Disasters and Economic Welfare: Can National Savings Explain Post-disaster Changes in Consumption?

The debate on whether natural disasters cause significant macroeconomic impacts and indeed hinder devlopment is ongoing. Most analyses along these lines have focused on impacts on gross domestic product. This paper looks beyond this standard national accounting aggregate, and examines whether traditional and alternative national savings measures combined with adjustments for the destruction of capital stocks may contribute to better explaining post-disaster changes in welfare as measured by changes in consumption expenditure. The author concludes that including disaster asset losses may help to better explain variations in post-disaster consumption, albeit almost exclusvely for the group of low-income countries. The observed effect is rather small and in the range of few percent of the explained variation. For low-income countries, capital stock and changes therein, such as forced by disaster shocks, seem to play a more important role than for higher-income economies where human capital and technological progress become crucial. There are important data constraints and uncertainties, particularly regarding the quality of disaster loss data and the shares of capital stock losses therein. Another important challenge potentially biasing the results is the lack of data on alternative savings measures for many disaster-exposed lower-income countries and small island states

Macroeconomic impacts of natural disasters

This paper discusses the macroeconomic effects that a number of developing countries, subject to substantial natural disaster risk, may experience after disasters. Further, the paper recommends the need to plan the recovery process on a macroeconomic basis. These points are substantiated with examples from recent experience in Honduras and El Salvador

Applying Recent Insights From Climate Risk Management to Operationalize the Loss and Damage Mechanism

With the impacts of climate change already being felt across the globe, it is imperative to manage and avoid further irreversible loss and intolerable damage. Adaptive learning, linked to climate risk management (CRM) and building on principled socio-economic analysis, can help overcome substantial scientific and political challenges, and provide operational support for debate around the Warsaw International Mechanism (WIM) for Loss and Damage (L&D)

Disaster Loss Financing in Germany - The Case of the Elbe River Floods 2002

In August 2002, floods in central Europe caused damage of about Euro 15 billion; insured losses were about Euro 3.1 billion. According to Munich Reinsurance, this was the most expensive natural disaster of the year 2002. In Germany, heavy rains led to some of the worst flooding the Free State of Saxony has witnessed in more than a century. In Dresden, the Elbe River rose from a normal summer level of about two meters to 9.13 meters surpassing the historical flood mark of 8.77 meters seen in March 1845, to reach on August 17, 2002, a water level of 9.40 meters -- the highest level that has ever been recorded in Dresden. Shortly after the flood event, overall damage in Germany was estimated to be Euro 22 billion, which in December 2002 was revised to about Euro 9.1 billion of direct losses. Concerning the regional distribution of losses, Saxony was hit hardest. With direct damage of Euro 6.084 billion the federal state bears 67% of the total losses. About 14.9% (Euro 1.353 billion) of the overall damage is corresponding to the German government and 11.3% (Euro 1.029 billion) to the state of Saxony-Anhalt. The major share of about Euro 3.316 billion accrued to state and municipal infrastructure (36.6%), federal infrastructure losses were Euro 1.353 billion (14.9%); private households suffered about Euro 2.547 billion of losses (28.1%), followed by private companies with Euro 1.438 billion (15.9%). The compensation of the flood losses was mainly financed by a special disaster relief and reconstruction fund set up by both the National Government and the federal states of Germany. This so-called "Sonderfonds Aufbauhilfe" amounted to Euro 7.1 billion, or seventy-eight percent of total direct losses. Other sources of financing were the insurance (estimated to amount to Euro 1.8 billion), an European Union emergency fund (Euro 444 million), and public donations (Euro 243 million). Total financing available amounting to 9.6 billion Euro thus exceeds the direct losses incurred, which will only be financed. Considering that government compensation will be provided in terms of replacement costs rather than current value lost, still all direct losses could be compensated in theory. Compared to total compensation provided in other major events in developed countries, which on average amounted to 45% of total losses, this large financing provided is exceptional. This can be attributed to the following factors: the floods constituted the largest losses ever in Germany and were commonly considered an event with a return period of less than 1000 years ("Jahrtausendhochwasser", millennium floods); the floods mainly affected East Germany that is still struggling economically and where unemployment is high; some observers cite the "hot" election phase as federal elections were in their final stages of what was known to be a very close election. The provision of government funds to the affected private households and companies and municipalities was and is governed by a set of principles that were explicitly set out by the government in order to guarantee the efficient allocation of the funds, allow quick reconstruction and provide and keep incentives for ex-ante measures. These principles include: subsidiarity (the delegation of responsibilities to the lowest administrative level feasible), parallelity (reconstruction in the affected East German region was and is parallel and independent of "Aufbau Ost" (reconstruction in East Germany after reunification), provision of Incentives (inclusion of deductibles in order to maintain incentives for mitigation and insurance), efficiency (financing of direct losses only to primarily compensate those worst affected), and the ability to rebuild (loss financing was provided in terms of reconstruction costs rather than current values). Regarding financing on the municipal level, the Saxon cities of Dresden and Pirna were examined since both experienced large damages to their infrastructure and public assets: Dresden Euro 400 million, equaling forty-seven percent of the municipal budget of 2002, and Pirna Euro 22 million, or thirty-five percent as a fraction of the budget. The cities expect to be reimbursed ninety percent of their damages in the currently ongoing financing negotiations. Also, large losses were suffered by the private households and business, however, these will not be compensated by the local governments but by the "Sonderfonds Aufbauhilfe." Households can expect to receive eighty percent of their losses, businesses up to seventy-five percent

The GAINS Model for Greenhouse Gases - Version 1.0: Methane (CH4)

Many of the traditional air pollutants and greenhouse gases have common sources, offering a cost-effective potential for simultaneous improvements of traditional air pollution problems and climate change. A methodology has been developed to extend the RAINS integrated assessment model to explore synergies and trade-offs between the control of greenhouse gases and air pollution. With this extension, the GAINS (GHG-Air pollution INteraction and Synergies) model will allow the assessment of emission control costs for the six greenhouse gases covered under the Kyoto Protocol (CO2, CH4, N2O and the three F-gases) together with the emissions of air pollutants SO2, NOx, VOC, NH3 and PM. This report describes the first implementation (Version 1.0) of the model extension model to incorporate CH4 emissions. GAINS Version 1.0 assesses the options for reducing N2O emissions from the various source categories. It quantifies for 43 countries/regions in Europe country-specific application potentials of the various options in the different sectors of the economy, and estimates the societal resource costs of these measures. Mitigation potentials are estimated in relation to an exogenous baseline projection that is considered to reflect current planning. The report identifies 28 control measures, ranging from animal feed changes over waste management options to various approaches for gas recovery and utilization. For each of these options, the report examines country-specific applicability and removal efficiency and determines the costs. As a result, CH4 emissions in Europe are estimated for the year 1990 at 63,600 kt CH4. Assuming the penetration of emission controls as laid down in the current legislation, emissions would decline up to 2020 by 12,600 kt CH4 per year. Full application of the presently available emission control measures could achieve an additional decline in European CH4 emissions by 24,000 kt per year. Seventy percent of this potential could be attained at a cost of less than two billion Euro/year or Euro/ton CO2- equivalent, while the further 7,000 kt CH4/year would require costs of 12 billion Euro/year

The GAINS Model for Greenhouse Gases: Emissions, Control Potentials and Control Costs for Methane

This report estimates current and future emissions of methane in 42 regions in Europe, assesses the potential for reducing emissions and quantifies the costs of the available emission control measures. The report identifies 28 control measures, ranging from animal feed changes over waste management options to various approaches for gas recovery and utilization. For each of these options, the report examines country-specific applicability and removal efficiency and determines the costs. As a result, methane emissions in Europe are estimated for the year 1990 at 64,200 kt CH4. Assuming the penetration of emission controls as laid down in the current legislation, emissions would decline up to 2020 by 11,700 kt CH4 per year. Full application of the presently available emission control measures could achieve an additional decline in European methane emissions by 24,000 kt per year. 75 percent of this potential could be attained at a cost of less than two billion Euros/year or 50 Euros/t CO2-equivalent, while the further 5,000 kt CH4/year would require costs of 12 billion Euros/year

The impact of air pollutant and methane emission controls on tropospheric ozone and radiative forcing: CTM calculations for the period 1990-2030

To explore the relationship between tropospheric ozone and radiative forcing with changing emissions, we compiled two sets of global scenarios for the emissions of the ozone precursors methane (CH₄), carbon monoxide (CO), non-methane volatile organic compounds (NMVOC) and nitrogen oxides (NO_x) up to the year 2030 and implemented them in two global Chemistry Transport Models. The 'Current Legislation' (CLE) scenario reflects the current perspectives of individual countries on future economic development and takes the anticipated effects of presently decided emission control legislation in the individual countries into account. In addition, we developed a 'Maximum technically Feasible Reduction' (MFR) scenario that outlines the scope for emission reductions offered by full implementation of the presently available emission control technologies, while maintaining the projected levels of anthropogenic activities. Whereas the resulting projections of methane emissions lie within the range suggested by other greenhouse gas projections, the recent pollution control legislation of many Asian countries, requiring introduction of catalytic converters for vehicles, leads to significantly lower growth in emissions of the air pollutants NO_x, NMVOC and CO than was suggested by the widely used and more pessimistic IPCC (Intergovernmental Panel on Climate Change) SRES (Special Report on Emission Scenarios) scenarios (Nakicenovic et al., 2000), which made Business-as-Usual assumptions regarding emission control technology. With the TM3 and STOCHEM models we performed several long-term integrations (1990-2030) to assess global, hemispheric and regional changes in CH₄, CO, hydroxyl radicals, ozone and the radiative climate forcings resulting from these two emission scenarios. Both models reproduce broadly the observed trends in CO, and CH₄ concentrations from 1990 to 2002. <P style='line-height: 20px;'> For the 'current legislation' case, both models indicate an increase of the annual average ozone levels in the Northern Hemisphere by 5ppbv, and up to 15ppbv over the Indian sub-continent, comparing the 2020s (2020-2030) with the 1990s (1990-2000). The corresponding higher ozone and methane burdens in the atmosphere increase radiative forcing by approximately 0.2 Wm^-2. Full application of today's emissions control technologies, however, would bring down ozone below the levels experienced in the 1990s and would reduce the radiative forcing of ozone and methane to approximately -0.1 Wm^-2. This can be compared to the 0.14-0.47 Wm^-2 increase of methane and ozone radiative forcings associated with the SRES scenarios. While methane reductions lead to lower ozone burdens and to less radiative forcing, further reductions of the air pollutants NO_x and NMVOC result in lower ozone, but at the same time increase the lifetime of methane. Control of methane emissions appears an efficient option to reduce tropospheric ozone as well as radiative forcing

A Methodology to Estimate Changes in Statistical Life Expectancy Due to the Control of Particulate Matter in Air Pollution

Studies in the United States have shown that those living in less polluted cities live longer than those living in more polluted cities. After adjustments for other factors, an association remained between ambient concentrations of fine particles and shorter life expectancy. This paper presents a methodology to apply the findings of these epidemiological studies to scenarios to control fine particulate matter in Europe and to estimate the resulting losses in statistical life expectancy that can be attributed to particulate matter pollution. Calculations are carried out for all of Europe with a 50*50 km resolution, distinguishing higher PM2.5 levels in urban areas. The methodology uses population statistics and projections from the United Nations, and applies changes in mortality risk identified by the epidemiological studies to the life tables for the individual countries. The preliminary implementation suggests that, for constant 1990 pollution levels, statistical life expectancy is reduced by approximately 500 days (95 percent confidence interval ranging from 168 - 888 days). By 2010, the control measures presently decided for emissions of primary particles and the precursors of secondary aerosols are expected to reduce these losses to about 280 days (94 -497), while the theoretical maximum technically feasible emission reductions could bring reduced life expectancy below 200 (65 -344) days. While the quantifications in this study must be considered as preliminary, the methodology will allow the introduction of health impacts from fine particulate matter into a multi-pollutant/multi-effect framework so that control measures can be explored taking full account of their ancillary benefits for acidification, eutrophication and ground-level ozone

Tackling exposure: Placing disaster risk management at the heart of national economic and fiscal policy

The number of disasters is increasing. When combined with upward trends in losses from economic disasters, it is clear that paying for disaster relief and recovery at such large scales is unsustainable, in both human and financial terms. Economic exposure to disasters is increasing faster than per capita gross domestic product (GDP), and the impacts of climate change on the severity and frequency of hazards will accentuate existing trends in disaster losses in the future. While support for effective disaster relief and recovery must remain, there should be a greater emphasis on proactive efforts to reduce risk, based on comprehensive risk assessments and the integration of risk-reduction measures into national economic and development planning