Assessing the benefits from improved hydromet services Orders of magnitude and future research

1. Assessing the benefits from improved hydromet servicesOrders of magnitude and future research Stéphane Hallegatte The World Bank, Sustainable Development Network Email: shallegatte@worldbank.org

2. Disasters and asset losses Data from Day (1970) or Carsell et al (2004) If warning reduces losses by 10%, and only half of the floods are forecasted, 200m EUR of benefits per year in Europe If warning reduces losses by 50% and 75% of the floods can be forecasted, 1.5b EUR of benefits per year in Europe Idem with windstorm: between 460m and 2.7b in Europe

3. Annual asset losses that could be avoided thanks to EWS Potential benefits, assuming countries have the same potential (wrt GDP) than Europe

4. Annual asset losses that could be avoided thanks to EWS Broad assumptions about the share of potentials that are realized today

5. Annual asset losses that could be avoided thanks to EWS Estimates of current benefits in all countries

6. Annual asset losses that could be avoided thanks to EWS Hydromet services and early warning systems could reduce annual asset losses by between 300 million and 2 billion USD per year in developing countries

7. Other economic benefits from hydromet information in Europe • Benefits from the optimization of economic production • Weather sensitive sectors at the global level: • Agriculture,  2,000 billion USD; • Mining and energy, 7,000 billion USD; • Construction, 3,200 billion USD; • Transport, 4,300 billion USD. • Total: sensitive sectors create more than 16,000 billion USD per year of added value, i.e. about 25% of world GDP.

8. Other economic benefits from hydromet information in Europe • Examples of optimization of production processes: • Nuclear plants production levels take hours to adjust, and rely on electricity demand forecasts that are weather-dependent; • Some activities in the construction industry are temperature-dependent (e.g., concrete additional ingredients are required if temperature exceeds 32°C); • Farmers base their decisions (e.g., harvesting date, fertilizer application) on weather data and forecasts. • Air traffic and other transports can anticipate perturbations • Case studies and national-scale studies in developed countries suggest value added gain from much larger than 1% of sector VA. • With 0.1% or 1% gain, total gain from hydromet services in developed countries are between 0.025 and 0.0025% of GDP.

9. Annual economic benefits from hydromet information in developing countries

10. Natural hazards kill on average 43,000 persons per year in developing countries Number of people reported killed by weather-related natural disasters (1975-2011), in developing countries and at the world level. There is no significant trend in these series. Data from EM-DAT: The OFDA/CRED International Disaster Database.

11. Developed vs. developing countries • There is an annual death probability of 7.5 per million due to weather events in developing countries. • The annual death probability is 2.2 per million inhabitants in developed countries. • Using EWS, we assume that the annual death probability in developing countries could be reduced from 7.5 to 4 per million • Half the current level • Twice the level in developed countries • Using Copenhagen Consensus values, it corresponds to an annual benefit of 700 million USD per year or 3.5 billion USD per year. • This estimate is conservative, as we do not account for morbidity (injuries and disaster-caused illness)

12. How to improve hydromet services and EWS ? • The local observation system, based on ground, in-situ observations • Forecasting capacity, i.e. the translation of low-resolution model forecast into high-resolution forecast  • Interpretation capacity, to translate model output into actual forecast and warnings  • Communication tools, to make sure the alert reaches the individuals in charge to implementing prevention measures • Users’ decision-making capacities, to make sure warnings are actually used (including for evacuation). Cost (from national scale studies) in 80 developing countries, less than $1 billion per year.

13. Conclusions

14. Areas for future research

15. What about marginal benefits? • To assess whether investments should be increased or decreased, what matters is the marginal benefit (i.e. benefit from one more dollar invested). The problem is the non-convexity of benefits wrt investments Benefits Easier when assessing existing capability or instrument (example of the METOP system) Cumulative investment

16. What about climate projections? • Adaptation requires also anticipation, especially in sectors with long-term investments: • Water management infrastructure (lifetime: up to 200 years); • Energy production and distribution infrastructure (up to 80 years); • Transportation infrastructure (50 to 200 years) ; • Natural disaster protections (50 to 200 years); • Urbanism, housing and architecture (25 to 150 years). • These infrastructures represent more than 200% of GDP in developed countries • In developing countries, these infrastructures are currently being built and it is urgent to take climate change into account.

17. IPCC, 2007

18. What about national security? • In the absence of national security considerations, much more cooperation and coordination would be possible.

19. 1 0.9 0.8 The best is never to protect: the forecast creates too many false alarms to be useful. Its value is zero 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 0 0 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 Link with decision-making Value of the deterministic forecast of temperature anomaly above 8°C, 6 days in advance (144h) during the summer 2003 (850hPa level) The best is to protect all the time: the forecast misses too many events to be useful. Its value is zero FORECAST VALUE (0=climatology; 1=perfect forecast) The ratio between protection cost and event losses (C/L) Source: ??

20. Link with decision-making Source: Olivier Mestre (Meteo-France)

21. The role of indirect losses The Northridgeearthquakein 1994 The Loma Prieta earthquake in 1989 in San Francisco

22. The Northridgeearthquake in 1994 Tierney (1997) Giuliano and Golob (1998)

23. Kroll et al. (1991)

24. Employment impacts

25. Model-based assessment of indirect losses Results from the ARIO model in Louisiana Katrina • Little or no indirect loss if direct losses are below $50 billion. • Indirect losses soar when direct losses exceed $50 billion. Hallegatte(2008)

26. Conclusions • We can claim that hydromet services benefits exceed costs in rich countries • We can claim that better hydromet services in developing countries would be cost-efficient (if we can do it) • We cannot conclude on the “optimal” budget in rich countries and on the cost-effectiveness of selected investments (except in some cases, see the Metop paper) • We have a long way to go to assess the cost-benefit ratio