The project consists of two phases of analysis estimating benefits of DRR as applied to flood and drought risk management options in Angola, Rwanda, Tanzania, and Zambia.
Phase 1: Direct benefit estimation The direct benefit of DRR will be estimated in terms of reduction in disaster damage. This is based on a standard accounting-based method using the replacement costs of assets as a measure of disaster damage. Probabilistic disaster risk models that incorporate hazard, exposure, and physical vulnerability information will be run to estimate disaster damage (i.e., probable maximum losses at different return periods as well as annual average losses) before and after DRR investment options. This direct benefit of DRR can then be compared to the cost of DRR investment to ascertain if DRR investment is economically efficient (i.e., a country can gain more from investing in DRR than not investing).
Phase 2: Indirect benefit estimation Instead of valuing reduction in disaster damage using a simple accounting method of replacement cost of capital, the indirect benefit of DRR quantifies the present value of future earnings that a productive capital is expected to yield by running a dynamic macroeconomic model. In addition to quantifying the monetary value of disaster damage, a dynamic macroeconomic model can also estimate additional benefits that can be expected from changes in the saving and investment behaviors of firms and individuals over time, along with other "co-benefits" of DRR investments, such as better access to services like water, electricity, and the protection of environmental quality.
The differences in the above two concepts are important to note. While the replacement cost-based method answers the question of how much it costs to replace houses, productive assets, and public infrastructure damaged now, the dynamic macroeconomic model answers the question of how much economic benefit we can gain in the future if we safeguarded houses, productive assets, and public infrastructure now. By broadening discussions on DRR investment benefits, this project provides improved science-based information that is more in line with African countries' aspiration to simultaneously achieve DRR and sustainable development.
Last edited: 05 September 2019
September 2019 - February 2020
International Institute for Applied Systems Analysis (IIASA)
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