How does wildfire smoke affect the economy?

Wildfires in the United States are becoming larger and more frequent, driven by hotter, drier weather resulting from climate change. Even when fires are hundreds of miles away, their smoke can negatively impact human health and lead to economic costs through air pollution, according to Casey Wichman, an associate professor at Georgia Tech's School of Economics.

The Air Quality Index (AQI) indicates the cleanliness or pollution level of the air - a healthy AQI is between 0 and 50, but wildfire smoke can cause it to soar to 500 or higher.

Poor air quality affects where and how people spend their time and money, diminishes productivity, and raises healthcare expenditures. Over the past four decades, environmental regulations like the Clean Air Act have significantly improved air quality. However, wildfire smoke is eroding these gains, as recent research shows it has wiped out approximately a quarter of progress in overall air quality and over half in some Western states.

Air pollution costs the economy billions annually, so it's crucial to consider these costs when assessing the full impact of climate change. When AQI levels are high, people tend to stay indoors, reducing spending and adversely affecting businesses that rely on foot traffic. Workers may choose to take the day off or companies may cancel operations due to safety concerns. Even those working from home are exposed to air pollution, which can decrease productivity.

High AQI levels from wildfire smoke also lead to increased labor participation in outdoor industries like agriculture and construction, with employees potentially taking days off or companies canceling work. While some research exists on the social cost of wildfires, many productivity impacts remain challenging to quantify and are less likely to be considered in the overall cost of wildfires.

The health effects of air pollution can result in significant economic costs. A study published in Science of the Total Environment estimated that short-term wildfire smoke exposure costs Americans $11 billion to $20 billion per year, while long-term exposure costs $76 billion to $130 billion annually, including hospital admissions, respiratory and cardiovascular illnesses, and premature deaths (in 2010 dollars).

Wichman anticipates more flexibility with work-from-home arrangements, increased disruptions to outdoor labor, and higher school cancellations as high-smoke days become more common. This could result in lost wages, delayed projects, and reduced economic activity, akin to canceling school due to hazardous road conditions.