The Economic Cost of Doing Nothing

It is perhaps tempting to think it might be easier to do nothing rather than to take steps to address some of these threats. Take for example the issue of extreme fluctuations in water levels and the grave concerns expressed by many residents and other stakeholders recently when Georgian Bay and Lake Huron hit – and stayed at – unbelievable historic lows for such an extended period of time. But there is often an economic cost associated with not taking action, and sometimes that cost can end up to be considerably more than expected.

To better understand and quantify the economic costs associated with sustained low water levels, Georgian Bay Forever recently worked with the University of Toronto’s Mowat Centre and the Council of the Great Lakes Region to determine how key sectors of the Great Lakes St. Lawrence Region’s economy would be affected. Mowat’s research team looked at the major financial losses associated with the destruction of historic wetlands resulting from sustained worst-case lower water levels, as well as changes to water quality and biodiversity. The scientists also considered the costs of remedial measures such as dredging, blasting, and shoreline fortifications.

Additionally, the impact on specific economic sectors deemed to be those most critical to the future prosperity of the Great Lakes Region was assessed, including effects on the shipping and transportation industry; recreational fishing, boating and tourism; residential waterfront properties and related property values; hydroelectric power generation; and, municipal and industrial users.

Their conclusion? The cost of doing nothing is not affordable. To not mitigate the impact of sustained low water levels now in these areas will lead to a shocking USD $9.61 billion by 2030 and to USD$18.82 billion (both converted to present value dollars) by 2050 in direct hard costs for the Great Lakes Region economy.

Further, these amounts are considered to be very conservative estimates. Indirect soft costs such as job losses, productivity losses, and impacts on additional economic sectors or secondary and downstream sectors were not included in these economic calculations. If both direct and indirect economic impacts were to be included, it is anticipated that the multiplier effects would likely cause the costs to increase by a factor of at least three or more above these preliminary estimates.

Here’s a breakdown showing how researchers decided each of the sectors examined would be impacted by sustained low water levels:

The shipping industry
Recreational boaters, anglers and tourists
Owners of residential waterfront properties
Hydroelectric power plants
Municipal and industrial users