Economic Impact of Wildfire Season: Local and National Effects

Key Takeaways

• Millions of acres of land are destroyed every year due to wildfires, a common and increasingly devastating occurrence.
• So far this year, as of August 2022, over 48,000 wildfires have destroyed nearly 6.2 million acres of land, on track to top 2021’s destruction of seven million acres.
• Wildfires have become a bigger threat in recent years due to a longer average season, higher temperatures that increase risk factors, earlier melting of winter snowpacks, and other results of rapid climate change.
• Wildfires cause health problems and loss of life, devastating communities. They can create long-term air pollution as well, also impacting the health of a community.
• There is also a profound economic impact from wildfires, as properties and businesses are destroyed, and tourism and recreation are decimated.

Wildfires burn millions of acres each year in the United States, causing billions of dollars in economic losses. Homes and infrastructure are destroyed, leading to rising healthcare costs from smoke exposure and significant disruptions to tourism and employment. These disasters leave lasting financial scars, affecting insurance markets, housing affordability, agriculture, and supply chains nationwide. These impacts underscore how wildfires have become not just an environmental crisis, but a growing threat to long-term economic stability.

Economic Consequences of Wildfire-Related Health Issues

Health and loss of life are significant personal impacts of wildfires that also affect economies. Fires across the U.S. in 2019 caused about 3,700 civilian deaths and another recorded 16,600 injuries. In addition to the major personal trauma of these deaths and injuries, they also have the potential to bring about change in local economies. Victims may be unable to work either permanently or for a period of time during recuperation.

Another health impact of wildfires related to the economy is air pollution. Individuals in close proximity to a wildfire face dangers from breathing smoke, and major wildfires can even negatively affect the air quality thousands of miles away. Even individuals not directly harmed in a fire may have health repercussions that affect their livelihood and healthcare needs.

Economic Impact of Property Damage from Wildfires

Property loss and damage is one of the primary effects of wildfires. A fire occurs in a structure every 64 seconds across the U.S., although outdoor fires remain more common. In total, fires in the U.S. in 2020 caused $21.9 billion in property damage.

The largest wildfires may cause well over $1 billion in property loss and damage individually—the costliest wildfire in U.S. history, 2018’s Camp Fire, resulted in a loss of about $10 billion at the time. Eight of the 10 costliest wildfires ever in the U.S. have taken place in the past four years.

Property loss is an immediate economic impact of wildfires, but there are also ripple effects that carry on for years. With the loss of property comes the displacement of individuals and families from their homes, the decimation of businesses, and significant effects for insurers. Perhaps surprisingly, local employment and wages may actually increase during large wildfires as fire suppression efforts generate employment opportunities. However, wildfires tend to make local labor markets less stable over time because they cause dramatic disparities in seasonal employment.

Wildfires’ Threat to Tourism and Recreation Economies

The U.S. outdoor recreation economy was nearly $374 billion in 2020, roughly 1.8% of the national GDP. Wildfires not only have the potential to wipe out outdoor areas that draw in tourists but also to drive people away for years to come. Tourists and outdoors enthusiasts tend to avoid state and national parks when smoke is present, and this can have a widespread impact on other industries as well. In this way, wildfires can also negatively affect hospitality, restaurant, and other industries.

The Bottom Line

Wildfires have a major impact on local and national economies. This ripples across industries and state lines, making the full financial toll difficult to measure. A University College London study estimated that California’s 2018 wildfires alone cost the U.S. economy $148.5 billion, with roughly one-third of those losses occurring outside the state. As wildfires grow more frequent and intense, the economic consequences of these interconnected impacts are likely to escalate.