Critical Infrastructure failure escalates the macroeconomic impacts of disasters

Critical infrastructures (CIs), such as power systems, are vulnerable to disaster-induced disruptions, often resulting in industrial shutdowns and production losses. These disruptions cascade through interregional supply chains, amplifying the economic consequences. Conventional disaster impact assessments often overlook production downtimes caused by CI failures and fail to account for the spatial interdependencies between CIs and economic sectors. This study develops a spatially explicit framework to quantify the macroeconomic impacts of CI failures. Using Zuid-Holland as a case study, we simulate how flood-induced power outages reduce manufacturing output, with the shocks propagating through the wider economy. Within the assumptions of our modelling framework, results indicate that CI failures could amplify the economic impacts by approximately 50%. Sensitivity analyses further reveal that this amplification varies with the degree of interregional substitution (i.e., economic resilience) and the robustness of CI assets, with higher impacts under less resilient conditions. Our findings also underscore the importance of incorporating the systemic economic consequences of CI failures into adaptation planning, alongside physical damages. In the case study, prioritising substations serving sectors with limited interregional substitution capacity yields the largest reductions in impacts. Overall, the proposed framework advances system-level risk assessment and supports effective climate adaptation of CIs.Practitioner PointsThe methods presented in this study can be used to estimate the reduction in supply-chain impacts when a specific infrastructure component (e.g., electrical substation) is made more resilient to natural hazard disruptions. This information can support CI operators in engaging stakeholders to explore where investment costs can be shared in proportion to the risks reduced or the benefits received by different actors.Climate adaptation funds are limited, and careful choices have to be made on investments. Often, the question of ‘Where to invest?’ is addressed through a criticality analysis, in which the most vulnerable infrastructure to a hazard is prioritized first. In this study, we show that the process of identifying the most critical infrastructure assets could also be complemented by considering the supply-chain consequences of CI failure.Interdisciplinary System InsightsWe adopt an interdisciplinary systems approach that links infrastructure systems with economic systems, bridging methodologies from natural hazard risk analysis and input-output analysis. This systems approach enables the quantification of the supply-chain effects of CI failure, which would have been obscured under a siloed approach where the systems are treated independently. The methods and insights can readily be extended to understand the systemic economic impacts of failures in other CI systems such as transportation systems, and guide investment decisions by prioritizing the reinforcement of transportation corridors whose disruption would cause the greatest supply-chain impacts.