With wildfires forecasted to worsen, life in Canada is expected to get more expensive. That is, in practical daily life, wildfires are not only going to be environmentally harmful, it will also generate lasting economic shocks with long-term consequences. Across Canada, including British Columbia, wildfires will affect businesses and homeowners alike.
Wildfire season in Canada is from April to September/October. Mid-May to late August are the peak or busiest months, which means this is the period that is most prone to catastrophic wildfires. Around 8,000 wildfires occur in the country annually, according to the Canadian Red Cross.
A big reason for this is the hot, dry, and windy weather that is prevalent during these months. This atmospheric environment is also conducive to lightning strikes, which in Canada is the no. 1 cause of wildfires. In a year, lightning ignites around 3,000 wildfires, which makes up half of all wildfires in the country. Meanwhile, human activities, such as outdoor burning, campfires, fireworks, etc., are responsible for wildfires in densely populated forest and grassland areas.
However, as climate changes, Canada’s wildfire season is expected to start earlier, lengthen, and last longer. There’s also the danger of zombie fires smoldering throughout the winter season. In addition, wildfires are also expected to become larger and more severe, and vulnerable or at-risk areas are predicted to grow as well.
Here are the main ways wildfires impact the Canadian economy.
Business Economic Impact
Wildfire seasons can wreak havoc on Canada’s most critical industries. Below are the other sectors that were hard hit by wildfires.
Forestry Industry
Canada’s forestry sector is a major contributor to the country’s economy to the tune of $25.2 billion of its nominal gross domestic product. Forestry also directly employs more than 184,000 people, making the industry one of the country’s largest employers.
Disrupt Forestry Operations
Wildfires can result in suspended harvesting or curtailments in saw mills. For instance, 40 forestry companies temporarily shut down during the 2017 wildfires in British Columbia.
But, even if there’s no suspension in forestry operations, wildfires can create challenges in the supply chain and transportation. The results: Trade is stalled, and companies lose revenue. For instance, Canfor, a sawmill company based in BC, reported losing $44 million in Q2 2023 partly due to wildfires.
Reduced Timber or Log Supply
The forestry sector suffers both immediate and long-term effects of wildfires. For instance, when sawmill operations were restricted due to the wildfires in the Interior in 2021, suspended harvesting resulted in reduced log supply.
“Sawmill closures can set back the forest economy for months,” the Canadian Climate Institute says. “In June and July 2023, lumber production in Canada was 20 per cent lower than the previous five-year average during the same months.”
Aside from drastically reducing the amount of harvestable timber, one research highlights that wildfires in British Columbia permanently altered the province’s timber harvesting potential. That is, wildfires can lead to lower-quality and less timber available for harvesting in an area that had been previously ravaged by wildfires.
Impact on Workers and Communities
When forestry companies suffer losses, this can be passed on to their employees in the form of lost wages or salary cuts, or worse, lost jobs.
“It’s significant. Closing mills and having to restart them is a lot of work and that’s people who have to be laid off temporarily,” industry group Forest Products Association of Canada (FPAC) CEO Derek Nighbor, who did not have an overall estimate of lost production, told Reuters.
For consumers of forestry products, lower timber supply can cause lumber prices to rise. Even if this increase is temporary, it still impacts homebuilding and housing affordability.
Winery Sectors
Wildfires cause physical damages to vineyards, but beyond that, winemakers lose thousands of dollars from reduced sales. For instance, the Canadian wine industry lost $3.7 billion due to wildfires in 2020. Here why: Wildfire smoke, which contains smoke compounds, passes through the grape skin and alters the flavor of the wine. Grapes affected by wildfire smoke create wine with smoky characteristics, which customers dislike, so sales plummet.
Tourism Industry
With wildfire season peaking in summer, which also coincides with Canada’s peak tourist season, the tourism industry suffers significantly. For example, the New York Times reports that business plunged in Tofino, a popular tourist destination for whale watching. The reason: Highway access was cut off by a wildfire.
One hotel, Pacific Sands Beach Resort, saw its occupancy rate sink from around 85% to 20% during the month. This continued through the rest of the year, with the hotel receiving few bookings.
Here’s another example. According to the Vancouver Sun, 2017 wildfires caused a direct tourism revenue loss of around $55 million in the Caribou-Chilcotin-Coast and $38.4 million in the Kootenay-Rockies.
Economic Impact on Canadians
If you’re a regular guy or gal, you will feel the impact of wildfires in two major areas of your life: home insurance and healthcare costs.
Surging Insurance Rates
As wildfires destroy more homes and properties, insurance costs also increase. The New York Times reports that before 2009, insured losses in Canada averaged around 450 million Canadian dollars per year, but in 2023, it regularly goes over $2 billion. Insured losses in West Kelowna and the Shuswap alone was estimated to be $720 million.
As a result, large reinsurers experienced several crippling payouts, which made them decide to pull back from the Canadian market. The consequence is increasing insurance costs for homeowners and businesses. According to the Vancouver Sun, home and mortgage insurance rates increased 33% across Canada since 2018 with wildfire as a contributing factor.
Healthcare Costs
When it comes to wildfire, it’s not just the blaze that causes physical injury or death. Wildfire smoke is also a significant issue that results in economic loss.
Wildfires smoke affects air quality up to thousands of kilometers away. The air pollutants in wildfire smoke contributed to up to 240 deaths per year due to short-term exposure, up to 2,500 deaths per year due to long-term exposure, and asthma, heart conditions, and other respiratory conditions. In terms of annual costs, wildfire smoke’s short-term health effects are estimated to cost $410 million to $1.8 billion, while its long-term health effects are estimated to cost $4.3 billion to $19 billion.
“Air quality matters for more than just health outcomes,” David Molitor, an associate professor of finance and economics at the University of Illinois, said in an interview. “It shows up in the statistics for economic productivity.”