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Thailand UNDP-GIZ workshop on CBA - Effective water management and sustainable agriculture in Thailand

Thailand, 27-28 November 2017 - UNDP and GIZ partnered with the Thailand Office of Agriculture Economics (OAE) to launch a workshop designed to connect vital stakeholders to build an effective National Adaptation Plan. The two-day workshop at the Rama Garden Hotel had 20 participants from each department under the Ministry of Agriculture and Cooperatives (MOAC). The workshop was designed to build capacity of planning officers to formulate better projects and budget submissions as well as potential climate finance proposal using cost-benefit analysis and ecosystem-based analysis appraisal tools.

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Cost-Benefit Analysis: Advanced Training
Presentation by Dr. Benoit Laplante
Bangkok, Thailand
November 27-28, 2017
Session 3:
Estimating cost of floods and benefits of flood mitigation
Estimating cost of floods
What are the impacts of floods and what are the costs of these
impacts? For example:
Impacts Costs
Damages to infrastructure Repair expenditures
People cannot go to work Lost productivity
Health and sickness Cost of treatment
Agricultural production Value of lost agriculture
Loss of lives ???
We can estimate
these costs…even
loss of lives.
Without CC No
project
Return
period
1/20
1/50
1/100
D1
D3
D5
Estimating cost of floods
Samoa
Estimating cost of floods
1-in-1 1-in-5
1-in-20 1-in-100
Estimating cost of floods
Without CC No
project
Return
period
1/20
1/50
1/100
D1
D3
D5
Expected
cost of flood
1/20*(D1)= + 1/50*(D3)
+ 1/100*(D5)
What is the expected cost of flood?
Estimating cost of floods
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Thailand UNDP-GIZ workshop on CBA - Effective water management and sustainable agriculture in Thailand

  • 1. Cost-Benefit Analysis: Advanced Training Presentation by Dr. Benoit Laplante Bangkok, Thailand November 27-28, 2017 Session 3: Estimating cost of floods and benefits of flood mitigation
  • 2. Estimating cost of floods What are the impacts of floods and what are the costs of these impacts? For example: Impacts Costs Damages to infrastructure Repair expenditures People cannot go to work Lost productivity Health and sickness Cost of treatment Agricultural production Value of lost agriculture Loss of lives ??? We can estimate these costs…even loss of lives.
  • 6. Without CC No project Return period 1/20 1/50 1/100 D1 D3 D5 Expected cost of flood 1/20*(D1)= + 1/50*(D3) + 1/100*(D5) What is the expected cost of flood? Estimating cost of floods
  • 8. Cost Return period1/201/501/100 D5 D3 D1 Expected cost of CC Exceedance probability function Estimating cost of floods
  • 9. Without CC No project With CC No project Return period 1/20 1/50 1/100 D1 D2 D3 D4 D5 D6 Impact (cost) of CC on flood D1D2 - D3D4 - D5D6 - Estimating cost of floods
  • 10. Cost Return period1/201/501/100 D5 D3 D1 Exceedance probability function without CC Estimating cost of floods Exceedance probability function with CC D6 D4 D2
  • 11. Without CC No project With CC No project Return period 1/20 1/50 1/100 D1 D2 D3 D4 D5 D6 Impact (cost) of CC on flood D1D2 - D3D4 - D5D6 - What is the impact of CC on the expected cost of flood? Estimating cost of floods
  • 12. Without CC No project With CC No project Return period 1/20 1/50 1/100 D1 D2 D3 D4 D5 D6 Impact (cost) of CC on flood D1D2 - D3D4 - D5D6 - Expected cost of CC 1/20*(D2-D1)= + 1/50*(D4-D3) + 1/100*(D6-D5) Estimating cost of floods
  • 13. Cost Return period1/201/501/100 D5 D3 D1 Estimating cost of floods D6 D4 D2 This area is the expected cost of CC
  • 14. Please note: These estimated damages depend (among other things) on:  The number of people in the future living in the identified flood areas; and  The value of assets (public and private) in the future in the identified flood areas. In order to estimate damages of flood in the future, we need: Hence:  Population projections for the targeted area (we can start with national population projections and assume that in the urbanized targeted area, in fact population growth will be higher than national population growth projection; and  GDP projections (it may be assumed that property values (in real terms) increase at the rate projected GDP growth rate. Estimating cost of floods
  • 15. Potential sources of information: For population: For GDP:  United Nations, Department of Economic and Social Affairs, Population Division  National statistics  World Bank GDP projections  IMF GDP projections  Ministry of Finance Estimating cost of floods
  • 16. Potential sources of information: For estimates of damages:  Hazard mapping  History of flood events and impacts Wish list: For every flood event in the last many years:  Date of the event  Location of the flood  Duration of the flood (number of days)  Area covered by the flood (in km2 or other measures)  Number of people impacted (exposed, deaths, sickness)  List of infrastructure damaged (number of houses, public buildings, etc.)  Repair costs  List of other losses (agriculture, etc.) Estimating cost of floods
  • 17. Estimating benefits of flood mitigation With CC No project D2 D4 D6 Return period 1/20 1/50 1/100 With CC With project D7 D8 D9 Benefit of the project D2D7 - D4D8 - D6D9 - What are the estimated benefits of flood mitigation?
  • 18. Estimating benefits of flood mitigation With CC No project D2 D4 D6 Return period 1/20 1/50 1/100 With CC With project D7 D8 D9 Benefit of the project D2D7 - D4D8 - D6D9 - Expected benefit of the project 1/20*(D7-D2)= + 1/50*(D8-D4) + 1/100*(D9-D6)
  • 19. Cost Return period1/201/501/100 Exceedance probability function with CC without project Exceedance probability function with CC with project Estimating benefits of flood mitigation
  • 20. 20 Let’s go back here Sukhothai Uttaradit Phitsanulok
  • 21. Return period Estimated damages without project Estimated damages with project Reduction in damages 1-in-5 18,970,000 0 18,970,000 1-in-10 330,210,000 98,380,000 231,830,000 1-in-25 1,222,500,000 735,450,000 487,050,000 1-in-50 1,737,070,000 1,076,960,000 660,110,000 Estimated Reduction in Flood Damages (Thai Baht) Estimating benefits of flood mitigation Please calculate the expected benefits of the project on flood mitigation. Expected benefits: 59,661,200 Thai Baht
  • 22. Return period Estimated damages without project Estimated damages with project Reduction in damages 1-in-5 18,970,000 0 18,970,000 1-in-10 330,210,000 98,380,000 231,830,000 1-in-25 1,222,500,000 735,450,000 487,050,000 1-in-50 1,737,070,000 1,076,960,000 660,110,000 Estimated Reduction in Flood Damages (Thai Baht) What happens if one benefit of the flood mitigation project is to save lives? Do we calculate an economic benefit? Estimating benefits of flood mitigation
  • 23. Value of statistical life (VSL) A flood mitigation project will reduce mortality risk in a given population in Thailand from 1/100,000 to 1/200,000. What is the benefit per statistical life saved? Estimating benefits of flood mitigation Meaning of VSL: It is the maximum willingness-to-pay that society is willing to pay to reduce the risk of losing 1 life. Key determinants of VSL: Income (or GDP per capita)
  • 24. In the USA, the VSL is about $7.4 million If risk preferences, discount rates, and survival probabilities were the same in all countries, then the VSL should simply be proportional to income: VSL Thailand = VSL USA * YThailand YUSA Ɛ Where Y is GDP per capita in PPP terms and Ɛ is income elasticity. Estimating benefits of flood mitigation
  • 25. We use GDP per capita measured in PPP. The IMF’s World Economic Outlook Database 2016 reports a GDP per capita of $57,536 and $16,888 for the USA and Thailand respectively. This provides a GDP per capita ratio of 0.294. Step 3: Income elasticity. Assuming an income elasticity of 1, then VSL in Thailand is: $2,234,640. Estimating benefits of flood mitigation Each time a flood mitigation project is expected to save 1 statistical live, then the economic benefit is $2.234 million per statistical lives saved.
  • 26. 26 Let’s go back here Sukhothai Uttaradit Phitsanulok
  • 27. Estimating benefits of flood mitigation Over the 9-year period between 2006 and 2014, a total of 44 lives were lost to floods in Sukhothai, and 41 in Phitsanulok. On an annualized basis, this would represent a total of approximately 4.9 lives lost in Sukhothai, and 4.6 in Sukhothai. Zero lives were lost to floods in Uttaradit. Using the population census of 2010, this would represent an incidence of mortality of approximately 0.79 per 100,000 people in Sukhothai, and 0.51 per 100,000 people in Phitsanulok. What do we need to do next? Scenario without project: How many lives in the future could be lost as a result of floods in these two provinces?
  • 28. Estimating benefits of flood mitigation Assume mortality incidence remains the same Population projections Year Phitsanulok Sukhothai 850,000 600,000 Number of lost lives Phitsanulok Sukhothai 4.8 4.4
  • 29. Estimating benefits of flood mitigation What is the next question? What could be the number of lives lost with the project? Year Number of lost lives With project Without project 4.8 Year Number of lost lives 4.4 4.4 Sukhothai Phitsanulok With project Without project From this step, we would have an estimate of the number of lives the project could save in the future. Then we can apply VSL to these estimates.
  • 30. Cost-Benefit Analysis: Advanced Training Presentation by Dr. Benoit Laplante Bangkok, Thailand November 27-28, 2017 Session 3: Estimating cost of floods and benefits of flood mitigation