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The Economic Impacts Of An El Nino
NOAA has the primary responsibility within the federal government to routinely provide climate forecasts and products to the nation. Most parts of NOAA are in some way involved in El Nino research, monitoring and prediction.
For example, NOAA monitors the developing (and, in time, decreasing pool of) warm waters in the tropical Pacific with state-of-the-art satellites; launches new research initiatives; improves future climate forecasts; monitors the impact of the climate event on the fish population in U.S. coastal waters; operates research ships to study the world's vast oceans; and provides critical ocean data to users.
NOAA's El Nino forecasts have become much more reliable in recent years. The new Operational Climate Forecast System (which is composed of a state-of-the-art ocean analysis system that uses relevant satellite observations, all available oceanic observations, and coupled ocean/atmosphere prediction models) provides NOAA and the nation a longer lead-time for developing strategies to deal with expected impacts—including economic impacts. For example, NOAA successfully predicted the major El Nino of 1997-1998 -- six months in advance -- and is now forecasting an El Nino for 2002-2003.
NOAA's definition of El Nino includes persistent enhanced precipitation along the equator near the international date line and warmer-than-normal sea-surface temperatures (exceeding +0.5 C) extending from the international date line to the South American coast. El Nino episodes occur roughly every four-to-five years and can last up to 12-to-18 months. It has been nearly four years since the end of the 1997-1998 El Nino, which was followed by three years of La Nina. El Nino means little boy in Spanish. The effect was named by Peruvian fishermen who would notice its impact on their catch around Christmastime and called the phenomenon after the baby Jesus.
Weather and Climate Impacts
El Nino events can have important effects on U.S. and global weather and climate. The first signs of an El Nino are an unusual warming of the water in the tropical Pacific Ocean, something that has begun to occur, according to researchers at NOAA's Climate Prediction Center.
In turn, this results in increases in rising warm air, changes in the air pressure patterns and shifts in the high-level winds that direct the movement of weather. Therefore, if the 2002-2003 El Nino develops as expected, the first impacts would be confined to the tropical Pacific, where Indonesia would begin to experience drier-than-normal conditions. Mature El Nino conditions develop over a period of several months. Typical impacts on the United States and the Atlantic basin include the following:
Implications of El Nino for the Nation's Economy
Weather and climate sensitive industries directly impacted by weather (such as agriculture, construction, energy distribution, and outdoor recreation) account for nearly 10 percent of GDP. Further, weather and climate indirectly impacts an even larger portion of the nation's economy, extending to parts of finance and insurance, services, retail and wholesale trade, as well as manufacturing. Some analysts estimate that nearly 25 percent of GDP, or $2.7 trillion, is either directly or indirectly impacted by weather and climate.
El Nino impacts important business variables like sales, revenues, and employment in a wide range of climate-sensitive industries and sectors. Overall, total U.S. economic impacts of the 1997-1998 El Nino were estimated to be on the order of $25 billion.
While economic impacts tend to cancel each other out at the national level, El Nino does cause real economic losses such as storm damage or crop losses, which are not offset by gains elsewhere. These are losses that can't be prevented or reduced by a better forecast or mitigation. For example, on average, El Ninos result in agricultural losses approaching $2 billion, or nearly 1-2 percent of total crop output. In the 1997-98 El Nino, property losses were estimated at nearly $2.6 billion. Fortunately, these real losses are generally a small fraction of the economic impacts of El Nino.
The Economic Benefits of Better El Nino Forecasts -- Improving Economic Decisions
Although all losses cannot be avoided, NOAA's El Nino forecasts produce economic value by allowing individuals, industries, and public officials to take timely actions based on the forecast to mitigate and reduce losses or to capitalize on the information to improve economic outcomes. For example:
Measuring the Economic Benefits of El Nino Forecasts
Economists have quantified the benefits of improved El Nino forecasts in various sectors:
We still have many uncertainties in our understanding and forecasting of El Nino Southern Oscillation (ENSO). For instance, we need to better understand and model how ENSO events are unique and how they interact with other climate and weather patterns, often leading to diverse regional and local economic impacts.
Those issues not withstanding, cost benefits studies have shown investments in El Nino forecasting to be a sound use of taxpayer dollars. Comparing forecast systems costs with anticipated benefits in just the U.S. agriculture sector yielded an estimated annual rate of return on that investment of between 13 to 26 percent.
NOAA's Climate Prediction Center
El Nino/Southern Oscillation (ENSO) Diagnostic Discussion
Most Recent 2 Months Sea Surface Temperature Anomaly Animation
NOAA's El Nino Home Page
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Study Links El Nino To Deadly South American Disease
Greenbelt - Jan 21, 2002
In a groundbreaking collaborative study, NASA climatologists and U.S. military health specialists may have discovered a way to predict outbreaks of a deadly South American disease by observing sea surface temperature.