Computable general equilibrium modelling of economic impacts from volcanic event scenarios at regional and national scale, Mt. Taranaki, New Zealand.

Abstract

The economic impacts of volcanism extend well beyond the direct costs of loss of life and asset damage. This paper presents one of the first attempts to assess the economic consequences of volcanic impacts across a range of time and space. To do this we use multi-regional and dynamic computable general equilibrium modelling. Based on the last decade of volcanic research findings at Mt. Taranaki, we generated three volcanic event scenarios, named Tahurangi, Inglewood, and Opua. The Tahurangi scenario (annual probability of 0.01– 0.02), was designed as a small-scale explosive and dome forming eruption. For this scenario, the economic impacts were negligible, with complete economic recovery experienced within a year. The larger Inglewood sub-Plinian to Plinian eruption scenario event (probability of ~ 0.003) produced significant impacts on the Taranaki region economy of NZ$207 million. This represents around 4% of regional GDP a year after the event, and would take around 5 years to recover. The Opua scenario (annual probability of 0.00018), is the largest magnitude volcanic hazard modelled. This is a major flank collapse and debris avalanche event with associated economic impacts of $397 million. This represents around 8% of regional GDP a year after the event. It also causes permanent structural change to the economy of the Taranaki region. Our dynamic analysis illustrates that different economic impacts play out at different stages in a volcanic crisis. We also discuss the key strengths and weaknesses of our modelling along with potential extensions.