What is CBA and why you need it

Transcription

1 Flood Hazard Research Centre Middlesex University, London What is CBA and why you need it Edmund Penning-Rowsell Professor of Geography Oxford London FLOODCBA2 Seville May 2017 Distinguished Research Associate

2 The FHRC is an interdisciplinary research centre, based in the School of Science and Technology at Middlesex University. Risk governance Investment appraisal Equity and social acceptability Environmental

3 1 2 3 Rivers and towns Coastal hazards Standards and safety Three knowledge assembly and transfer projects across 8 EU countries Directorate General for the Humanitarian Aid and Civil Protection

4 Three knowledge assembly and transfer projects How to make wise 100% completed (proactive) investment decisions based on 100% completed systematic appraisal methods (principally using a Cost:Benefit c. 60% completed Analysis framework) Directorate General for the Humanitarian Aid and Civil Protection

5 1 2 3 Rivers and towns Coastal hazards Standards and safety Three knowledge assembly and transfer projects 1. A Common framework of terms and ideas 2. Guidelines for using investment appraisal techniques 3. Awareness raising and training 4. A legacy of a toolkit on a knowledge platform All systematically stakeholder validated Directorate General for the Humanitarian Aid and Civil Protection

6 3 SIGMA Consultants Ltd (GR) Lead Partner Greece Middlesex University Higher Education Corporation, Flood Hazard Research Centre (UK) UK University Pablo de Olavide (ES) Interdisciplinary Centre for Social Sciences, CICS.NOVA, University Nova de Lisboa (PT) Environmental Agency of Andalusia Region, REDIAM (ES) Region of East Macedonia and Thrace (GR) Municipality of Amadora (PT) Spain Portugal Spain Greece Portugal Regional/Urban authorities

7 Costs Benefits??

8 The basic CBA process Do Nothing ( Baseline ) Assess the current state of flood damages Convert to annual average damages Convert to present value of damages (by discounting) Do something to reduce risk ( Measures ) Assess the resulting (lower) state of flood damages Convert to annual average resulting damages Convert to present value of resulting damages (by discounting) BCA (Compares Measures against the Baseline ) Compare the two results ( Baseline minus Measures ) and compare with the cost of the Measures

9 Cost: benefit analysis (CBA, or BCA) is designed to make you THINK! Vera, Spain

10 article gallery Cost: benefit analysis (CBA, or BCA) is designed to make you THINK! Andalusia and Murcia

11 f Is flood protection the best use of our money? What are the alternative approaches. Who is paying, anyway? Mallorca, Spain

12 Who is suffering? What if we cannot pay? What can be done at really low cost? Bobadilla, Spain

13 Types of flood risk reduction measures Dams, reservoirs, retarding basins Structural measures Channel modifications Levee banks Water control measures Non-structural measures Flood-proofing Catchment modifications Schemes of drainage and flood protection Flood forecasting, flood warning & emergency planning Planning controls Acquisition & relocation Land use control measures Financial relief & loss reduction Flood insurance Public information & education

14 The Middlesex FHRC* Manuals: From 1977 to 2013/4 Blue Manual Red Manual FLAIR Yellow Manual 2005 Multi- Coloured Manual Centre founded Direct damages Indirect losses Coastal added 2010 All Update topics 2013/14 Why? To seek sensible decisions on where and when to invest our hard-pressed taxpayers money on reducing the risks of flooding and erosion.. * Flood Hazard Research Centre, Middlesex University Routledge, November

15 Flood risk management budget for England: 2005 to 2015 (c. 0.6bn or Euros 0.7bn per annum) Tax payers Defra Environment Agency

16 Why CBA? To seek sensible decisions on where and when to invest our hard-pressed taxpayers money on reducing the risks of flooding and erosion.. It is all about the merits of reducing flood risk

17 Why CBA? To seek sensible decisions on where and when to invest our hard-pressed taxpayers money on reducing the risks of flooding and erosion.. It is all about the merits of reducing flood risk

18 The impacts of floods, and flood damage data Tangible Measurement Intangible Form of loss Direct Indirect Damage to building and contents: houses and shops Loss of industrial production/ retail trade Loss of an archaeological site Inconvenience of post-flood recovery

19 Impact 1 We know a great deal about the economic damage caused by floods. 44,000 38,000 22,000 31,000 5,000

20 Plus: Impact 2 Evacuation: 50% of those with flood water > 30cm are not back in their homes inside 30 days But the economic damage caused by floods is only part of the story.

21 Impact 3: Health and floods: The time line of impacts Flood Up to 80% < 60% Psychological impacts Physical impacts?? years

22 Assessing the benefits of flood alleviation Lower flood stage Lower flood damage With and without criterion

23 What did we need? A flood extent map

24 44,000 38,000 22,000 31,000 5,000

25 Metres Metres Metres Metres Depth Metres Method application, for high street shop stock component Figure 3: Depth damage curves for high street shops Sub-category 211 (High Street Shop) Scenario: River flood, no warning and duration less than 12 hours Depth Damage Curve ,000 1,250 1,500 Damage /m2 High Susceptibility Band Low Susceptibility Band Indicative Susceptibility Building structure, fabric and services Moveable equipment Indicative value 739 per m2 Indicative value 63 per m % 10% 20% 30% 40% 50% 60% 70% 80% 90% 100 Percent % High Susceptibility Band Low Susceptibility Band Indicative Susceptibility % 10% 20% 30% 40% 50% 60% 70% 80% 90% 100 Percent % High Susceptibility Band Low Susceptibility Band Indicative Susceptibility Fixture and fittings Stock Indicative value 340 per m2 Indicative value 372 per m % 10% 20% 30% 40% 50% 60% 70% 80% 90% 100 Percent % High Susceptibility Band Low Susceptibility Band Indicative Susceptibility % 10% 20% 30% 40% 50% 60% 70% 80% 90% 100 Percent % High Susceptibility Band Low Susceptibility Band Indicative Susceptibility

26 Depth Metres Method application, for high street shop: depth/damage relationship Depth Damage Curve ,000 1,250 1,500 High Susceptibility Band Low Susceptibility Band Indicative Susceptibility Damage /m2 26

27 What is the extra value (benefit) you might obtain from spending more? Cost : Euros 25,000 The answer : We compare the marginal increase in benefit with the marginal increase in costs: that should be exactly the same with spending on flood hazard mitigation: extra protection costs extra money! Ford Focus Cost : Euros 45,000 Mercedes E class

28 What is the extra value (benefit) you might obtain from spending more? Cost : Euros 5,000 The answer : Ford Focus Extra protection costs extra money! Cost : Euros 6bn Mercedes E class

29 The impacts of floods, and flood damage data: benefits and costs of interventions Question: To what standard should this community be defended: what is the most efficient use of resources? Intervention Design standard A 12 B 20 C 50 D 100 E 125 Yalding, Kent, 2000 The return period (in years) of the largest flood that is protected against

30 The impacts of floods, and flood damage data: benefits and costs of interventions Question: To what standard should this community be defended: what is the most efficient use of resources? Intervention Benefits ( m) Costs ( m) A B C D E Yalding, Kent, 2000

31 The impacts of floods, and flood damage data: benefits and costs of interventions Intervention Benefits ( m) Costs ( m) A B C D E

32 The impacts of floods, and flood damage data: benefits and costs of interventions Intervention Intervention Benefits ( m) Benefit/ cost ratio Costs ( m) A B C D E Benefit minus cost A B C D E

33 The impacts of floods, and flood damage data: benefits and costs of interventions Intervention Benefits ( m) Costs ( m) A B C D E Efficiency = Outputs minus inputs C is the efficient choice

34 Confidence that an intervention is desirable Confidence >>> Benefit-cost ratio >> Dead Ducks Marginal Certain projects Incredulity

35 CBA for Flood Risk Management: Merits and problems Merits: Transparent Interrogable Leads to suggested expenditure Problems: May not include those aspects which are most important (the socalled intangibles ) Somerset, FLOODCBA2 UK Seville Winter May

36 ?? Oxford Flood Alleviation Scheme: Demonstration Case Study The results as of mid-2016

37 The flood in 2007 The situation in Oxford: Circa 2,000 homes, and Circa 200 businesses affected Nursing homes evacuated Oxfordshire clean-up 34 million Schools costs 632,000 Tourism bookings 40% down (John Kelly, ) Oxford Flood Alleviation Scheme: Demonstration Case Study The results as of mid-2016

38 The flood in 2007 The situation in Oxford: Circa 2,000 homes, and Circa 200 businesses affected Nursing homes evacuated Oxfordshire clean-up 34 million Schools costs 632,000 Tourism bookings 40% down (John Kelly, ) Oxford Flood Alleviation Scheme: Demonstration Case Study The results as of mid-2016

39 Where are the properties that could be flooded in the future?

40 Euros 140m Oxford Flood Alleviation Scheme: Demonstration Case Study The results as of mid-2017

41 The proposed bypass channel Euros 140m 50% central government grant 50% local contributions Oxford Flood Alleviation Scheme: Demonstration Case Study The results as of mid-2017

42 All millions What this means Walk away : No maintenance at all of existing FRM Continued existing maintenanc e ( Option 2 ) Option 2 plus interim measures ( Option 12 ) Medium sized bypass channel

43 The proposed bypass channel Euros 140m So: 1:8 benefits vs costs 1:1.2 benefits compared to next best alternative Oxford Flood Alleviation Scheme: Demonstration Case Study The results as of mid-2017

44 Fin! Oxford Flood Alleviation Scheme: Demonstration Case Study The results as of mid-2016