Why the LA fires should spark economic alarm in Australia

The harrowing infernos consuming whole communities in Los Angeles offer frightening imagery all too familiar for many Australians, five years on from our own Black Summer.

The scale of the lives lost or disrupted and early estimates of a damage bill of as much as $US150 billion ($242 billion) – roughly the annual output of South Australia, Tasmania and the ACT combined – should give us pause to reconsider our own vulnerabilities.

A person tries to hose down embers from the Palisades Fire in the Pacific Palisades neighbourhood of Los Angeles. Credit: AP

Much will be made in the coming federal election about the cost of taking action on climate change. The Californian conflagrations, exploding in the middle of their winter, should remind us there’s a significant and probably much heftier bill waiting for us if we don’t act.

They’ll undoubtedly hope we’ll ignore or downplay the fact 2024 was clearly the hottest year on record, beating 2023. Ask Europe’s Copernicus climate service or the US’s National Oceanic and Atmospheric Administration or even our own Bureau of Meteorology. (Our 2024 narrowly lagged the bushfire-seared 2019 as Australia’s hottest ever year, BoM says.)

As treasurer of NSW, I saw the catastrophic cost of not acting – the cost of rebuilding infrastructure, towns, lives and livelihoods, which dwarfs the cost of taking strong and decisive action to address our emissions.

Emerging research on so-called hydroclimate whiplashes (as reported in the Herald last week) reveal how a more variable climate elevated LA’s fire risk. Unseasonably heavy rainfall in early 2024 triggered extra vegetation growth that dried out as a severe drought took hold by mid-year.

Similar conditions are taking shape over a broad swath of Australia. Three consecutive years of the relatively damp La Nina Pacific climate driver and the present prospect of a fourth one in five years mean eastern Australia forests and grasslands are unusually flush. A reversion to an extended dry spell will no doubt keep our fire chiefs awake at night.

Our reliance on hazard-reduction burning to reduce fuel loads near communities, too, has lately been hampered by limited opportunities to conduct such operations in many parts of the country. The lengthening fire seasons mean the windows for such burning in the springs and autumn of the future are likely to narrow.

Some will argue that cutting our emissions wouldn’t do anything to curb risks in California – or here – if big economies don’t rein in their pollution. Of course, all nations, including China and India, need to head to net zero emissions, but Australia is hardly a minnow. Including our fossil fuel exports, Australia makes up about 4.5 per cent of global emissions, according to Climate Analytics. As a relatively wealthy nation with one of the world’s highest per-capita carbon pollution rates, Australia can hardly hold out for poorer nations (with much lower per-head emissions) to plug their smokestacks and exhaust pipes.

But it’s not as though passivity on our part will be cost-free. LA’s rebuild costs, ballooning by the day, will partly be picked up by global reinsurers. When they price their service to Australian insurers, they will want a higher reward for risk-taking. Insurance premiums have been among the fastest growing bills for Australian households. California’s catastrophe – and last year’s hurricanes and flood damage in many nations – will inevitably take a toll.

Australia’s fire authorities, likewise, will have to reassess the likelihood that water-bombing aircraft will be more in demand in the future. If fire seasons in the northern hemisphere lengthen further – as seems inevitable – we’ll have to pay more for leased planes. More likely, our governments will have to fund the purchase of more of our 170-odd airborne fleet, at no small cost of taxpayers.

Those additional expenses are just a fraction of dealing with our fire-related exposures. Ask those caught up in the 2009 Black Saturday fires in Victoria or the 2019-20 bushfires about the personal costs of the destruction and years needed to rebuild lives and communities.

Climate change impacts, of course, will be much more varied. Our Great Barrier Reef, for instance, has been hit by five mass coral bleachings in eight years (with another possible this summer unless more monsoonal weather – including cyclones – arrives). Tens of thousands of tourism-related jobs are at risk as the waters around Australia heat up and turn more acidic. This will bring its own disruptions, quite apart from the depletion of one of the world’s natural wonders. How to put a price on that?

Firefighters inspecting extensive damage in residential areas in Los Angeles. Credit: Anadolu via Getty Images

Thinking 2024’s 0.1 degree rise in average global temperatures on the previous year is bearable overlooks last year’s serious heatwaves in many regions. On July 10, almost half the globe – a record, at 44 per cent – was affected by “strong” to “extreme heat stress” with “feels-like” temperatures reaching at least 32 degrees, the Copernicus report highlights. (Heaven help those in Algeria, where such readings spiked to 59.1 degrees at one point.)

So what do we do? First, Australia and other nations must step up efforts to slow and then halt the rise in greenhouse gases – mostly sourced from burning fossil fuels – as soon as possible.

Carbon dioxide concentrations averaged a record 422.1 parts per million in 2024, the highest in at least 2 million years. Those of methane, at 1998 parts per billion, are the most in at least 800,000 years, Copernicus notes.

From a climate perspective, our naturally variable weather – especially for rainfall – makes Australia highly exposed if extremes increase, as scientists predict. From an economic view, though, few nations enjoy Australia’s bounty of solar and wind power potential. We also have abundant lithium and other resources that will allow us to store surplus energy when conditions are dark and still.

We can reduce the climate impacts to come, and also secure the benefits of a world economy that must decarbonise – if we have the wit and will to do so. A delay in taking climate action is not an option.

Matt Kean is chair of the Climate Change Authority. He previously served as a NSW minister for energy.

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