How Much Do Wildfires Really Cost California’s Economy?

Back CalMatters Oct 11, 2021 By Grace Gedye

Not a single structure burned down in the city of South Lake Tahoe. And yet, the threat of the fast approaching Caldor Fire cost surrounding El Dorado County tens of millions of dollars, if not more. 

In South Lake Tahoe, Domi ​​Chavarria, co-owner of Verde Mexican Rotisserie, felt the devastation of the Caldor Fire even before the city was evacuated in August. Smoke had blanketed the city, and the tourists had mostly left. When the evacuation orders came down, Verde was stocked with food, almost all of which went bad during the more than two weeks the restaurant ultimately remained closed. Produce wilted; proteins went bad; prepared sauces couldn’t be used. 

“All that stuff, none of that’s made to last weeks — it’s all made the last days,” says Chavarria. He estimates the lost inventory was worth between $10,000 and $13,000. None of it was covered by his insurance.

Losses like Chavarria’s add up — to at least $50.3 million in lost economic activity for El Dorado County, according to an initial estimate shared with CalMatters. 

Food inventory from the Verde Mexican Rotisserie restaurant had to be discarded after a 2 week evacuation order due to the Caldor Fire in South Lake Tahoe. Domi Chavarria, the owner of Verde Mexican Rotisserie, lost about $10K worth of inventory when they shut down for two weeks due to the Caldor Fire evacuation. Photo courtesy of Domi Chavarria.
Food inventory from the Verde Mexican Rotisserie restaurant had to be discarded after a two-week evacuation order due to the Caldor Fire in South Lake Tahoe. Photo courtesy of Domi Chavarria.

Knowing the true cost of wildfires could spur more ambitious action from both government and the private sector, experts say. For instance, tracking the costs systematically over several years could help policymakers figure out which fire prevention and mitigation strategies are most cost effective. 

But right now, California has an incomplete understanding of how much wildfires cost the state each year.

The costs of business disruption, the cost of damage to uninsured homes, the cost of ecosystem damage, and the cost of secondary health impacts — such as those caused by wildfire smoke — aren’t being tracked. 

Right now, we don’t have a comprehensive picture of the economic harm wildfires cause each year, according to Teresa Feo, senior science officer at the California Council on Science and Technology and lead author of a 2020 report from the council on the cost of wildfires in California. 

“There isn’t a statewide systematic tracking effort to figure out these costs,” says Feo. She said it took only about a month of digging into the question to realize: ”Oh no, you can’t come up with a number, this is actually impossible with the existing data.”

The state does not track or estimate the cost of wildfires in a way that accounts for public health costs or ecological damage on a regular basis, confirmed Heather Williams, communications director for California Natural Resources Agency. “Those would always be a moving target since health impacts can occur years later. But with more research being funded, this may be more feasible to help the state better understand the economic and ecological impacts so we can continue to make science-based informed policy decisions,” Williams wrote in an email. 

The different costs of wildfires

The initial analysis of the Caldor Fire’s economic impact was prepared by Tom Harris, an economist at the University of Nevada, Reno, for the Tahoe Prosperity Center, an economic development organization for the Lake Tahoe Basin. It estimates the combined losses of El Dorado and Nevada’s Douglas County at $93 million. And, says Harris, that preliminary estimate is low: It doesn’t include the losses in sectors like rental homes or recreation businesses. Nor does it include the lost economic activity caused by residents evacuating, and it doesn’t take into account the healthcare costs associated with wildfire smoke exposure.

Some costs are more immediate — the cost of Chavarria’s rotted food, for instance, and the fact that the fire took place over Labor Day weekend. 

Domi Chavarria poses for a portrait at his restaurant Verde Mexican Rotisserie in South Lake Tahoe on Oct. 6, 2021. Domi Chavarria, the owner of Verde Mexican Rotisserie, lost about $10K worth of inventory when they shut down for two weeks due to the Caldor Fire evacuation. Salgu Wissmath for CalMatters
Domi Chavarria poses for a portrait at his restaurant Verde Mexican Rotisserie in South Lake Tahoe on Oct. 6, 2021. Photo by Salgu Wissmath for CalMatters

“That’s not a slow weekend in Tahoe,” says Chavarria. Tourism is about 63 percent of the Tahoe basin’s economy, according to a 2018 report from Tahoe Prosperity Center

Between the slowdown in business due to smoke and the evacuation, Verde lost several weeks of revenue. Chavarria says that a month of sales for the restaurant is more than $100,000. Verde’s employees also went without paychecks for the two weeks the restaurant was shut down. 

Nicole Smith, co-founder and taproom manager of South Lake Brewing Company, said her business fared better than many, partially because none of the beer went bad. But between the loss of sales in the company’s own taproom and the beer it sells to other local businesses, the brewery lost somewhere between $30,000 and $50,000 of revenue during the evacuation, estimates Smith.

In addition to lost business, some figures are easier to pin down, like the amount Cal Fire spends on fire suppression. 

But the state, for example, does not systematically track deaths and health conditions linked to wildfire smoke exposure. The costs associated with smoke may be the largest costs we’re missing, says Feo. One study produced by public health department researchers and academics tracked the use of Medi-Cal services during San Diego’s 2007 fall fire season. It found that during the peak fire period, emergency room visits for respiratory conditions increased by 34% and visits for asthma increased by 113%. Especially concerning was a 136% increase in ER visits for children four and younger for asthma. That finding, the authors wrote, “is cause for particular concern because of the potential for long-term harm to children’s lung development.”

A systematic effort to track wildfire smoke effects would be especially profound, says Feo, because it reaches so far beyond the location of the fire. In 2018, for example, smoke from the Camp Fire clogged San Francisco, a city more than a 100 miles away. If you can put figures on the impact of smoke across the whole state, “who’s impacted by the fire suddenly changes very dramatically, and therefore who benefits from the prevention and mitigation changes,” she said.

Different approaches to wildfire data

The current approach to assessing the aftermath of wildfires is a hodgepodge of research looking into different aspects that is not led by any one agency. 

A smattering of data collection efforts includes: 

  • The California Air Resources Board is funding a study of the health impact of wildfire smoke statewide for 2017, 2018 and 2020, which will be ready in three or four years; 
  • The board is also funding a study of lost work days due to wildfire smoke, which will be ready in a couple of years; 
  • Cal Fire is also increasing funding for research into forest health;
  • The Department of Insurance tabulates the damage to insured homes for some major wildfires, but does not track damage from all wildfires each year;  
  • And a variety of academic studies.

Academic research on the cost of wildfires tends to come out several years later, and different studies focus on different fires using different methodologies. That makes it difficult to compare the findings, or track the costs over time. 

These studies are also conducted based on the interests of the particular researcher, says Louise Comfort, a professor at the University of Pittsburgh and a faculty affiliate at UC Berkeley’s Center for Information Technology Research in the Interest of Society Policy Lab. “That doesn’t give us a comprehensive view,” Comfort says. She credits an UC-system wide effort to study the impacts of wildfires as a step in the right direction, but says the results are still not coming in in a standardized way. 

The state may be in the best position to lead the effort on tracking the economic impact of wildfires. “The only thing that would give us a comprehensive view is if the state really said, ‘We want this kind of information,” says Comfort. But the state agencies shouldn’t go it alone, she says, they should engage experts in the university system.

Cook Isaura Martinez preps food in the kitchen at Verde Mexican Rotisserie in South Lake Tahoe on Oct. 6, 2021. Domi Chavarria, the owner of Verde Mexican Rotisserie, lost about $10K worth of inventory when they shut down for two weeks due to the Caldor Fire evacuation. Salgu Wissmath for CalMatters
Cook Isaura Martinez preps food in the kitchen at Verde Mexican Rotisserie in South Lake Tahoe on Oct. 6, 2021. Photo by Salgu Wissmath for CalMatters

Without statewide, systematically published numbers, it’s more difficult to compare how different regions are suffering from wildfires, or to assess the cost effectiveness of different wildfire prevention strategies. And it may be more challenging to justify spending on expensive, but nonetheless cost-effective, mitigation or prevention programs. 

That’s a question that comes up when talking about spending taxpayer dollars, Feo said.  

While wildfire costs aren’t tracked, there are some academic studies that attempt to estimate those costs and produce mind boggling figures. In 2020, for example, a team of researchers studied the nationwide impact of California’s 2018 wildfire season, and estimated that its economic damage totaled $148.5 billion. 

The study, published in Nature Sustainability, captured direct capital costs, such as buildings burning down; health costs, including those related to air pollution exposure; and indirect losses such as the economic disruption of lost hours working, as well as disruption to regional and national supply chains. 

The costs identified in that study exceed that of any disaster in the U.S. between the 9/11 terrorist attacks in 2001 and the ongoing COVID-19 pandemic, other than Hurricane Katrina, says Adam Rose, a research professor at University of Southern California and an expert in energy and environmental economics. 

Rose said that a standardized methodology for assessing the total cost of wildfires should be established and applied on a regular basis — and it needs to be one that can be implemented relatively rapidly, as opposed to several years after a fire. That would allow a whole field of researchers to help track these costs, and would make their findings comparable. In addition to helping make the political case for government-led fire-prevention efforts, those numbers might spur private sector action on fire prevention efforts. 

But not all experts said that measuring the costs associated with each wildfire season is important. William Siembieda, a professor emeritus at Cal Poly in San Luis Obispo and senior member of a Cal Poly team that prepared several of the state’s annual hazard mitigation plans, says he doesn’t know how policymakers would make use of those numbers. 

What would be useful, Siembieda says, is for cities to model the economic impact of different levels of fire damage. What would be the cost if 5% of the city burned? What if 10% or 20% burned? 

With those estimates, local officials could decide whether they’re prepared to eat that loss, insure against the risk, or pursue other strategies.

What’s next for victims?

For a couple weeks now, South Lake Tahoe residents and business owners have been reopening their restaurants, shops, and adventure outfits, taking stock of what happened. When Lisa Schafer, co-owner of Wildwood Makers Market, returned to the city and drove to her shop for the first time, she felt waves of different emotions. There was the fear she’d been holding on to — that her hometown, her house, and her business would all burn to a crisp. There was the gratitude she felt for the fact that they had all been spared. 

“I cried the whole drive,” she said.

Her shop, which sells jewelry, wall decor, embroidery kits and other gifts, smelled smoky for her first few days back. It wasn’t a pleasant campfire smell; “it smelled like beef jerky.”

Business didn’t return to normal immediately; tourists didn’t rush back to the area. All told, Shafer lost about 60% of sales in September. Her insurance won’t cover that loss of business. 

It’s clear, she says, that these fires are not going away. She said she wishes there were some sort of automatic aid for businesses and individuals impacted by the fire. 

Ultimately, Wildwood Makers Market will bounce back from loss of business, Schafer said. But if something happens in the winter that disrupts the holiday shopping season, that could be “catastrophic,” she says. “One more hit would not be good for us.”

CalMatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics. ​​

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