Volker Meyer Costs of Natural Hazards

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Forum Loire & affluents Au coeur de l'Europe des fleuves Echange d’expériences et transfert de savoir-faire en matière de coopération sur la gestion intégrée des bassins fluviaux. CONHAZ Costs of Natural Hazards

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Cost assessment of natural hazards – state-of-the-art, knowledge gaps and recommendations Volker Meyer, N Becker, V Markantonis, R Schwarze, J C J H Aerts, J C J M van den Bergh, L M Bouwer, P Bubeck, P Ciavola, V Daniel, E Genovese, C Green, S Hallegatte, H Kreibich, Q Lequeux, B Lochner, I Logar, E Papyrakis, C Pfurtscheller, J Poussin, V Przyluski, A H Thieken, P Thompson, C Viavattene :

Orleans, December 2014 Cost assessment of natural hazards – state-of-the-art, knowledge gaps and recommendations Volker Meyer , N Becker, V Markantonis, R Schwarze, J C J H Aerts, J C J M van den Bergh, L M Bouwer, P Bubeck, P Ciavola, V Daniel, E Genovese, C Green, S Hallegatte, H Kreibich, Q Lequeux, B Lochner, I Logar, E Papyrakis, C Pfurtscheller, J Poussin, V Przyluski, A H Thieken, P Thompson, C Viavattene Source: UFZ, André Künzelmann

Objectives of cost assessment:

Objectives of cost assessment Naturals hazards cause huge losses Cost assessment supports Ex post: assessments of recent hazards Ex ante: decisions about allocation of public budget & efficient risk mitigation This requires reliable and comprehensive estimates of costs Difficulties : Diversity of terminology and methodological approaches for different hazards and impacted sectors

The CONHAZ project:

Page 3 Co sts of N atural Haz ards Instrument: Coordination Action Project, EU FP7 (not a research project, i.e. no development of new methods) Project duration: 2/2010 – 2/2012 The CONHAZ project

Objectives of CONHAZ:

Objectives of CONHAZ Compile state-of-the-art methods for cost assessment  considering different cost types  across sectors and hazards; Analyse and assess these methods assumptions, supporting theories, technical aspects, terminologies, data quality and availability, and research gaps Synthesise resulting knowledge into recommendations and identify further research needs 1 2 3

Cost types:

Cost types Working definition of cost types within CONHAZ : Direct tangible costs: Direct physical impact on economic assets Losses due to business interruption : Losses due to interruptions in industry, commerce and agriculture directly caused by the hazard Indirect costs: Induced by direct damages or losses due to business interruption (production losses of suppliers, traffic disruption) Intangible (non-market) costs: Damages difficult to monetise (adverse health effects, environmental goods and services) Mitigation costs: Costs of risk reduction

Project structure:

Page 6 Project structure WP9: Synthesis & Recommendations (UFZ) Meyer et al. 2012 WP5: Costs of Droughts (UAB) Logar and van den Bergh 2011 WP6: Costs of Floods (MU) Gr een et al. 2011 WP7: Costs of Coastal Hazards (UniFe) Lequeux and Ciavola 2011 WP8: Costs of Alpine Hazards (UIBK) Pfurtscheller et al. 2011 WP1: Direct Costs & Business Interruption (GFZ) Bubeck and Kreibich 2011 WP2: Indirect Costs (SMASH/CIRED) Przyluski and Hallegatte 2011 WP3: Intangible Effects (UFZ) Markantonis et al. 2011 WP4: Costs of Mitigation (IVM) Bouwer et al. 2011 Hazards Cost types

Project structure:

Page 7 Project structure WP9: Synthesis & Recommendations (UFZ) Meyer et al. 2012 WP5: Costs of Droughts (UAB) Logar and van den Bergh 2011 WP6: Costs of Floods (MU) Gr een et al. 2011 WP7: Costs of Coastal Hazards (UniFe) Lequeux and Ciavola 2011 WP8: Costs of Alpine Hazards (UIBK) Pfurtscheller et al. 2011 WP1: Direct Costs & Business Interruption (GFZ) Bubeck and Kreibich 2011 WP2: Indirect Costs (SMASH/CIRED) Przyluski and Hallegatte 2011 WP3: Intangible Effects (UFZ) Markantonis et al. 2011 WP4: Costs of Mitigation (IVM) Bouwer et al. 2011 Hazards Cost types

Compilation of methods: direct costs:

Compilation of methods: direct costs

Compilation of methods: busisness interruption:

Compilation of methods: busisness interruption

Compilation of methods: indirect costs:

Compilation of methods: indirect costs

Compilation of methods: intangible (non-market) costs:

Compilation of methods: intangible (non-market) costs

Compilation of methods: risk mitigation costs:

Compilation of methods: risk mitigation costs

Compilation of methods:

Compilation of methods

Compilation of methods:

Compilation of methods Direct tangible costs: Susceptibility functions (single/multi-parameter) Losses due to business interruption : Indirect costs: Intangible (non-market) costs: Mitigation costs:

Knowledge Gaps & Recommendations:

Knowledge Gaps & Recommendations

Comprehensiveness: Cost assessments still biased, incomplete:

Comprehensiveness : Cost assessments still biased, incomplete Focus of practice (and methods) still very much on direct costs, indirect and intangible costs often neglected also consider costs due to business interruption indirect costs intangible/non-market costs complete picture of the costs of natural hazards all relevant information for supporting decisions

Uncertainty and Validation Cost assessment still very uncertain:

Uncertainty and Validation Cost assessment still very uncertain Still very high uncertainties in all parts of cost assessment improve the availability and quality of data (see recommendations on data) advance models (see recommendations on methods). However: all data and cost estimations are inaccurate to some extent documentation & communication of remaining uncertainties

Data:

Data Lack of ex post data availability and quality ex post damage data Data on costs of mitigation framework for supporting data collection on European level minimum data quality standards consistency of European and national databases

Improvement of methods 1. shock to the system – direct costs :

Improvement of methods 1. shock to the system – direct costs Simple one-parameter models may lead to inaccurate estimates better capture the variety of damage influencing parameters multi-parameter damage models resistance parameters Link to indirect cost assessment still weak… Source: Thieken et al. 2008

Improvement of methods 2. Indirect, economic system:

Improvement of methods 2. Indirect, economic system Little understanding of the economic response to external shocks More research how markets function outside equilibrium, role of networks dynamics of return to equilibrium output (GDP) time ? ? ?

Improvement of methods 3. intangible, non-market:

Improvement of methods 3. intangible, non-market Intangible costs rarely considered in cost assessments Monetary valuation methods are available , but not often applied in practice Physical processes/impacts of natural hazards on environment and health often not well understood Better estimation of ecological impacts, health effects Better inclusion into the decision making process: Multi-Criteria Analysis framework (non-monetary) or Cost-Benefit Analysis framework (monetarisation necessary)

Improvement of methods 4. costs of mitigation:

Improvement of methods 4. costs of mitigation Costing of mitigation measures focus on estimating direct costs , especially investment costs More attention to operation and maintenance costs , indirect and intangible costs of mitigation measures Non-structural measures often not considered in decision support frameworks better estimation of the costs of non-structural measures , together with structural alternatives

Future dynamics most ex ante cost assessments assume current risk situation:

Future dynamics most ex ante cost assessments assume current risk situation Dynamics of risk drivers not often considered in cost assessment More research is needed on effects of climate and socio-economic change on the future costs how to integrate such dynamics in cost assessment approaches

Distribution of costs and risk transfer :

Distribution of costs and risk transfer How are costs (and risks) distributed within society : who pays, who benefits etc.? more research is needed on the distribution of the costs: on potential risk transfer systems (including insurance) effect on society´s ability to recover & influence total damage costs incentives for risk mitigation

Knowledge transfer:

Knowledge transfer Many cost assessment methods developed in science require some experience/expertise for applying them in practice Training is needed to transfer knowledge on cost assessment methods from science to practice. especially for methods assessing indirect and intangible (non-market) costs

Decision support cost assessement for better decision support:

Decision support cost assessement for better decision support Cost estimations often incomplete & to some degree uncertain Optimisation will remain an illusion (by means of Cost-Benefit Analysis) Need for decision support tools & guidance consider & communicate uncertainties transparent participatory iterative costs , benefits protection R*

Summary:

Summary Cost assessment in support of better decision making Comprehensive, welfare based approach Improving data, advancing models Considering dynamics of risk, distribution of risk Embedded in local risk dialogues, acknowledging uncertainties

PowerPoint Presentation:

Cost assessment Principles: context-specific applicable comprehensive transparent considers dynamics 1 st Step : Definition of the context of cost assessment Basic Steps 5 th Step : Monitoring and updating of costs, adjustment of risk management 2 nd Step : Assessment of all relevant costs 3 rd Step : Integration of scenarios of future dynamics of risk 4 th Step : Using cost assessment for making better decisions on risk mitigation Ex ante Ex post adjust data & methods adjust aim & scope update scenarios If necessary: refine data, reduce uncertainties

Cost assessment of natural hazards – state-of-the-art, knowledge gaps and recommendations Volker Meyer, N Becker, V Markantonis, R Schwarze, J C J H Aerts, J C J M van den Bergh, L M Bouwer, P Bubeck, P Ciavola, V Daniel, E Genovese, C Green, S Hallegatte, H Kreibich, Q Lequeux, B Lochner, I Logar, E Papyrakis, C Pfurtscheller, J Poussin, V Przyluski, A H Thieken, P Thompson, C Viavattene :

Wien, April 2011 Cost assessment of natural hazards – state-of-the-art, knowledge gaps and recommendations Volker Meyer , N Becker, V Markantonis, R Schwarze, J C J H Aerts, J C J M van den Bergh, L M Bouwer, P Bubeck, P Ciavola, V Daniel, E Genovese, C Green, S Hallegatte, H Kreibich, Q Lequeux, B Lochner, I Logar, E Papyrakis, C Pfurtscheller, J Poussin, V Przyluski, A H Thieken, P Thompson, C Viavattene Source: UFZ, André Künzelmann see www.conhaz.org Cost type reports: direct costs and costs due to business interruption (Bubeck and Kreibich 2011) indirect costs (Przyluski and Hallegatte 2011) costs due to intangible, non-market effects (Markantonis et al. 2011) costs of risk mitigation (Bouwer et al. 2011) Hazard types reports: droughts (Logar and van den Bergh 2011) floods (Green et al. 2011) coastal hazards (Lequeux and Ciavola 2011) Alpine hazards (Pfurtscheller et al. 2011) Synthesis Report, Papers & book chapters: Meyer et al. 2012 (synthesis report) Meyer et al. 2013 (in NHESS) Kreibich et al. 2014 (in Nature Climate Change) Meyer et al. 2014 (in Quevauviller 2014)

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