "wipeouts" coming at such a rate that it becomes too much of a risk, even if you can get some good years out of it in the intervening years.

This is why I am completely sceptical of economic predictions of the effect of climate change:  even if you make guesses on whether certain regions become generally wetter or drier (and therefore more or less potentially agriculturally productive), the confounding factor is in the details of the frequency of wet or dry disasters within the big picture.  

There's no way of confidently predicting that at the moment, so how can you deal with it in economic models?