ECONOMICS OF NATURAL HAZARDS
ECONOMIC ESSENTIALS
IN NATURAL HAZARD MANAGEMENT Natural hazard managers are often under pressure to prioritise and justify their investments in mitigation activities. New research has informed a suite of tools to help practitioners decide which mitigation option is best given individual budgets and limited resources. RADHIYA FANHAM Bushfire and Natural Hazards CRC
The Value Tool for Natural Hazards is a searchable online database of intangible economic values. PHOTO: UNIVERSITY OF WESTERN AUSTRALIA
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The 2015 Productivity Commission’s report on natural hazard funding arrangements in Australia found that governments overinvest in post-disaster reconstruction and underinvest in mitigation activities that would limit the impact of natural hazards. With the multitude of natural hazards that require mitigation and response from government agencies and with tighter budgets at both state and national levels, natural hazard managers are increasingly under pressure to prioritise and justify their investments. Governments need to ensure that the benefits justify the costs and that they are getting the best value for money from these investments. So how do you decide which mitigation option is best when only one can be afforded, and how do you know if you are making the most of limited resources? The University of Western Australia and the Bushfire and Natural Hazards CRC have conducted integrated economic analyses of management options for different natural hazards to
FIRE AUSTRALIA
ISSUE FOUR 2021
generate estimates of both tangible (market) and intangible (non-market) values. The Economics of natural hazards project provided evidence on the economic, social and environmental impacts of natural hazards to help hazard managers make better decisions about the allocation of resources for the mitigation of natural hazard impacts. Researchers developed tools and materials that make it easier for natural hazard managers to understand and estimate the value of mitigation, integrate intangible values in economic analyses of mitigation, and evaluate the difference it makes to intangible values. “Economic analysis is a key tool that can support decision-making about resource allocation for the mitigation of natural hazards,” notes project leader and economist Dr Veronique Florec from the University of Western Australia. “An economic analysis won’t tell you exactly what you should do, but it does provide guidance and makes the trade-offs between the available options clearer.” Through this project, the research team has launched: the Value Tool for Natural Hazards, a searchable database of the best available non-market value estimates relevant to natural hazards the Economic Analysis Screening Tool for the evaluation of the costs and benefits of mitigation options an online video series on the economics of natural hazards to explain basic concepts and how they are applied to evaluate different mitigation options
an online training course for managers and practitioners on how to use economics in natural hazards management.
Value Tool for Natural Hazards
The Value Tool for Natural Hazards is a searchable online database of the best available intangible economic values associated with the impacts of natural hazards, such as health, environmental and social values. The values are designed to be incorporated into other economic analysis tools, such as the Economic Analysis Screening Tool. The Value Tool incorporates annual Consumer Price Index increases to the values, allowing users to use values corrected to the relevant date. It is currently being used by natural hazard managers across the emergency management sector. The increased awareness of intangible values and their importance has led to a clearer understanding of the trade-offs between tangible and intangible impacts, helping hazard managers to make more informed and comprehensive decisions about different mitigation options.
Economic Analysis Screening Tool
The Economic Analysis Screening Tool performs economic analyses and evaluates the tangible and intangible costs and benefits of mitigation options for any natural hazard. Used in conjunction with the Value Tool for Natural Hazards, it enables the evaluation and prioritisation of mitigation options that provide the best potential value for money. The Economic Analysis Screening Tool allows users to: conduct economic analyses in weeks rather than months or years understand the data requirements for
