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Project Evaluation of Flood Management Projects in Japan

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Investing in infrastructure: Costs, benefits and effectiveness of disaster risk reduction measures.

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Masato OKABE
Japan Institute of Country-ology and Engineering

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Project Evaluation of Flood Management Projects in Japan

  1. 1. Project Evaluation of Flood Management Projects in Japan Masato OKABE Japan Institute of Country-ology and Engineering 2019.9
  2. 2. 2 Purpose of Project Evaluation Q. What is the purpose of project evaluation? [Japan] 1. Ensuring accountability for public works to the public 2. Promoting efficient and quality public services that is for the benefit of the public 3. Shifting to outcome-oriented government from the viewpoint of citizens Public works projects are evaluated for: - planning stage, adoption of new project, and justification of continuation or suspension of project - completed projects to implement appropriate improvement measures if necessary Purpose Government Policy Evaluations Act (Act. No. 86 of 2001)
  3. 3. 3 Process of Planning, Evaluation and Budget Allocation Q. What is the process of planning, evaluation and budget allocation for flood management projects? [Japan] [Long‐term Plan] River Improvement Basic Policy -Basic policy of river improvement from a long-term viewpoint [Mid‐term Plan] River Improvement Plan (every 20~30 years) -Defining river improvement targets for 20-30 years later -Defining concrete measures/projects for river improvement Statutory Consultees Implementing Agency (MLIT) Local Authorities Experts Residents Opinion Adoption of Basic Policy Disclosure of River Improvement Basic Policy <Minister of MLIT> Approval <Panel on Infrastructure Development> Express opinions on Basic Policy <Regional Bureaus of MLIT> Formulation of Draft Basic Policy Adoption of the Plan Disclosure of River Improvement Plan <Minister of MLIT> Approval <Experts/Residense> Express opinions on draft Plan Opinion <Governors of prefectures> <Water users> Express opinions on final draft <Regional Bureaus of MLIT> Formulation of draft Plan <Regional Bureaus of MLIT> Conducting project evaluation (Self-evaluation) <Ministry of Internal Affairs and Communications> Inspection Submission of evaluation report Advice/Opinion <Project Evaluation Monitoring Committee> Decision on the results of project evaluation Disclosure of the project evaluation results <National Diet> Confirmation Selection of projects for which budget will be allocated Formulation of annual plan Budget request <Cabinet,Ministry of Finance> Policymaking Formulation of draft budget <National Diet> Budget decision <Regional Bureaus of MLIT> Implementation of project Allocation of project budget for the fiscal year Selection of project implementation sites [Project Evaluation] Conducting project evaluation (every 3~5 Years) -Justifying continuation or suspension of project -Conducting appropriate improvement measures as needed [Budget preparation] Justify implementation of project (every fiscal year) -Deciding projects to be implemented in a given fiscal year <MLIT HQ> Decision on response policy Suspension Yes No Yes Yes No No Government Review Review Consultation Opinion Projects may be funded for implementation even in cases where the above policy/plan is not yet adopted. Disclosure of draft Plan Disclosure Disclosure <Experts> Express opinions on draft report Opinion <Regional Bureaus of MLIT> Decision on draft response policy Disclosure The flow is approximately the same for -Planning stage evaluation -New project adoption stage evaluation -Re-evaluation -Ex-post evaluation after completion Submission <Governors of prefectures> Express opinions on draft report Opinion Submission to MLIT HQ
  4. 4. 4 Timing of Project Evaluation [Process of Project Evaluation] (before evaluation for new project adoption ) (continued for 5 years) (work not started for 3 years) (3 years after previous re-evaluation) (within 5 years after completion) conduct prior to adoption of a new project (starting 2014) Planning stage evaluation conduct at time of adoption of a new project (since 1998) New project adoption stage evaluation conduct re-evaluation every 5 years if construction has started and is continuing, and every 3 years if construction has not yet begun. (since 1998) Re-evaluation conduct ex-post evaluation within 5 years of completion (since 2003) Ex-post evaluation after completion (New project adoption) (Start work) (Completion) Q. When is project evaluation for flood management projects conducted? [Japan]
  5. 5. 5 Regulations and Manuals for Project Evaluation Government Policy Evaluation Act (Act No. 86 of 2001) Technical Guidance for Cost Benefit Analysis of Public Works (applied to all sectors) Execution Procedure for Project Evaluation of MLIT Works for Planning Stage Execution Procedure for Project Evaluation of MLIT Works for Adoption of New Project Execution Procedure for Project Evaluation of MLIT Works for Re-evaluation Execution Procedure for Project Evaluation of MLIT Works for Completed Project Manual for Economic Evaluation of Flood Control Investments (2005.4) (Property Assessment Unit Values and Deflators” (2013.2 ) - includes the most recent property unit values, etc) Manual for Flood Damage Indices Analysis” (2013.6) Q. What regulations, standards, guidance or manuals are available for project evaluation of flood management projects? [Japan] Execution Procedure for Project Evaluation of Public Works Economic/quantitative evaluation of flood management project
  6. 6. 6 Unit and Scale of Project Q. What projects are subject to project evaluation and what are their unit and scale? Are there any regulations specifying them? What is typically applied? [Scope of projects subjected to project evaluation] All public works under the jurisdiction of MLIT are targeted except for those related to maintenance or disaster recovery/rehabilitation. (1) Projects implemented by MLIT (national projects) (2) Projects by Incorporated Administrative Agencies (3) Projects under the jurisdiction of MLIT but are implemented by local government [Projects subjected to project evaluation] Following projects are subjected to evaluation 1. Projects for which budget is to be allocated 2. Projects for which budget is to be allocated for preparation and planning (large scale projects such as dams only) [Project unit for evaluation] The project unit for evaluation of flood management projects is defined as the segment of the river that experiences series of impacts of the project. (e.g. evaluation is typically conducted for a set of projects within a “river basin”, or “individual project” such as dam, retarding basin or a segment of levee) Dam Individual projects such as dam, retarding basin or a segment of levees River Basin Project unit for evaluation Retarding basin Levee [Japan]
  7. 7. 7 Q. What information is evaluated in the project evaluation? Evaluation Criteria for Project Evaluation [Evaluation Criteria] (River/Dam project) (1) Necessity of the project 1. Changes in socio-economic situation 1)Impact of potential disasters 2)Historical disasters 3)Risk of disaster occurrence 4)Conditions of regional development 5)Regional cooperation schemes 2. Investment effectiveness 1) Cost-Benefit Analysis 2) Flood Damage Indices 3. Condition of project progress 1)Project adoption year, 2)Land acquisition and construction start year, 3)Condition of project progress (2)Expected progress of the project 1) Future project schedule, etc (3)Possibility of cost reduction and alternative options 1) Consideration of possibility of alternative options 2) Plans for cost reduction 6) Urgency of the project 7) Importance within the water system (river project only) 8) Disaster information dissemination system 9) Consistency with relevant project 10) Possibility of alternative options Re- evaluation New project evaluation ←economic evaluation by Benefit Cost ratio (B/C) ←quantitative evaluation of flood impact difficult to translate into monetary values. ・ The information considered for project evaluation includes not only cost-benefit analysis but also necessity of the project, project schedule and expected progress, and possibility of cost reduction or alternative options. [Japan]
  8. 8. 8 Benefit Cost Ratio (B/C) > standard value (often 1.0) Cost Benefit Analysis in Japan Source: Technical Guidance for Cost Benefit Analysis of Public Works, 2009 MLIT Q. What are the quantitative evaluation criteria of project evaluation? Are there any decision criteria or standards? Quantitative Evaluation Criteria of Project Evaluation Investment efficiency of residual project Investment efficiency of the overall project Treatment of evaluation result from the perspective of economic efficiency Over the standard value Over the standard value Continue Under the standard value Continue in principle but revise the project as necessary Under standard value Over standard value Re-examine after revision of the project Under standard value Discontinue in principle [Japan]
  9. 9. 910. Increase in land prices as a result of improvement in flood protection Direct damage Indirect damage Intensification benefit 3. Business interruption ・ Business interruption damage (household , businesses, public and public interest services ) ・ Emergency response costs (household, businesses, public and public interest service) 4. Impairment of social welfare facilities (hospitals, social welfare facilities, disaster management facilities) 5. Economic impact (disruption of traffic , lifeline, cascading economic impact of damages) 6. Other damage (underground space, cultural facilities, waste generated by flood) 7. Psychological damage 8. Risk premium (insecurities due to possibility of damage) 9. Damages that cause permanent changes to the local economic system (Because the region as a whole is severely damaged by a large-scale flood the economic system cannot recover to its pre-disaster state.) Q. What categories of damages are considered for cost-benefit analysis? What is included in the benefit? Are there any impacts that cannot be monetized but are quantitatively assessed? What damages are usually considered for real cases? Categories of Damages considered for Cost-Benefit Analysis ( : Damages not considered in Cost-Benefit Analysis (difficult to monetize) but are quantitatively assessed ( : Considered in Cost-Benefit Analysis)[Japan] 1. Damage to asset ・General property damage (houses, residential properties depreciable assets and inventory assets of businesses, depreciable assets of fishing and farming properties, etc.) ・ Agricultural product damage ・ Infrastructure damage 2. Human damage (human loss, people isolated etc.) ( : Damages not considered in Cost-Benefit Analysis (difficult to monetize) but are quantitatively assessed ( : Considered in Cost-Benefit Analysis)
  10. 10. 10 Categories0 Methods of evaluation Manual Manual for Economic Evaluation of Flood Control Investment (April 2005, MLIT) General conditions Evaluation period The project implementation period plus 50 years after completion of the project. Lifetimes of assets levee 50 years, dam 80 years Evaluated damages Direct damage property damage, agricultural damage, infrastructure damage Indirect damage business interruption loss, emergency response cost at household levels Calculating method of total benefit Damage reduction, difference between the damages calculated for with and without project cases, is multiplied by the annual exceedance probability, and are summed up to calculate the expected average annual damage, which becomes the annual benefit. Annual benefit is accumulated over the evaluation period and the residual value of the asset constructed by the project is added to determine the total benefit. Calculating method of total cost Project construction cost (including construction cost, land acquisition cost and compensation cost) and maintenance/operation cost Social discount rate 4%(based on the real rate of interest of national bond) Quantitative evaluation criteria Benefit Cost Ratio (B/C) Methodology of Cost-Benefit Analysis in Japan Methodology of Cost-Benefit Analysis Q. What is the methodology of Cost-Benefit Analysis employed? What are the criteria, conditions of damage rate, unit value of property, residual value, etc used for cost benefit analysis, and how are they defined? [Japan]
  11. 11. 11 Items Methods of evaluation Manual “Manual for Flood Damage Indices Analysis” (2013.6, MLIT) General conditions Flood magnitudes In principle damage reduction is not converted into expected annual damage reduction, but instead the magnitude of damage reduction is assessed under a specific size of flood, such as a design flood (single or multiple floods). Evaluated damages Direct damage Human damage (inundated population, expected loss of life, maximum number of persons isolated, etc.) Indirect damage Damage caused by impaired social functions (medical/welfare facilities, disaster management facilities) Cascading impact (traffic disruption, lifeline, economic damage) Others (underground space, cultural facilities, debris waste generated by flood) Computation of overall non- monetized impact For each of the damage categories damages are evaluated quantitatively whenever possible, e.g., affected population, etc Quantitative Evaluation of Damages difficult to be included in the Cost-Benefit Analysis Quantitative Evaluation of Damages Difficult to be Included in the Cost-Benefit Analysis Q. What is the methodology used to evaluate damages that are difficult to be monetized to be included in the Cost-Benefit Analysis? What categories of damages are quantitatively evaluated but are not monetized to be included in the benefit? (What types of damages? Are there standards or manuals?) [Japan]
  12. 12. Methodology for evaluating economic effectiveness of flood management project in Japan (Example of A River) 12 1. Outline of Project Evaluation 2. Cost-Benefit Analysis 3. Flood Damage Indices Analysis
  13. 13. 13 医療施設の機能低下による影響に関する試算結果Overview of the River Basin 1. Outline of Project Evaluation River Basin Area:667km2 Basin Area Population: 273,000 people Overview of A-River Section of Project A-River Sea Length of River (35.4km)
  14. 14. 14 Outline of A-River Improvement Plan Project Evaluation 医療施設の機能低下による影響に関する試算結果1. Outline of Project Evaluation Outline Remarks Implementing body of the project River Office of the Regional Development Bureau, Ministry of Land, Infrastructure, Transport and Tourism (MLIT) Purpose of the project evaluation [Re-evaluation] (for justification of continuation or suspension of the project for which construction has not begun after adoption of the project (3 years for nationally implemented projects)) Evaluation procedure Re-evaluation is conducted by the Regional Development Bureau. The opinions of the relevant prefectures and the Project Evaluation Monitoring Committee consisted of third party specialists are accounted for in decision making. Project to be evaluated River channel improvement measures (river channel excavation, construction of embankment, confluence improvement, etc) Evaluation period 80 years (Improvement period (30 years) and evaluation period after completion (50 years)) In principle 50 years after the project implementation and completion of flood control facilities. Scale of the project Project cost : approx. 5,343 million yen Indices used for evaluation Cost-Benefit Ratio (B/C), Flood Damage Indices, etc See p6 1. Outline of Project Evaluation
  15. 15. -Inundation simulation is conducted for multiple flood sizes -Inundation areas under pre- and post-project status are assessed 1. Inundation Simulation River Improvement Plan -Compute expected damage for each flood size based on simulation results [Amount of damage reduction for a given flood size] =[Expected damage under without-project state] -[Expected damage under with-project state] [Reduction in expected annual damage] =Σ([Amount of damage reduction for a given flood size] x [probability of occurrence]) 2. Computing reduction in annual average flood damages -Total benefit=Sum of [reduction in expected annual damage] of each year Evaluation period: improvement period + 50 years Base year for discounting: the year the evaluation is conducted Discount rate: 4% Add residual value of the constructed asset at the end of the evaluation period 3. Computing total benefit 5. Computing B/C [cost]=[annual project cost] + [maintenance and management cost] [total cost]= sum of [annual project cost] of each year Evaluation period: improvement period + 50 years Base year for discounting: evaluation year Discount rate:4% 4. Computing total cost 2-2. 2.便益の算出 2. Flowchart of Cost-Benefit analysis 15 2. Cost-Benefit analysis Source: “Manual for Economic Evaluation of Flood Control Investments” (MLIT, 2005.6)
  16. 16. 16 Inundation Simulation Conditions 医療施設の機能低下による影響に関する試算結果2.1 Inundation Simulation (Example of A-River) specification Model Computation method Two-dimensional floodplain & one-dimensional river channel flow model Grid size 50m grid Inundation blocks 6 blocks defined (independent inundation blocks that are separated by embankments of tributaries, etc) Ground elevation Average ground elevation is assigned to each grid size based on aerial survey data Continuous structures in floodplain Location of continuous structures in floodplain are set by field survey Roughness coefficient Defined based on land use Buildings Average building occupancy ratio is defined as the average ratio of randomly sampled areas Conditions Flood magnitude Design flood (simulations conducted for six magnitudes of floods between 5yr flood (above no-damage flow) to 100yr flood (design level)) Locations of levee failure 6 locations (1 location for each inundation block) * Location that results in largest damage is selected Condition of levee failure Completed levee: High Water Level (HWL) (design water level) Temporary levee: Hypothetical levee height is set to satisfy the cross-sectional stability with the current levee width. Failure water level is assumed to be the hypothetical levee height minus freeboard. 2. Cost-Benefit Analysis References: “Manual for Economic Evaluation of Flood Control Investments” (MLIT, 2005.6) “Inundation Simulation Manual” (1996.2)
  17. 17. 17 医療施設の機能低下による影響に関する試算結果2.1 Inundation Simulation (Example of A-River) 2. Cost-Benefit Analysis Division of inundation blocks Divide into areas considered as independent inundation areas due to embankments of tributaries Divide into 6 inundation blocks Locations of levee breach Defined for each block at the location where breached would result in maximum damage 6 locations defined (Total damage is the sum of damages of all blocks) Inundation blocks and location of levee breach
  18. 18. L1 Block R1 Block L2 Block R2 Block Flood area extend according to increase probability scale ・Simulation conducted for floods with different return-periods to determine inundation extent in each block ダム ダム ダム Simulated inundation area for before project Simulated inundation area for after project* probability scale 1/5 1/50 1/80 1/100 1/10 1/30 ● ● ● ● ● ● ● ● ● ● Expected annual average damage before project Expected annual average damage after project ■ Inundation simulation ■ Computation of expected annual damage for each return-period Without With ・Estimate the inundation areas expected without project and with project 2.2 Computing Reduction in Annual Average Flood Damage Computing expected annual damage for floods with different return-periods Expected annual damage is calculated for with and without project, based on simulation results 18 ・Expected annual damage for each return-period is computed based on the property value in each grid cell (quantity of property x unit value of property), inundation depth and damage rate defined by inundation depth. 2. Cost-Benefit Analysis References: “Manual for Economic Evaluation of Flood Control Investments” (MLIT, 2005.6)
  19. 19. 2.2 Computing Reduction in Annual Average Flood Damage Computing reduction in expected flood damage 9 ×0.3 billion=2.7 billion 6 ×0.5 billion=3.0 billion 4 ×1.0 billion=4.0 billion 3 ×2.0 billion=6.0 billion 8 ×0.3 billion=2.4 billion 4 ×0.5 billion=2.0 billion 3 ×1.0 billion=3.0 billion 0 ×2.0 billion=0 billion 整備 整備 Without With 7.4 billion Reduction in expected damage 15.7-7.4=8.3 billion15.7 billion Riverimprovement 浸水深 0~0.5m 未満 ~1.0m 未満 ~3.0m 未満 ~5.0m 未満 浸水深 0~0.5m 未満 ~1.0m 未満 ~3.0m 未満 ~5.0m 未満 ・Grid data (elevation, properties, gradient) and simulation results are used to determine expected damage for each grid ・Expected damage reduction (benefit) is computed as a difference between damages of with and without project 19 2. Cost-Benefit Analysis Image Image Expected Damage 15.7 billion Expected Damage 7.4 billion() () Inundation depth Project Site Project Site References: “Manual for Economic Evaluation of Flood Control Investments” (MLIT, 2005.6)
  20. 20. 2.2 Computing Reduction in Annual Average Flood Damage Computing reduction in annual average flood damage Without project ① With project ② Damage reduction ③=①-② D0+D1 2 D1+D2 2 Dm-1+Dm 2 Discharge Level Exceedance probability Damage Reduction Q0 N0 Average damage per interval④ Average probability per interval⑤ Annual average damage ④×⑤ Sum of annual average damage = Expected reduction in annual average damage Q1 N1 d1 D1 N1-N2 d2 d1+d2 N0-N1 d1 D0(=0) Nm-Nm+1 dm Dm Q2 Qm Nm N2 D2 d1+d2+・・・+dm Design discharge of River Improvement Plan (design level) e.g., 100yr flood discharge Sock impact of flood management projects Reduction in annual average flood damage ・Damage reduction is the difference between damages caused under with and without project. ・Damage reduction for a given return period flood is multiplied by the occurrence probability and is added up to the design return period to obtain “reduction in annual average flood damage” Damage reduction for a given return period flood =expected damage without project – expected damage with project Annual average damage reduction = Σ(damage reduction for a given return period) x (occurrence probability) 20 2.Cost-Benefit Analysis Flood return period Amountof damage 1/50 1/100 Before project 1/30 After project References: “Manual for Economic Evaluation of Flood Control Investments” (MLIT, 2005.6) Discharge capacity at time of evaluation (no damage flow) e.g., 10yr flood discharge
  21. 21. 2.2 Computing Reduction in Annual Average Flood Damage Computing expected flood damage 21 Directdamage generalassetdamage Categories Indices Unit price of asset Damage rate (depend on depth) Remarks Residential Houses Total floor area 135.8~226.3 (thousand yen/m2) 0.032~0.888 Damage rate depends on land gradient and sedimentation Residential properties (content) Number of households 14,683 (thousand yen/house) 0.21~0.991 Damage rate changes by occurrence of sedimentation Offices depreciable assets Number of employees 1,115~49,950 (thousand yen/person) 0.099~0.995 Asset values for industrial categories. Damage rate changes with sedimentation inventory assets 57~63,414 (thousand yen/person) 0.056~0.982 Asset values for industrial categories. Damage rate changes with sedimentation Damage to fishing and farming properties depreciable assets Number of properties 1,900 (thousand yen/house) 0.0~0.725 Damage rate changes by occurrence of sedimentation inventory assets 536 (thousand yen/house) 0.0~0.845 Damage rate changes by occurrence of sedimentation Agricultural product damage (rice paddy/field) Amount of yield 11~2,145 (thousand yen/ton) 0.11~1.00 Set for each crop. Damage rate depends on depth and days of inundation Infrastructure 1.694 multiplied by general asset (total value) Indirectdamage Categories Indices Damage per unit (depends on inundation depth ranks) Remarks Business interruption Number of employees 20,734~102,880 (yen/person) Emergency response cost at households Clean-up works Number of houses 10,749 (yen/day) Cost increase due to alternative activities Number of houses 82.5~343.3 (thousand yen/household) Emergency response costs of businesses Number of offices 470~6,619 (thousand yen/office) 2.Cost-Benefit Analysis [expected damage] = [direct damage]+[indirect damage] [direct damage] = Σ([asset values in grid cell] x [damage rate]) [indirect damage] = Σ([number of asset units in grid cell]×[damage per unit]) References: “Manual for Economic Evaluation of Flood Control Investments” (MLIT, 2005.6) “Property Assessment Unit Values and Deflators” (2013.2 )
  22. 22. 2.2 Computing Reduction in Annual Average Flood Damage Computing expected flood damage 22 2. Cost-Benefit Analysis ・Unit value of properties are revised every year based on the fluctuation in prices Property value of businesses Values of agricultural products (1000 yen/ton) Unit price Unit price Rice 200 Podded peas 1051 Wheat 53 Green beans 754 Soybeans 103 White raddich 65 Azuki beans 350 Carrots 108 Peanuts 460 Burdocks 194 Sweat potatoes 188 Taros 248 White potatoes 109 Apples 223 Cucumbers 237 Oranges 190 Eggplants 295 Chinese citrons 136 Tomatoes 278 Pears 282 Pumpkins 158 Persimmons 215 Watermelons 156 Grapes 774 Strawberries 815 Peaches 349 Green peppers 335 Tea leaves 654 Melons 619 Sugar beet 11 Chinese cabbages 53 Konjac 227 Cabbages 56 Tobacco leaves 2,145 Lettuces 131 Rushes 908 Spinach 372 Chrysanthemum 53 Long green onions 246 roses 63 Onions 97 Carnations 38 Cocoons Fruites Industrial crops Petals Leaf and stem vegetables Name Name Fruites and Vegitables Potatoes Beans Vegetable legumes Root vegetables Reference: “Property Assessment Unit Values and Deflators” (2013.2 ) (thousand yen/person) Depreciable assets Inventory assets Amount of added value (Suspension of business) D Mining 12,839 3,784 103 E Construction 1,472 3,649 20 F Manufacturing 5,107 4,527 28 G Electric/Gas/Heat supply/Water supply 109,953 5,455 54 H Information and communication 5,641 1,426 37 I Transport 5,178 1,254 22 J Wholesale/Retail 1,815 2,162 27 K Finance/Insurance 4,622 290 21 L Real estate 24,251 9,296 49 M Food/Hotel 1,943 154 22 N Medical/Welfare 1,712 57 14 O Education/Learning support 864 271 23 P Multiservice 4,622 290 22 Q Service 4,622 290 22 R Public service 4,622 290 22 (Note)For industrial classification, refer to Japan Standard Industrial Classification(revised in March 2002) Industrial classification
  23. 23. Damage rates are mainly derived from the interviews and surveys conducted in disaster areas 2.2 Computing Reduction in Annual Average Flood Damage Computing expected flood damage 23 Damage rates for residential houses 0.0 0.2 0.4 0.6 0.8 1.0 0 1 2 3 4 5 Damagerate[-] Inundation depth [m] A-Group B-Group C-Group Floor height Reference: “Manual for Economic Evaluation of Flood Control Investments” (MLIT, 2005.6) *Damage rate computed from ”Flood damage survey” 1993-1996 (Damage situations in flood affected areas were surveyed by conducting questionnaires and interviews) (Damage rates in case of sedimentation are the conventionally used rates and are not based on the above surveys) * The values reflect complete or partial destruction of the house Inundation depth Gradient Below floor level Above floor level Sedimentation (Above floor level) less than 50cm 50 – 99 cm 100 - 199 cm 200- 299 cm over 300cm less than 50cm less than 50cm A-Group (I<1/1000) 0.032 0.092 0.119 0.266 0.580 0.834 0.43 0.785 B-Group (1/1000≦I<1/500) 0.044 0.126 0.176 0.343 0.647 0.870 C-Group (I<1/500) 0.050 0.144 0.205 0.382 0.681 0.888 2. Cost-Benefit Analysis
  24. 24. 2.2 Computing Reduction in Annual Average Flood Damage Example of A-River 24 Directdamage generalassetdamage Categories Subjects Amount of asset evaluation (million yen) Amount of damage (million yen) Remarks Residential houses Buildings 228,587 3,915 No sedimentation Residential properties (content) Household goods/cars 7,294 2,705 No sedimentation Offices depreciable assets Fixed asset 30,493 2,238 No sedimentation inventory assets Inventory asset 18,189 1,223 No sedimentation Damage to fishing and farming properties depreciable assets Fixed asset 240 8 No sedimentation inventory assets Inventory asset 63 3 No sedimentation Agricultural product damage (rice paddy/field) agricultural product 786 50 Infrastructure Road/ bridge etc. 592,250 17,094 Indirectdamage Asset items Subjects Amount of damage (million yen) Remarks Business interruption Suspension of production 539 Emergency response cost at households Clean-up works value Ex-post activity of clean-up etc. 110 Cost increase due to alternative activities Substitute purchase of drinking water etc. 170 Emergency response costs of businesses Ex-post activity of clean-up etc. 192 Computation of total damage (without project, 1/100 flood) Without project , 1/100 flood Expected Damage = 28,247 million yen 2.Cost-Benefit Analysis
  25. 25. 2.2 Computing Reduction in Annual Average Flood Damage Example of A-River Simulated inundation area for before project Simulated inundation area for after project * probability scale 1/5 1/50 1/80 1/100 1/10 1/30 ■Inundation simulation ■ Computation of expected annual damage for each return-period Without With Expected annual damage for each return-period flood is computed based on the property value in each grid cell (quantity of property x unit value of property), inundation depth and damage rate defined by inundation depth. ● ● ● ● ● ● ● Damage: 28,247 million yen Damage: 20,184 million yen Damage: 790million yen No inundation: 1/5 -1/30 Damage: 115 million yen Damage 264 million yen ● ● ● 1/5 flood 1/50 flood 1/100 flood 1/100 flood 1/50 flood Damage reduction 20,069 million yen Damage reduction 27,983 million yen Damage reduction 790 million yen 25 ■Expected reduction in annual average flood damage ・Compute expected damage reduction for each return-period flood by taking the difference in damages of without project and with project 2.Cost-Benefit Analysis ・Simulation conducted for floods with different return-periods to determine inundation extent in each block ・Estimate the inundation areas expected without project and with project
  26. 26. Construction of river levees Before improvement After improvement Damage:10 billion yen Damage: 0 yen For those projects that generate benefit during the construction phase (such as levees), annually expected benefit (damage reduction) is determined for the project implementation phase as well as after completion. 2.3 Total Benefits Computing expected annual damage reduction (river improvement) ・Project impact Damage reduction of 10 billion yen ・Generation of benefit Implementation period Evaluation period after completion of facilities Completion of levee Evaluation periodProject start (time of evaluation) Benefit is realized during construction phase Annual average damage reduction discounted to present value Annual average damage reduction 年 ・・・・ During project implementation 26 2.Cost-Benefit Analysis References: “Manual for Economic Evaluation of Flood Control Investments” (MLIT, 2005.6)
  27. 27. 2.3 Total Benefit Computing expected annual damage reduction (dams) Evaluation period after completion Benefit of the project will be only realized after completion of structures. Generates benefit not only through damage reduction but also by maintaining the normal functions of river (augmenting river flows to satisfy normal uses, etc) ・Project impact Before project 50 billion yen After project 0 yen Damage reduction of 50 billion yen Completion of dam evaluation period Project start (time of evaluation) Annual average damage reduction discounted to present value Annual average damage reduction Benefit is generated only after completion 年 27 2.Cost-Benefit Analysis Construction of dams ・Generation of benefit Implementation period References: “Manual for Economic Evaluation of Flood Control Investments” (MLIT, 2005.6)
  28. 28. (1) River improvements ●Levees and low flow channels, etc. If the facilities are adequately maintained, their flood control functions will not deteriorate. Accordingly the asset values of the facilities will not decrease until the end of an evaluation period. ●Structures including revetments, etc. It is assumed that the residual values of the structure at the end of the evaluation period shall be 10% of total costs. (2) Dam Dams should depreciate with time by a straight line method based on the legal durable period. (3) Land 49 1 0 1 1 50 )1(        S S t t S r c C 49 1 0 2 2 50 )1( 1.0         S S t t S r c C 49 1 0 49 1 0 50 )1( 1.0 )1( ) 80 50 1(9.0             S S t t S S t t S r d r d D 49 1 0 50 )1(        S S t t S r k KC,D,K : residual values discounted to the present as of the point in time when evaluation of river channels, dams, costs of land is conducted ct ,dt : miscellaneous costs incurred every year for construction except for costs of land, compensation costs, indirect costs, construction costs kt : the costs of land that incurs every year r : discount rate(i.e., 4%) S : project period(year) 2.3 Total Benefit Computation of total benefit Total benefits is calculated by summing the annual benefits during the evaluation period and by adding the residual value of the constructed asset at the end of the evaluation period. 28 Residual valueSum of annual benefits      49 0 0 )1( S t t t r b B Total sum of annual benefits during the evaluation period discounted to the present value at the time of evaluation B : total sum of annual benefit bt : annual benefit r : discount rate (i.e., 4%) S : project period (year) Total benefit(B) = Sum of annual benefits (B0) + Residual value(C+D+K) 2.Cost-Benefit Analysis References: “Manual for Economic Evaluation of Flood Control Investments” (MLIT, 2005.6)
  29. 29. 29 医療施設の機能低下による影響に関する試算結果2.3. Total Benefit Example of A-River 0 200 400 600 800 1000 1200 1400 0 10 20 30 40 50 60 70 80 金額(百万円) 経過年数(年) 年平均被害軽減期待額 Evaluation period after completion (50yrs)Project period (30 years) Project completion Evaluation period: 80years Annual average damage reduction discounted to present value Annual average damage reduction Computation of annual average damage reduction (annual benefit) Annual damage reduction increases as the project progresses Annual average benefit is computed from damage reduction and occurrence probability Total benefit(B) 15,914 million yen      49 0 0 )1( S t t t r b B B : total sum of benefits during the evaluation period bt : benefits generated in t year r : discount rate (i.e., 4%) S : project period (year) 2.Cost-Benefit Analysis References: “Manual for Economic Evaluation of Flood Control Investments” (MLIT, 2005.6) ①Current (2013) ②After completion ③Damage reduction (①- ②) 229 53 152 546 698 27,983 25,071 1,10822,570 0.008 W=1/100 0.010 181 26,527 0.003 20,069 17,593 0.013 28,247 264 Annual average damage reduction Sum of annual average damag reduction W=1/ 80 0.013 25,302 231 927 80 1,188 W=1/ 5 0.200 790 0 Return period Exceedance probability Damage Reduction Average reduction Probability 53 790 990 0.100 99 1,190 8,153 0 395 0.067 15,116 0.020 W=1/ 30 0.033 15,116 0.133 W=1/ 3 0.333 0 0 0 20,184 115 W=1/ 10 0.100 1,190 0 W=1/ 50 Annual benefit is discounted to present value (discount rate r=0.04)
  30. 30. 30 医療施設の機能低下による影響に関する試算結果2.3 Total Benefit Example of A-River Categories Benefit (million yen) Total sum of annual benefit (B0) 15,914 Residual value River channels(C) Non-structures 129 Structures 9 Dam (D) - Land (K) 11 Total benefit (B) 16,063 Computation of total benefit Total benefit(B) = Total sum of annual benefit (B0) + Residual value (C+D+K) 2.Cost-Benefit Analysis
  31. 31. 2.4 Total Cost computation of total cost Flood control investment cost consists of the total construction costs and the maintenance costs incurred during the evaluation period Total cost (C) = Construction cost (C1) + Maintenance costs (C2) [C1] Total cost include all construction costs up to completion of facility. (e.g. cost related to construction, land acquisition and compensation, etc.) [C2] Maintenance cost is computed as the total sum of the maintenance costs incurred during the evaluation period. (50 years after completion of facility) (Ex. Case of river improvement (construction of levee)) (Ex. Dam construction) Improvement period Evaluation period after completion of facility Completion of levee Evaluation periodTime of evaluation year Improvement period Evaluation period after completion of facility Completion of dam Evaluation periodTime of evaluation Construction costs Construction costsMaintenance costs Maintenance costs Project cost discounted to the present value Project cost discounted to the present value 31 2.Cost-Benefit Analysis References: “Manual for Economic Evaluation of Flood Control Investments” (MLIT, 2005.6)
  32. 32. 32 医療施設の機能低下による影響に関する試算結果2.4 Total Cost Computation of total cost 0 50 100 150 200 250 300 350 400 450 500 0 10 20 30 40 50 60 70 80 金額(百万円) 経過年数(年) 費用 Evaluation period after completion of facility (50 years) Maintenance costs(C2) Improvement period (30 years) Construction costs(C1) Project completion Evaluation period: 80 years Total costs(C) = Construction costs + Maintenance costs(C2) Cost (million yen) Construction cost (C1) 5,343 Maintenance cost (C2) 440 Total cost (C) 5,783 Annual project cost discounted to present value Annual project cost      49 0 )1( S t t t r c C C : total sum of the costs during evaluation period Ct : cost generated in t year r : discount rate (i.e., 4%) S : project period (year) 2.Cost-Benefit Analysis years Cost
  33. 33. 2.5 Computation of Cost-Benefit Ratio (B/C) Example of A-River 33 Total (million yen) Total benefit (B) 16,063 Total cost (C) 5,783 Cost-Benefit ratio (B/C) 2.78 Computation of Cost-Benefit Ratio 2.Cost-Benefit Analysis Cost-Benefit ratio(B/C) = total benefit (B) / total cost (C) Compute Cost-Benefit ratio (B/C)
  34. 34. 34 医療施設の機能低下による影響に関する試算結果3. Analysis of Flood Damage Indices items Consideration contents Items Consideration contents 1: Human damage 1-1 population in inundation area 5: Lifeline 5-1 population affected by disruption of electric power supply 1-2 number of vulnerable people in inundation area requiring assistance under disaster conditions 5-2 population affected by disruption of gas supply 1-3 expected loss of life 5-3 population affected by disruption of water supply 1-4 maximum number of people isolated 5-4 population affected by disruption of sewerage system 1-5 number of people isolated for more than 3 days 5-5 population affected by communication service (fixed) 1-6 total number of people subject to evacuation per 10 years 5-6 population affected by communication service (cellular phone) 2: Medical/social welfare facility 2-4 number of impaired social welfare facilities 6: Economic impact within and outside the region 6-1 economic losses using economic models such as input-output inter-industrial relations, etc 2-5 number of users of impaired social welfare facilities 6-2 impact on supply chain caused by damage to high market share companies 3: Base facility for disaster management 3-1 number of impaired major disaster management facilities (police station, firehouse, public office etc.) 6-3 number of listed companies suffered by flood 3-2 population of jurisdictional area with impaired major disaster management facilities 6-4 number of employees suffered by flood 7: Under- ground space 7-1 routes and stations, etc. of subway suffered by flood 4: Losses caused by disruption of traffic 4-1 disruption of major road 7-2 number of users affected by flooding of subway services 4-2 amount of traffic affected by disruption of road 7-3 flooded underground shopping complex/facility 4-3 increase in travel time due to disruption of road 7-4 number of users affected by inundation of underground shopping complex/facility4-4 disruption of main railway 8: Cultural facility 8-1 flooded cultural facilities, etc. 4-5 number of users affected by disruption of railway 9: Waste 9-1 amount of flood disaster waste generated 9-2 management cost of flood disaster waste 3. Analysis of Damage Indices Reference: “Manual for Flood Damage Indices Analysis” (2013.6, MLIT) Categories of damages considered for non-monetary evaluation (quantitative impacts are analyzed)

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