Uncovering the veil of night light changes in times of catastrophe

Natural disasters have large social and economic consequences. However, adequate economic and social data to study subnational economic effects of these negative shocks are typically difficult to obtain especially in low-income countries. For this reason, the use of night light data is becoming increasingly popular in studies which aim to estimate the impacts of natural disasters on local economic activity. However, it is often unclear what observed changes in night lights represent exactly. In this paper, we examine how changes in night light emissions following a severe hurricane relate with local population, employment, and income statistics. We do so for the case of Hurricane Katrina, which struck the coastline of Louisiana and Mississippi in August 2005. Hurricane Katrina is an excellent case for this purpose as it is one of the biggest hurricanes in recent history in terms of human and economic impacts, it made landfall in a country with high-quality sub-national socioeconomic data collection, and it is covered extensively in the academic literature. We find that overall night light changes reflect the general pattern of direct impacts of Katrina as well as indirect impacts and subsequent population and economic recovery. Our results suggest that change in light intensity is mostly reflective of changes in resident population and the total number of employed people within the affected area and less so but positively related to aggregate income and real GDP.</p

Risk reduction in compulsory disaster insurance:Experimental evidence on moral hazard and financial incentives

In a world in which economic losses due to natural disasters are set to increase, it is essential to study risk reduction strategies, including individual homeowner investments in damage-reducing (mitigation) measures. In this lab experiment (N = 357), we investigated the effects of different financial incentives, probability levels, and deductibles on self-insurance investments in a natural disaster insurance market with compulsory coverage. In particular, we examined how these investments are jointly influenced by financial incentives, such as insurance, premium discounts, and mitigation loans. We also studied the influence of behavioral characteristics, including individual time and risk preferences. We found that investments increase when the expected value of the damage increases (i.e., higher deductibles, higher probabilities). Moral hazard is found in the high-probability (15%) scenarios, but not in the low-probability (3%) scenarios. This suggests that moral hazard is less of an issue in an insurance market where probabilities are low. Our results demonstrate that a premium discount can increase investment in damage-reduction, as can a policyholder‘s risk aversion, perceived efficacy of protective measures, and worry about flooding

Dealing with Uncertainty in Flood Management Through Diversification

This paper shows, through a numerical example, how to develop portfolios of flood management activities that generate the highest return under an acceptable risk for an area in the central part of the Netherlands. The paper shows a method based on Modern Portfolio Theory (MPT) that contributes to developing flood management strategies. MPT aims at finding sets of investments that diversify risks thereby reducing the overall risk of the total portfolio of investments. This paper shows that through systematically combining four different flood protection measures in portfolios containing three or four measures; risk is reduced compared with portfolios that only contain one or two measures. Adding partly uncorrelated measures to the portfolio diversifies risk. We demonstrate how MPT encourages a systematic discussion of the relationship between the return and risk of individual flood mitigation activities and the return and risk of complete portfolios. It is also shown how important it is to understand the correlation of the returns of various flood management activities. The MPT approach, therefore, fits well with the notion of adaptive water management, which perceives the future as inherently uncertain. Through applying MPT on flood protection strategies current vulnerability will be reduced by diversifying risk

Perceptions of Catastrophic Climate Risks

Many climate change-related risks, such as more frequent and severe natural disasters, can be characterised as low-probability/high-consequence (LP/ HC) events. Perceptions of LP/HC risks are often associated with biases which hamper taking action to limit these risks, such as underestimation of risk, myopia, and the adoption of simplifed decision heuristics. This chapter discusses these biases and outlines key elements of policies to overcome them in order to enhance climate action

Low-carbon transition is improbable without carbon pricing

Unidad de excelencia María de Maeztu CEX2019-000940-MThis Letter has a Reply and related content. Please see: Reply to van den Bergh and Botzen: A clash of paradigms over the role of carbon pricing (https://doi.org/10.1073/pnas.2014350117) - Opinion: Why carbon pricing is not sufficient to mitigate climate change-and how "sustainability transition policy" can help (https://doi.org/10.1073/pnas.2004093117)

Insurance instruments and disaster resilience in Europe - insights from the ENHANCE project

Improving multi-sectoral collaboration is one of the core aims of the project ‘Enhancing risk management partnerships for catastrophic natural disasters in Europe’ (ENHANCE), FP7 research consortium, led by the Institute for Environmental Studies, VU University Amsterdam. Under ENHANCE new risk scenarios and hazard information have been developed and shared with multi-sectoral stakeholders across different case studies, in order to support the development of innovative approaches to DRR

Methodological issues in natural disaster loss normalization studies

The mixed results in Pielke (2020) for natural disaster loss normalisation studies are due to methodological differences. Flaws exist in commonly used normalisation approaches that assume unitary elasticities between exposure indicators and losses. We refute Pielke’s arguments that statistical studies estimating these relationships are biased. We conclude with an agenda for future research

The intention-behavior gap in climate change adaptation

Most empirical studies on private climate change adaptation rely on self-reported intentions which often fail to translate into real actions. Consequently, this strand of literature can only insufficiently account for the intention behavior gap (IBG) in climate change adaptation, which complicates the deduction of policy recommendations for stimulating adaptation behavior. Using a large unique longitudinal survey data set from Germany covering more than 5,000 households, our study offers extensive insights into the IBG in climate change adaptation by analyzing intentions and actual implementations of both floodproofing and heat stress reduction measures. Our results do not only reveal a substantial IBG for most stated intentions but also show that intentions can rarely serve as good predictors for realized actions. At the same time, the IBG itself can hardly be explained by observable household data characteristics which in turn again makes it difficult to reveal information on realized actions out of stated intentions only. However, we also find that drivers of adaptation intentions are often reasonable proxies for assessing the drivers of behavior. This implies that similar explanatory variables affect both intentions and implementations, but they provide only limited insights on the actual levels of implemented intentions. In line with regret theory, the IBG in our data can be partly explained by anticipated regret caused by a feeling of having invested in vain in cases where adaptation measures are installed but extreme weather events do not occur for the time being