Newsletter XVIII - OECD High Level Forum on investment in resilient infrastructure, on 18-19 September 2019

Oct 24, 2019

A meeting entitled “Investing in infrastructure: Costs, benefits and effectiveness of disaster risk reduction measures”, was held under the auspices of the Organisation for Economic Co-operation and Development (OECD) High Level Forum, on 18-19 September 2019 in Paris. The aim of the meeting, which was co-organized by the Platform for Climate Adaptation and Risk Reduction (PLACARD), was to showcase, share and discuss the different approaches and methodologies for cost benefit analyses (CBA), broader cost effectiveness analysis and the different tools used to inform and support infrastructure resilience investment decisions. A brief summary of the meeting’s sessions is provided below.

 Modelling the net present value of resilience measures: This session compared present costs and future benefits of investments in disaster risk reduction (DRR). A set of existing discount rates was identified, focussing on variables in calculation of discount rate values (up to 7%).

 Assessing the value of intangibles: In this session, the following methods of revealed preferences (i.e. methods of analysing choices by individuals) were found to apply: Hedonic pricing method (HPM); Travel cost method (TCM); Cost of illness (CoI) approach; Replacement or restoration cost method (RCM). Also, stated preferences utilise the following approaches: Contingent valuation method (CVM); Choice methods method (CMM); Life satisfaction analysis (LSA).

 Monetisation of the benefits of multi-purpose resilient infrastructures: Here, CBA could be used to monetise and integrate co-benefits of DRR projects. Economic effectiveness tools to monetise or estimate the value and co-benefits of hard and soft resilience packages, were explored.

 Post-disaster analysis: Post-disaster analysis often highlights the disproportionate socio-economic impacts of a disaster experienced by different genders and social groups. It is important to consider the vulnerability of different population groups when analysing the impact of DRR projects.

 Resilience of infrastructure systems for local emergency management: This session focused on the 2009 L’Aquila earthquake. After that event Italy’s government spent €965 million on seismic risk reduction activities, with the introduction of a seismic risk index which was used to allocate the funds among regions.

 Impact of community-based DRR projects: Tools such as comprehensive climate risk management (CRM), which reflect on current and future climate-related risk, involve a layering of measures related to DRR and climate change adaptation (CCA) at local and national levels, to enhance coverage of communities and population. CRM may include fiscal risk assessments with longer-term budget analyses and fiscal stress testing for economic effectiveness at national level, with local-level training and soft investments.

 Assessment of the economic value of ecosystem-based measures: Usually DRR projects include hard and soft infrastructure improvements, the former providing physical protection and the latter reducing communities’ exposure to hazards. Events in Colombia were discussed to identify the positives and negatives of the country’s experience.

 Finally, after two days of discussions and presentations, the participants summarized the main challenges in this area, as follows: (a) Changes in governance are needed to meet the above-mentioned challenges. (b) Different CBA approaches (history, social welfare economics) are being used to identify the best projects in the area of DRR and CCA. (c) Inclusion of intangible factors differs in countries around of world. (d) A wide range of discount rates is applied and there is a need to improve the existing approaches.

Oleksandr Sushchenko and Reimund Schwarze
Helmholtz Centre for Environmental Research (UFZ), Leipzig,
Markus Leitner
Environment Agency Austria (Umweltbundesamt), Vienna

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