A total eclipse of the economy?

Photographer: NASA/Getty Images

How Space Could Trigger a Future Economic Crisis

Mark Gilbert is a Bloomberg View columnist and writes editorials on economics, finance and politics. He was London bureau chief for Bloomberg News and is the author of “Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable.”
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A report published in the journal Space Weather this week makes for sobering reading. In four scenarios envisaging the economic impact of a solar storm, the mildest triggers a daily loss to the U.S. economy of $6.2 billion, or 15 percent of daily output; the worst case sees a cost of $41.5 billion, wiping out every dollar the world’s largest economy generates each day.

What sort of event could do that? Something, say, along the lines of the massive explosion on the sun akin to “thousands of nuclear bombs exploding at the same time” that happened on March 10, 1989, according to the U.S. National Aeronautics and Space Administration. The explosion released a vast cloud of solar plasma that raced toward the earth at a million miles an hour. When it hit Canada, the electrically charged storm knocked out Quebec’s power grid, leaving 6 million people without power for nine hours.

The World Economic Forum’s annual assessment of global risks, published last week, rates extreme weather events as the most likely risk to the world and the second-most impactful (detonating weapons of mass destruction was perceived as the risk with the greatest consequences, though deemed unlikely to happen).

Weather-related disasters cost the U.S. economy $46 billion last year, with 17 billion-dollar events making 2016 the second-most costly year since 1980, according to the National Centers for Environmental Information. Inland flooding inflicted the most damage, including Hurricane Matthew and August flooding in Louisiana each causing $10 billion of damage during a fourth consecutive year of above-average precipitation.

A solar storm, though, could be responsible for an off-the-charts economic disaster. Global Positioning Systems, satellite services and electronic communication systems are all at risk from the solar flares known as coronal mass ejections.

But it’s national power grids that are seen as the most vulnerable earthbound assets, with a risk that power surges will overload transformers which are both expensive and difficult to replace. Changes in the earth’s magnetic field interfere with electrical currents and blow large high-voltage transformers, which take at least five months to build and are bulky to transport.

A study published last month by the Cambridge Centre for Risk Studies estimates that a solar storm would have the potential to wipe between $140 billion to $613 billion off the global economy in a five-year time span, depending on the severity of the impact. A world without power because of damaged transformers would become economically stagnant:

Such high value assets are not easy to procure and replace in the short-term. Failure in these critical assets could cause systemwide instability issues leading to cascading failure across the electricity system, passed on to other critical interdependent infrastructures such as transportation, digital communications and our vital public health systems.

This week’s Space Journal report focuses on the aftershocks from a solar storm knocking out power in the U.S.:

Sound unlikely? In July 2012, earth dodged a bullet when a solar flare erupted from the opposite side of the sun, missing our planet. It was even bigger than the Carrington Event, a solar storm in 1859 that scientists reckon was the biggest eruption on record. Moreover, there are plenty of historical examples of space weather disrupting everyday life on earth, and they’re more common than you probably realize.

We can’t dodge, prevent or suppress solar flares. But we can increase funding for early-warning systems such as the Space Weather Prediction Center in Boulder, Colorado. The U.K.’s Met Office opened its own space weather forecast center in 2014 after getting additional money from the government. And in November, Europe completed a program to coordinate data collection from more than two dozen institutions to improve forecasting.

We can also throw up more satellites specifically designed to watch out for solar storms. Last month, European ministers agreed to fund the design phase of a $478 million proposal to sit a satellite side-on to bursts coming from the sun, to complement the current head-on view from space hardware. The spacecraft, though, isn’t due to fly before 2023.

“We have been lucky that we have not been hit by a really big event,” Juha-Pekka Luntama, who heads the European Space Agency’s space-weather team, said in an article published in the journal Nature this week. “We will be hit eventually; the question is, ‘When?’” For the moment, it’s a question too few are asking. 

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Mark Gilbert at magilbert@bloomberg.net

To contact the editor responsible for this story:
Therese Raphael at traphael4@bloomberg.net