IPCC_Managing Risks of Extreme Events.pdf - Climate Access

Changes in Impacts of Climate Extremes: Human Systems and EcosystemsChapter 4extremes, especially in highly urbanized areas, as a result of the rapidurbanization and economic growth in those countries (Bouwer et al.,2007; Nicholls et al., 2008).It should also be noted that in a small country, a disaster can directlyaffect much of the country and therefore the magnitude of losses andrecovery demands can be extremely high relative to GDP and publicfinancial resources (Mechler, 2004). This is particularly the case in theevent of multiple and/or consecutive disasters in short periods. Forexample, in Fiji, consecutive natural disasters have resulted in reducednational GDP as well as decreased socioeconomic development ascaptured by the Human Development Index (HDI) (Lal, 2010). In Mexico,natural disasters resulted in the HDI regressing by approximately twoyears and in an increase in poverty levels (Rodriguez-Oreggia et al., 2010).Patt et al. (2010) indicated that vulnerability in the least-developedcountries will rise most quickly, which implies an urgent need forinternational assistance.Costs and impacts not only vary among developing and developedcountries, but also between and within countries, regions, local areas,sectors, systems, and individuals due to the heterogeneity of vulnerabilityand resilience (see Chapter 2). Some individuals, sectors, and systemswould be less affected, or may even benefit, while other individuals,sectors, and systems may suffer significant losses in the same event.In general, the poorest and those who are socially or economicallymarginalized will be the most at risk in terms of being exposed andvulnerable (Wisner et al., 2004). For example, women and children arefound to be more vulnerable to disasters in many countries, with largerdisasters having an especially unequal impact (Neumayer and Plümper,2007).4.5.3. Methodologies for Evaluating Impact andAdaptation Costs of Extreme Events and Disasters4.5.3.1. Methods and Tools for Costing ImpactsDirect, tangible impacts are comparatively easy to measure, but costingapproaches are not necessarily standardized and assessments are oftenincomplete, which can make aggregation and comparability across theliterature difficult. In some countries, flood impact assessment has longbeen standardized, for example, in Britain and parts of the United States(e.g., Handmer et al., 2002). Intangible losses can generally be estimatedusing valuation techniques such as loss of life/morbidity (usuallyestimated using value of statistical life benchmarks), replacement value,benefits transfer, contingent evaluation, travel cost, hedonic pricingmethods, and so on (there is a vast literature on this subject, e.g.,Handmer et al., 2002; Carson et al., 2003; Pagiola et al., 2004; Readyand Navrud, 2006; TEEB, 2009). Yet, assessing the intangible impacts ofextremes and disasters in the social, cultural, and environmental fieldsis more difficult, and there is little agreement on methodologies (Albala-Bertrand, 1993; Tol, 1995; Hall et al., 2003; Huigen and Jens, 2006;Schmidt et al., 2009).Studies and reports on the economic impacts of extremes, such asinsurance or post-disaster reports, have mostly focused on direct andtangible losses, such as on impacts on produced capital and economicactivity. Intangibles such as loss of life and impacts on the naturalenvironment are generally not considered using monetary metrics (Parryet al., 2009). Loss of life due to natural disasters, including futurechanges, is accounted for in some studies (e.g., BTE, 2001; Jonkman,2007; Jonkman et al., 2008; Maaskant et al., 2009). Estimates of impactsthat account for tangibles and intangibles are expected to be muchlarger than those that consider tangible impacts only (Handmer et al.,2002; Parry et al., 2009). Potential impacts include all direct, indirect,and intangible costs, including the losses from public goods and naturalcapital (in particular ecosystem services), as well as the longer-termeconomic impact of disasters. Indirect impacts and intangible impactscan outweigh those of direct impacts. There will therefore often be alarge gap between potential impacts and the estimates from studiesthat consider only direct impacts.Indirect economic loss assessment methodologies exist but produceuncertain and method-dependent results. Such assessments atnational, regional, and global levels fall into two categories: a ‘topdown’ approach that uses models of the whole economy understudy, and a bottom-up or partial equilibrium approach that identifiesand values changes in specific parts of an economy (van der Veen,2004).The top-down approach is grounded in macroeconomics under which theeconomy is described as an ensemble of interacting economic sectors.Most studies have focused on impact assessment remodeling actualevents in the past and aim to estimate the various, often hidden followonimpacts of disasters (e.g., Ellson et al., 1984; Yezer and Rubin, 1987;Guimaraes et al., 1993; West and Lenze, 1994; Brookshire et al., 1997;Hallegatte et al., 2007; Rose 2007). Existing macroeconomic or topdownapproaches utilize a range of models such as the Input-Output,Social Accounting Matrix multiplier, Computable General Equilibriummodels, economic growth frameworks, and simultaneous-equationeconometric models. These models attempt to capture the impact of theextreme event as it is felt throughout the whole economy. Only a fewmodels have aimed at representing extremes in a risk-based frameworkin order to assess the potential impacts of events and their probabilitiesusing a stochastic approach, which is desirable given the fact that extremeevents are non-normally distributed and the tails of the distributionmatter (Freeman et al., 2002; Mechler, 2004; Hallegatte and Ghil, 2007;Hallegatte, 2008).The bottom-up approach, derived from microeconomics, scales up datafrom sectors at the regional or local level to aggregate an assessmentof disaster costs and impacts (see van der Veen, 2004). The bottom-upapproach to disaster impact assessment attempts to evaluate the impactof an actual or potential disaster on consumers’ willingness to pay (orwillingness to accept). This approach values direct loss of or damage toproperty, as well as that of the interruption to the economy, impacts onhealth and well-being, and impacts on environmental amenity and266