Economic implications of potential ENSO frequency and strength shifts

Some argue that global climate change may alter the frequency and strength of extreme events. This paper examines the economic damages in the agricultural sector arising from a shift in El Nino Southern Oscillation (ENSO) event frequency and strength. The assumptions about the frequency of ENSO shift are motivated by an article by Timmermann et al. (1999). The damage estimates reported here are in the context of the global agricultural system. Annual damages in the 3 to 4 hundred million U.S. dollar range are found if only the frequency of ENSO events changes. However, annual damages rise to over $1 billion if the events also intensify in strength. Event anticipation and crop mix adaption on the part of farmers can help offset the damages but cannot fully alleviate them.