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Economic Outcomes of Conflagrations

Valuable and viable ecosystem is very important for state economy. Healthy ecosystem,  development of natural resources, change in climate conditions, ecological environment  make influence on Economy of Climate.

It should be noted that conflagrations generate significant impact on economic sustainability and social welfare of the country, both global and local outcomes of conflagrations and their outcomes cause serious challenges and risks to business sector. According to reports by the world’s leading global organizations, conflagrations are recorded in ten top global threats that change ecosystem of the earth, damage flora and fauna on the planet.

More than 7.5mln conflagrations are registered in the world on average every year, covering 5% of the planet surface and generating negative climate changes, including there are more than one million centers of forest and landscape conflagrations. If we realize that woodlands are of crucial importance for human race survival (they absorb carbon dioxide, halt climate changes, give food, water, wood materials, bioenergy, play important role in shaping micro climate and weather conditions), the Authorities are obliged to ensure efficient mechanisms and infrastructure for fire prevention.

It should be noted that 25% of the planet population depend on woodland resources. However, regretfully, 13mln hectares of woodland are annihilated every year by conflagrations, forestry management, private or civil sector (World Resources Institute).

It should be stressed that forest conflagrations bring serious impact on state economy, including in terms of:

  • reduction/annihilation of natural resources; annihilation of wood materials;
  • Human death and injuries;
  • Damage and annihilation of infrastructure;
  • Direct of indirect losses in recreation zones and tourism sector.
  • Insurance costs and losses;
  • Reduction in political will (conflagration causes the feeling of uncertainty and instability).

At the same time, accompanying processes such as air pollution, water and soil ecological problems need corresponding treatment and preventive mechanisms. And this factor puts certain burden on the state budget.

It is worth noting that in developed countries «the value» of conflagrations constitute 1% in GDP and it includes: direct and indirect damages, management of firefighting offices, monitoring and distance control systems, insurance and safety systems,  scientific-technical research of fire safety, consulting and scientific work.

It is important to note the scales of losses inflicted by conflagrations to Georgian business sector (Eliava Fair, World of Children building and other complexes) remain as «general and unclear statistics» for uninsured bodies, for those who receive tiny state compensations. The mentioned conflagrations in business space has certain relation to beneficiaries of social allowances, growth in emigration and unemployment.

Note that besides economic losses, social losses should be also taken into account. Social losses are not subject to economic calculation, but evaluation of separate social damages may be reflected in economic indicators. For example, the life of one American citizen is valued at 278 000 USD, including 172 000 USD for quitting job, 1200 USD for burial, 13 000 USD for medical assistance. Moreover, according to the US bureau, the life of US citizens is valued by 386 000 USD at the age of 30 and by 205 000 USD after the age of 50.

Every year in the USA 100 000 persons are hospitalized because of conflagrations and expenditures on them exceed 1bln USD (the US National Security Association). Keeping such indicators and statistics is impossible in Georgia because the government structures of Georgia lack for analysts and scientist-researchers.

In 2001-2015, a total of 20860 cases of conflagrations were registered  in Georgia, where 313 persons died and 633 were injured (Interior Ministry statistics). According to the report by  Global Forest Watch Fires, in 2012-2017, more than 4000 forest conflagration cases were registered in Georgia. These cases have caused degeneration and «fragmentation» of environment. Finally, «isolated spaces» were also violated.

The article reads that at this stage the country continues fighting against fire  and it is difficult to reflect all direct or indirect damages in monetary value and carry out  economic analysis.

We should also take into account forecasts made by international organizations. In the coming years, forest conflagration scales will enlarge and they will bring more disastrous outcomes (Union of Concerned Scientists).

At the same time, forest conflagration break out mostly in unattainable  places and it is necessary to use forest monitoring global systems, satellite systems, and online platforms for fire prevention  (American Association for the Advancement of Science).

As a result, the Government should develop a flexible management center with due equipment and efficient programs for timely notification and detection of fires, prevention of threats in risk zones.

Rati Abuladze

Professor, Doctor of Economics