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Acclimate: a global damage transfer model

Summary of the global damage transfer model Acclimate

The Global Adaptation Strategies research group has developed the global damage transfer model Acclimate.

With the model Acclimate we aim at estimating the economic costs of climatic induced production failures, including indirect costs with potential low-probability but high-damage events, and conducting a systemic assessment of the limits of adaptation of the supply network. The model uses zeean data as a baseline.

The numerical model Acclimate incorporates production sites, consumption sites, material storage and transportation, as well as decision dynamics for the response to failures of either of these components. It depicts the forward and backward propagation of disaster induced shock waves in a highly non-linear, time-dependent and spatially explicit way.

Model setup and decision rationale

The core of the model is the interplay of several nonlinear functions describing transactions between economic agents, namely production and consumption sites. The agents are connected to each other via inputs and, in case of a production site, outputs. The output of a production site can be reduced by an external perturbation, e.g., an extreme weather event, as well as by a lack of inputs from other production sites. After a shock, each agent intends to find back to its equilibrium state.


acclimate decision rationale
Figure 1: Acclimate's decision rationale

Figure 1 depicts Acclimate's decision rationale for a production site: It is connected to other economic agents via inputs and outputs. Inputs that are not used for immediate production are put into storage. According to the current production and storage level the production site addresses demand requests to other production sites. The delivery of its output to other production and consumption sites is time-delayed due to transportation. Decisions are taken to either sustain or regain the initial production level. The Production Manager (PrM) sets the current production in accordance with the input storages and the demand for its product. Sales Manager (SM) and Purchasing Manager (PM) decide on output and demand distribution. (Wenz et al. (2014).

 

 

Propagation of disaster-induced production failures

The model acclimate is designed to show how local production disruptions due to an extreme event may induce shock waves that propagate through the economic network and potentially evoke supra-regional production failures. The propagation of economic losses along global supply chains may occur via forward (i.e. with the economic flow) and backward (i.e. against the economic flow) linkages in the network. More precisely, production sites in other, primarily unaffected parts of the world may be obliged to also reduce their productions because of missing inputs (supply shortages) and/or decreased demand requests. Within the modeling framework, such higher-order losses can be reduced by the existence of sufficiently large material storages, by the possibility of demand readdressing and by the capability of unaffected production sites to extend their initial production by a certain factor. In the latter case, a recovery of the entire system is possible (dissipation effect).

Time scale

The model explores immediate response dynamics following a climatic impact (days to weeks), the subsequent recovery phase of the supply network (weeks to months). Future model versions/setups will also take the longer time scale into account in which the economic system adapts to the changing production and investment environment (months to decades).

The model focuses on analyzing the indirect effects of local perturbations without taking into account economic growth. More precisely, each agent performs a local optimization where it is assumed that the agents cannot anticipate future extreme events.

Work in progress and planned extensions

The short-term response will be complemented by middle and long-term adaptation strategies within the production network which may reduce the costs of climatic impacts. For this purpose we will be investigating different adaptation strategies which are based on price dynamics as well as network dynamics.

Acclimate was developed and has been implemented by three PhD students, Robert Bierkandt, Leonie Wenz and Sven Willner, together with Anders Levermann. The strong link to Katja Frieler's EXPACT project manifests itself in the close collaboration with Christian Otto.

Please see the publications section below for the first two articles describing the model Acclimate and its basic dynamics.


Publications

The acclimate model descriptions are documented in the following publications:

R. Bierkandt, L. Wenz, S.N. Willner, A. Levermann (2014): Acclimate - a model for economic damage propagation. Part I: basic formulation of damage transfer within a global supply network and damage conserving dynamics, Environment, Systems and Decisions, 34, 507-524, doi: 10.1007/s10669-014-9523-4.

L. Wenz, S.N. Willner, R. Bierkandt, A. Levermann (2014): Acclimate - a model for economic damage propagation. Part II: a dynamic formulation of the backward effects of disaster-induced productions failures in the global supply network, Environment, Systems and Decisions, 34, 525-539, doi: 10.1007/s10669-014-9521-6.

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