Would you invest in a project that pays for itself 4 times over?

Policy Pulse - 11 May 2019 - George Anjaparidze

Cyclone Fani made landfall in the Indian state of Odisha on 3 May, leaving a trail of destruction that spread all the way to northern Bangladesh. As of 11 May the death toll had reached 59 but it could have been much worse. In 1999, when a cyclone of comparable strength hit this region, over 10,000 people were massacred.

This time, carnage was avoided thanks to improvements in the early warning system and better preparedness to respond. The physical damage to infrastructure is still being assessed and is likely to be extensive. At least some of the damage could have been reduced with better resilience planning. Nevertheless, the example of cyclone Fani illustrates how investing in disaster management is a worthwhile undertaking.

Empirical evidence supports this assertion. R. Mechler`s 2016 global review of 39 studies, undertaken between 1998 and 2015, found that the benefit to cost ratio of disaster risk management programs is 3.7 (See chart). That means that on average disaster risk management programs pay for themselves nearly four times over.

These finding mirror earlier assessments. In 2005, the US Multihazard Mitigation Council assessed over 5,400 disaster risk management programs, costing $3.5 billion. It estimated these programs to have a discounted net present value of social benefits of $14 billion. Meaning that $1 spent on disaster risk management programs created $4 of benefits.

Leading experts in the field, such as Charlotte Benson and E.J. Clay, have identified the multifaceted types of impacts from disasters, including the existence of adverse long-term macroeconomic consequences. Benefit-cost analysis frameworks are not well suited to incorporate longer-term impacts and intangible benefits of risk reduction programs. Therefore, the findings from the empirical studies mentioned above can be viewed as conservative estimates and the actual benefit to cost ratios may be even greater.

As experts and donors gather in Geneva from 13-17 May for the Global Platform for Disaster Risk Reduction they do so under a backdrop of an accelerating trend in natural disasters, which have grown in intensity and impose ever increasing costs. This accelerating trend, combined with the economic rationale of investing in disaster risk management, means that incremental progress is no longer sufficient. Delegates need to deliver a step change in the scale-up of support for disaster risk management programs.

About Veritas Global: Our vision is to have a positive impact on the world through truthful advice informed by robust analysis. We are a premier provider of tailored solutions on climate change, international conflict economics and infrastructure.

#GP2019Geneva #theresiliencedivident #fani #sendaiFramework #climatechange #economics

Paris Agreement: the inconvenient gap between ambition and reality

Policy Pulse - 17 April 2019 - George Anjaparidze

Key policy messages:

• Nationally Determined Contributions (NDCs) represent an improvement in the emission trajectory but fall short of achieving the temperature goals of the Paris Agreement

• There is an immediate need to scale-up support, particularly by OECD countries, to fast track NDC implementation in developing economies

• This will enable countries to implement their NDCs sooner and create a conducive environment to raise their ambitions as part of the global stocktake

The IMF/World Bank Spring meetings, a gathering of Finance Ministers and Central Bank Governors, concluded on 14 April 2019. Climate change did not feature prominently on the agenda, despite an immediate need to further scale-up efforts to meet the Paris Agreement temperature goals.  This places even more pressure on the UN Climate Action Summit in September to accelerate support for climate action.

The Paris Agreement is a major milestone in international efforts to address climate change. It strengthened the political ambition to hold the increase in global average temperature to well below 2°C and pursue efforts to limit the increase to 1.5°C above pre-industrial levels. Crucially, it also broadened the climate mitigation efforts in developing countries.

The Paris Agreement is a bottom-up policy framework where each country independently determines the appropriate level of mitigation effort. Through Nationally Determined Contributions (NDCs) countries have communicated their planned actions, which taken together represent an improvement in the global GHG emission trajectory. However, it falls short of the trajectories that would be consistent with achieving the Paris Agreement temperature goals.

The UNFCCC estimates that compared with the emission levels under the least-cost 2°C scenarios, aggregate emission levels resulting from the implementation of NDCs are expected to be higher by 15.2 Gt of CO2 equivalent in 2030 (See Chart). Our assessment indicates that the NDC emission trajectory is most consistent with about a 3°C warming. This means governments need to further scale-up efforts to achieve the Paris Agreement temperature goals. 

The global stocktake, scheduled for 2023, aims to assess the collective progress towards achieving the long-term goals of the Paris Agreement. The outcome of the global stocketake is aimed to inform governments in updating and enhancing their actions for addressing climate change. In the absence of progress in implementation of NDCs, it will be unlikely that governments scale up actions. However, fast tracking NDC implementation can build confidence in the ability of countries to achieve their NDCs and create a more conducive environment to raise their ambitions.

Therefore, OECD countries need to immediately scale-up their support for NDC implementation in developing countries. In particular, they should increase their support for initiatives that target NDC implementation, such as the Asian Development Bank`s NDC Advance platform. To further build confidence, they need to ensure a successful replenishment of the Green Climate Fund and scale-up support through bilateral agencies, as has been done by Agence Française de Dévelopment.

In the absence of an immediate scale-up in support for NDC implementation, the global stocktake will likely be a frustrating affair and the Paris Agreement goals are unlikely to be met.

About Veritas Global: Our vision is to have a positive impact on the world through truthful advice informed by robust analysis. We are a premier provider of tailored solutions on climate change, international conflict economics and infrastructure. 

#climatechange #economics #finance #springmeetings2019