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From Risk to Resilience #9: Understanding the Costs and Benefits of Disaster Risk Reduction under Changing Climatic Conditions

Authors: Marcus Moench; The Risk to Reilience Study Team

The benefits of investing in disaster risk management substantially exceed the costs. This is the core finding that emerges from a series of detailed probabilistic analyses of avenues for flood and, to a lesser extent, drought risk reduction in India, Nepal and Pakistan. In most cases investigated, benefit/cost ratios are positive and in some instances may be well above those achieved through other common development investments. This finding holds true for an array of interventions that range across a spectrum from insurance to early warning and from distributed responses at the village level to large-scale infrastructure. Return rates are often higher when the impacts of climate change are considered, particularly for strategies that are resilient under uncertainty. Return rates appear particularly robust for the often lower-cost “people-centered” interventions that reduce risks associated with high frequency but low magnitude events rather than large disasters. Such events are a source of chronic, in some cases annual, losses that can erode the wealth of affected populations. The economic benefits from interventions that require high initial investments and are targeted at less frequent “extreme events” are particularly vulnerable to assumptions regarding the appropriate discount rate to use and to uncertainties regarding the frequency and magnitude of extreme events as climate conditions change. Investing in lower cost forms of risk reduction that are designed to increase the resiliency of livelihoods, housing and other infrastructure at the household and community level may be among the most economically effective avenues for reducing risks and thereby supporting adaptation to climate change. This does not, however, imply that investments should be directed away from the lower frequency-higher magnitude disasters that can set individuals, households and regions back for many years. Instead, it implies the need for a balanced approach that combines sustained attention to the small disasters that receive little public or policy attention as well as the large-scale, high-profile impact of extreme events.

Citation: Moench, M., & The Risk to Resilience Study Team. (2008). Understanding the costs and benefits of disaster risk reduction under changing climatic conditions (Risk to Resilience Working Paper No. 9). M. Moench, E. Caspari, & A. Pokhrel (Eds.). Kathmandu, Nepal: Institute for Social and Environmental Transition-Boulder, Institute for Social and Environmental Transition-Nepal, & Provention Consortium.

Funded By: UK Department for International Development (DfID); National Oceanic and Atmospheric Association (NOAA); Canadian International Development Research Centre (IDRC).