Economics for Disaster Prevention and Preparedness Investment in Disaster Risk Management in Europe Makes Economic Sense SUMMARY REPORT © 2021 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 15 14 13 12 This work is the product of the staff of the World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgement on the part of the World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved. This publication was produced with the financial support of the European Union. Its contents do not necessarily reflect the views of the European Union. Administration Agreement between the European Commission and the International Bank for Reconstruction and Development concerning the Part II Europe 2020 Programmatic Single-Donor Trust Fund (No.TF073473) (EC Contract No. ECHOSUB/IBRD/2020/827615). Rights and Permissions This work is available under the Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) https://creativecommons.org/licenses/by/3.0/igo/. Under the Creative Commons Attribution license, you are free to copy, distribute, transmit, and adapt this work, including for commercial purposes, under the following conditions: Translations If you create a translation of this work, please add the following disclaimer along with the attribution: This translation is an adaptation of an original work by The World Bank and should not be considered an official World Bank translation. The World Bank shall not be liable for any content or error in this translation. Adaptation If you create an adaptation of this work, please add the following disclaimer along with the attribution: This is an adaptation of an original work by The World Bank. Views and opinions expressed in the adaptation are the sole responsibility of the authors of the adaptation and are not endorsed by The World Bank. The report was completed in April 2021. 2 STATEMENT FROM EUROPEAN COMMISSION capacity to model the impact and prepare for increasingly complex risks: this is European solidarity at its best. In the challenging socio-economic context that the COVID-19 pandemic has put before us, demonstrating the return on investments of prevention and preparedness measures will be critical. The increasing pressure on national budgets make it an imperative to use resources to generate as many benefits as possible. Investing in making Europe more resilient to disasters and crises provides an opportunity to promote green Paraskevi Michou and sustainable development. Reviewing more than 70 Director-General Europe-based examples, this study shows that there is Directorate-General for European Civil Protection a robust economic case for investing in Europe’s and Humanitarian Aid Operations (ECHO) resilience. Reducing risks with ‘smart’ investments European Commission stimulates economic activity, promotes innovation, and generates multiple social, environmental, and The COVID-19 crisis has been an unprecedented economic benefits that materialise even when a challenge for Europe and a major stress test for the disaster does not occur. The study also modelled the resilience of our society, infrastructure, and economy. impact of earthquakes and floods on the economies of We have adapted to new constraints posed by the EU Member States, analysed the financial instruments pandemic and turned the lessons learned through this available to manage these risks, and found that some crisis into a strengthened Union Civil Protection disaster scenarios may cause potential funding gaps at Mechanism (UCPM). We have upgraded our European national and EU level, including for response assistance. emergency management system so that it can be better equipped for responding to future emergencies Physical and financial resilience need, therefore, to be and offer concrete and timely EU solidarity to the EU’s tackled jointly. To do so, we need to continue to invest in citizens. human capacity for disaster resilience. The UCPM is well placed to provide access to both knowledge and At the same time, the COVID-19 crisis has also financing. Our recently created “Knowledge Network” emphasised the importance of using the scientific and is the shared platform for UCPM Member and technical resources we have at our disposal to better Participating States that bridges science and decision- anticipate, plan, and prepare for the next crisis. making in disaster risk management. In addition, the Modelling the impact of future risks is an imperative for financing instruments available under the Prevention making sound decisions when developing the next and Preparedness Programme of the UCPM can be European civil protection capacities. With robust data leveraged to develop strategies and the investments and technical advice, we can develop more accurate needed for resilience. disaster scenarios and review our preparedness accordingly. Understanding the socio-economic impacts of risks and modelling their future trends will allow us to review Economics for Disaster Prevention and Preparedness is our response capacity accordingly, so that we do not a concrete example of how a partnership between the prepare for the disaster that just happened, but European Commission and the World Bank can use anticipate future crises while contributing to Europe’s data to improve our understanding of risks, produce social, economic, and environmental well-being. This new tools for communicating them, and, ultimately, study is a step in the right direction, providing evidence make our society more resilient and prosperous. A and examples of how we can become more resilient, common emergency management system with a joint together. Statement from European Commission 3 STATEMENT FROM WORLD BANK Disasters and hazards, whether natural, technological, authorities and stakeholders involved in disaster risk or health-related, can have devastating physical, management, including technical knowledge, human social, and financial effects. In the European Union capacity, and institutional coordination. alone, average economic losses from natural disasters stand at approximately EUR 12 billion per year1, and Placing disaster prevention and preparedness within are expected to increase further as climate change the context of the COVID-19 recovery, and develop­ manifests itself across more and more aspects of our ment more broadly, helps save lives and protect lives. The well-being of society is at stake if appropriate livelihoods. It provides a practical way to operationalize prevention or preparedness measures against the green, resilient, and inclusive agenda. The reports disasters are not implemented. For some EU countries under Economics of Disaster Prevention and that have been affected by natural disasters in recent Preparedness project highlight the importance of years, the COVID-19 pandemic has compounded enhancing prevention, preparedness, and emergency these challenges that have led to a devastating loss of response, which helps to reduce disaster and climate life and extensive economic damage. risks for people, improve sustainability, and enhance the welfare of European countries. It provides To address these challenges, the World Bank is recommendations that can help drive Europe’s green focusing its efforts on supporting a greener, more and resilient recovery through international, Europe- resilient, and inclusive development.2 Adopting smart wide, and national programs as well as financing. The and sustainable approaches is needed considering report components present a range of good practices the investment gap of around EUR 2 trillion per year in that can inspire reforms of financial frameworks, order to reach the Sustainable Development Goals by integrated investments, and technical assistance tools 2030. The collaboration between the World Bank and on the path to a better and more resilient future. the European Commission on the economics of disaster prevention and preparedness is offering new evidence for strengthening resilience across the physical, financial, and institutional dimensions. Investments that aim to reduce disaster and climate Gallina Vincelette risks can help contribute to the EU’s goal of climate Country Director for the European neutrality by 2050 under the European Green Deal. Union countries, World Bank This summary report shows that enhancing physical resilience is critical and can generate social, economic, Sameh Wahba and environmental co-benefits even in the absence of Global Director for Urban, disasters. The report shows that holistically-designed Disaster Risk Management, investments yield substantially high benefits across a Resilience and Land, World Bank range of developmental goals. Effective design can help reduce impacts of disasters and better protect citizens, particularly when facing risks of cascading or Steven Schonberger simultaneous disasters that may become more Regional Director for Sustainable frequent in the future. Similarly, building resilience Development in the Europe and cannot be achieved without improving the capacity of Central Asia region, World Bank 1 European Environment Agency ,2020. Economic damage caused by weather and climate-related extreme events in Europe (1980-2019). Indicator Assessment. Link. 2 World Bank. 2021. From COVID-19 Crisis Response to Resilient Recovery - Saving Lives and Livelihoods while Supporting Green, Resilient and Inclusive Development (GRID). Development Committee Statement from World Bank 4 ACKNOWLEDGEMENTS This report forms part of deliverables under the technical assistance Economic Analysis of Prevention and Preparedness in European Union Member States and Countries under EU Civil Protection Mechanism. This activity is funded by the European Commission’s Directorate General for European Civil Protection and Humanitarian Aid Operations (DG ECHO) through the Annual Work Program of 2020. This report corresponds to the output “Report on the retrospective analysis of the cost and benefits of selected investments aimed at building resilience in the Participating States”. This report was prepared under the guidance and supervision of Christoph Pusch (Practice Manager, Urban, Disaster Risk Management, Resilience and Land, Europe and Central Asia) and Gallina Vincelette (Country Director for the European Union Countries). The report was prepared under the leadership of Alanna Simpson (Lead Disaster Risk Management Specialist), Samantha Cook (Senior Financial Sector Specialist) and Zuzana Stanton-Geddes (Disaster Risk Management Specialist). Drafting of the report was coordinated by Solene Dengler (Disaster Risk Management Analyst), and expert inputs were provided by Shaikh Eskander (Senior Environmental Economist), Stuart Fraser (Senior Disaster Risk Management Consultant), Mattia Amadio (Disaster Risk Management Consultant), Daniel Johnson (Heatwave Expert), Zahraa Saiyed (Senior Earthquake Engineer), Josh Macabuag (Senior Disaster Risk Engineer), and Maryia Markhvida (Senior Disaster Risk Management Consultant). Research and analytics support came from Tianyu Zhang (Data Analyst) and Jayne Hoagbin (Research Assistant), with modelling from Domingos Viegas (Professor and Senior Wildfire Expert, Department of Mechanical Engineering, University of Coimbra), Miguel Almeida (Wildfire Expert), the Global Earthquake Model Foundation, and JBA Risk Management. The report was edited by Anne Himmelfarb and designed by Ariane Kascha. The report benefitted from comments and guidance received from Reinhard Mechler (Acting Program Director, Risk and Resilience Department, International Institute for Applied Systems Analysis) and Adam Rose (Research Professor, University of Southern California); Justine Morven Sylvester (Land and Urban Analyst) and from peer review comments from received from Julie Rozenberg, Artessa Saldivar-Sali, and Jun Rentschler. The team would like to express its gratitude for the cooperation and guidance of the representatives of the European Commission, and all the stakeholders consulted during the report’s preparation. STATEMENT ON COVID-19 PANDEMIC The COVID-19 pandemic has led to substantial restrictions on travelling, the organization of workshops, and face-to face meetings. Despite these limitations, the World Bank team in collaboration with the European Commission and stakeholders has managed to effectively undertake extensive consultations online to collect data and information as a basis for this work. Acknowledgements 5 Contents Statement from European Commission3 Statement from World Bank4 Acknowledgements5 Statement on COVID-19 pandemic5 Glossary 9 Abbreviations10 About this Report11 Executive Summary��������������������������������������������������������������������������������������������������������������������� 12 : Disaster and Climate Risks Are Growing Despite Robust 1. Introduction Economic Arguments for Prevention and Preparedness �������������������������������������������������������������� 20 1.1. Disaster and Climate Change Impacts 20 1.2. The Global Economic Case for Investment in Resilience 26 Greening Infrastructure26 Moving Beyond “Hard” Investments26 The Value of Integrated Investments: One Intervention, Many Benefits27 2. Economic Analysis and Triple Dividend of Resilience ������������������������������������������������������������������ 30 2.1. Use of Benefit-Cost Analysis to Assess Investments in DRM 30 2.2. Application of the Triple Dividend of Resilience Framework 31 Dividend 1: Saving Lives and Reducing Losses 32 Dividend 2: Unlocking Economic Potential32 Dividend 3: Generating Social, Environmental, and Economic Co-benefits33 3. Case Study Selection for This Report�������������������������������������������������������������������������������������������������� 39 4. Overall Findings ���������������������������������������������������������������������������������������������������������������������������������������� 42 4.1. Overall Results 42 4.2. Key Highlights of Findings by Hazard 48 Multi-hazard48 Flood48 Earthquake52 Extreme Heat58 Drought61 Wildfire 63 Mass Movement/Landslide67 Volcanic Eruption69 Epidemic and Disaster Health Preparedness70 Oil Spills and Nuclear and Chemical Risks72 4.3. Conclusions 74 5. Recommendations Moving Forward�����������������������������������������������������������������������������������������������������77 6. References �������������������������������������������������������������������������������������������������������������������������������������������������� 79 7. Annexes ������������������������������������������������������������������������������������������������������������������������������������������������������ 86 7.1. Annex 1: A step-by-step practitioner report on applying the Triple Dividend BCA 86 7.2. Annex 2: Overview of case studies reviewed as part of background research 91 6 Figures Figure 1. Overview of case studies analysed under this report14 Figure 2. Findings of benefit-cost analysis by hazard: Benefit-cost ratios, excluding extreme values and including extreme values16 Figure 3. Economic damage caused by weather- and climate-related extreme events in Europe (1980–2019)22 Figure 4. Economic loss from considered hazards and climate impact at warming levels for the EU and UK (for macro regions; billion €)22 Figure 5. Countrywide socio-economic resilience levels for select south-eastern European countries disaggregated by poverty levels (top) and hazard type (bottom) 23 Figure 6. Comparison of socio-economic resilience with different policies for select south-eastern European countries24 Figure 7. Number of people annually exposed to a present 50-year heatwave, and projected changes in human exposure to these events for global warming of 1.5°C, 2°C, and 3°C25 Figure 8. The incremental cost of increasing resilience of future investments is significantly reduced if asset exposure is determined 28 Figure 9. Benefit-cost ratios of disaster risk reduction investments in the US28 Figure 10. The 10 steps of a BCA34 Figure 11. The do’s and don’ts of a BCA to assess DRR investments35 Figure 12. Triple Dividend of Resilience35 Figure 13. Process for the selection of case studies40 Figure 14. Overview of case studies analysed under this report40 Figure 15. Case studies by hazard and type of analysis41 Figure 16. Findings of benefit-cost analysis by hazard: Benefit-cost ratios, excluding extreme values and including extreme values 44 Figure 17. Findings of benefit-cost analysis by hazard: Net present values (million €)45 Figure 18. Findings of benefit-cost analysis by hazard: external rates of return 46 Figure 19. Selected lessons learned, by hazard47 Figure 20. Findings of benefit-cost analysis for floods (benefit-cost ratios)50 Figure 21. Benefit-cost ratio values for four adaptation measures for the period 2020–2100, under a 2°C warming scenario52 Figure 22. Mean seismic hazard map from ESHM13 for the 475-year return period in terms of peak ground acceleration (PGA)54 Figure 23. Findings of benefit-cost analysis for earthquakes (benefit-cost ratios)54 Figure 24. Map of seismic countries in the EU by exposed value of education facilities55 Figure 25. Costs (investments) and benefits considered for quantitative analysis to provide the capacity-building benefit-cost ratio for the Albania (2019) and Croatia (2020) earthquakes 55 Figure 26. Capacity-building costs and benefits for the Albania earthquake (2019) further broken down and ranked for each actor 56 Figure 27. Fractions of area expose to drought risks under three global warming scenarios (1.5°C, 2 °C, and 3°C)62 Figure 28. Forest fire danger in the present, and under two climate change scenarios, according to two different climate models (1.5°C, 2 °C, and 3°C)64 Figure 29. Findings of benefit-cost analysis for wildfires (benefit-cost ratios)64 Figure 30. Bushfire Safety System in Victoria, Australia66 Figure 31. Primary network considered in Albania study on reducing transport disruptions from landslide68 Figure 32. Pandemic preparedness: Preparation of countries in Europe and select other regions for infectious disease before COVID-1971 Figure 33. Difficulty of funding investments in disaster risk reduction76 7 Tables Table 1. Top-10 countries for flood and seismic risk, by average annual loss as a percentage of exposure21 Table 2. Main methodologies used for the economic analysis of disaster risk reduction investments36 Table 3. Triple Dividend benefit-cost analysis template36 Table 4. Triple Dividend analytical framework: Preliminary summary of data requirements and challenges 37 Table 5. Benefit-cost ratio of implementing early warning systems in Flanders by dividend, over 30 years 50 Table 6. Investment in public buildings in Italy: Probable maximum loss analysis (475-year return period) by facility type56 Table 7. Benefit-cost analysis for schools conducted for this report57 Table 8. Projected changes in exposure and fatalities related to heat and cold extremes: EU and UK 59 Table 9. Benefit-cost ratio for heatwave early warning systems in France, by dividend60 Table 10. Expanded triple dividend cost-benefit ratio calculation of fuel management for wildfire risk reduction in central region of Portugal65 Table 11. Benefit-cost ratio for landslide measures implemented, by corridor 68 Table 12. Cost of PPE supplies in the United States: Before and during COVID19 71 Table 13. Expanded Triple Dividend cost-benefit ratio calculation for cleaning up hazardous waste in Latvia73 Boxes Box 1. Impacts of disasters on poverty and well-being of households in countries from south-eastern Europe23 Box 2. Impacts of seismic risks in Europe and Central Asia24 Box 3. Impacts of urban heat islands in Europe 25 Box 4. Targeting investment to the most vulnerable infrastructure is critical 27 Box 5. Economic Analysis in the US28 Box 6. European Green Deal and COVID-19’s catalyst for widespread sustainable development 29 Box 7. Integrating Energy Efficiency and Structural Strengthening29 Box 8. Typical approaches to economic analysis in Europe (2014–2020)33 Box 9. Economic analysis in Austria34 Box 10. Economic analysis in the Netherlands34 Box 11. Flood management in the Netherlands51 Box 12. Managing flood risk in Roma, Australia 51 Box 13. Comparison of BCR for different adaptation measures across EU Member States 51 Box 14. Earthquake experience from New Zealand57 Box 15. Comprehensive earthquake risk prevention in Japan 58 Box 16. Heatwave impact prevention in the US60 Box 17. Heatwave impact prevention in France61 Box 18. Improving water security in Portugal62 Box 19. Early warning and preparedness in the Danube 62 Box 20. Wildfire prevention in Australia66 Box 21. Enhanced wildfire response in Europe66 Box 22. Economics of prevention versus response for landslides in Italy68 Box 23. Economics of prevention versus response for landslides in Switzerland69 Box 24. Evacuation routes in volcanic areas of Italy70 8 GLOSSARY benefit-cost analysis (BCA): Process used to identify, green infrastructure: Sustainable, nature-based measure, and analyse the benefits of a project, Infrastructure that makes use of natural processes programme, or decision versus the costs associated and ecosystem services for functional purposes, such with it. as disaster risk reduction. Such infrastructure usually yields risk reduction benefits as well as social and benefit-cost ratio (BCR): Ratio used in BCA to environmental effects. summarize the relationship between overall relative benefits and costs of a project. A BCR lower than 1 grey infrastructure: Structural, human-engineered means that the project’s net benefits could be negative, infrastructure for flood or other disaster risk i.e., benefits are lower than costs. management, which includes both static and active elements and which is usually built with materials like direct and indirect benefits/costs: Benefits/costs steel and concrete. either directly or indirectly associated with the impact of the project/program/decision. An example of a internal rate of return (external rate of return): Metric direct benefit is the prevention of asset losses or used in analysis to estimate the benefits of potential enhancement of environmental value due to a flood investments. The internal rate of return is a discount prevention measure; a direct cost is the cost of the rate that would make the net present value of all flood prevention measure. An example of an indirect monetary flows equal to zero in a discounted benefit is the productivity losses prevented given the monetary flow analysis. The external rate of return flood measure, while an indirect cost is the increase in further adjusts for inflation and costs of capital. prices in the area leading to displacement and loss of welfare/well-being of certain populations. net present value (NPV): Difference between the present value of monetary inflows and the present disaster risk management (DRM): Processes for value of cash outflows over a period time. The idea designing, implementing, and evaluating strategies, behind the NPV is to project all future monetary inflows policies, and measures to improve the understanding and outflows associated with a project/program/ of disaster risk, foster disaster risk reduction and decision, discount all these flows to the present day, transfer, and promote continuous improvement in and add them together. A positive NPV means that, disaster preparedness, response, and recovery after accounting for the time value of monetary flows, practices, all with the explicit purpose of increasing the project/program/decision could yield net benefits. human security, well-being, quality of life, and sustainable development. sensitivity analysis: analysis that determines and showcases how results change when assumptions, disaster risk reduction (DRR): Both a policy goal and parameters, or variables of an analysis are changed. the strategic and instrumental measures employed for anticipating future disaster risk. DRR reduces existing value of a life year: A concept derived from the exposure, hazard, or vulnerability and improves willingness to pay for increasing life expectancy by one resilience. additional year. This measure is considered more appropriate for disasters that mostly displace discount rate: Rate of return used to discount future mortality (i.e., affect certain age groups) rather than cash flows back to their present value. Financial mostly causing premature deaths. Theoretically, discount rates are the interest rates used to calculate measurements of actual changes in life expectancy the present value of future cash flows from a project or would be the exact measure to consider. investment. Social discount rates indicate a society’s average valuation of future versus present impacts of value of statistical life (VSL): The marginal rate of interventions (benefits and costs). A high discount rate substitution between income (wealth) and mortality indicates a lower valuation of the future and a risk, i.e., how much individuals are willing to pay on preference for the present, which particularly in the average to reduce the risk of death. It therefore context of climate change also has implications for indicates not the value of an actual life but the value of intergenerational equity. marginal changes in the likelihood of death. Glossary 9 ABBREVIATIONS AAL average annual loss BCA benefit-cost analysis BCR benefit-cost ratio DG ECHO Directorate General for European Civil Protection and Humanitarian Aid Operations DALY disability-adjusted life years DiD difference-in-difference DRM disaster risk management DRR disaster risk reduction ERR external rate of return EWS early warning systems EU European Union GDP gross domestic product GHG greenhouse gas GRP gross regional product IRR internal rate of return JRC Joint Research Centre MS Member States NBS nature-based solutions NPV net present value PESETA Projection of Economic impacts of climate change in Sectors of the European Union based on bottom-up Analysis PML probable maximum loss PS Participating States SDGs Sustainable Development Goals UCPM Union Civil Protection Mechanism UHI urban heat island VSL value of statistical life Note: Currencies have been converted throughout the report to euro values. Where the original values were in other currencies, this has been indicated in footnotes. The currency exchange rates used in this report come from the Eurostat database (Eurostat Database, 2021). All dollar amounts are US dollars unless otherwise indicated. Abbreviations 10 ABOUT THIS REPORT This report forms part of the World Bank’s technical Given the variety of disasters and sectors covered assistance project undertaken with the European and respective methodologies utilized, the report Commission’s Directorate-General for European focuses on calculations for specific investments, but Civil Protection and Humanitarian Aid Operations does not derive average values of benefits and costs (DG ECHO) and financed under the Union Civil for sectors or hazards. The methods to calculate net Protection Mechanism (UCPM) Annual Work benefits include scenario-based analysis or analysis Programme 2020. This report is the output produced based on average annual losses, as well as hypothetical under Component 1, “Retrospective analysis of the scenarios or retrospective analysis of real investments. costs and benefits of selected disaster risk The report also accounts for dividends from the management (DRM) investments”, with the aim to investments in various ways. The results are therefore showcase the benefits of investing in the prevention of communicated mostly as case-specific, investment- disaster risks. specific, and location-specific; and wherever possible (based on information availability) they are compared The objective of this report is to provide EU Member to findings in the literature. Moreover, although the States/Participating States (MS/PS) and UCPM report aims to provide a full assessment of impacts, members with consolidated analysis and information this has not always been feasible due to data and on the economic value of investing in disaster and information limitations and methodological climate preparedness and prevention. The analysis constraints. As the results are based on analysis that is can serve as a basis for (i) demonstrating the net based on inherent uncertainty, results from new benefits of investing in prevention and preparedness analysis under this study are presented as rounded for various hazards, (ii) showcasing best practices in numbers (i.e. to a maximum of two decimal places) investing in prevention for various MS/PS and UCPM and/or as ranges. members as well as at a regional scale, and (iii) providing guidance on methodological approaches to This summary report is accompanied by a technical estimate the net benefits of interventions, including background report that covers (i) methodological soft investments, with a focus on the application approaches for the economic assessment of of the Triple Dividend of Resilience framework for investments for disaster risk management and climate economic analysis (Tanner, et al., 2015), though other change, and (ii) summaries of all the case studies methodologies are also described in this report. featured in this report. Although the report mainly focuses on Europe, international examples are presented throughout. About this Report 11 Executive Summary The physical, financial, and social impacts of found that the net benefit of investing in more resilient disasters in Europe are growing and will continue to infrastructure in low- and middle-income countries is grow unless urgent actions are taken. In the European €3.75 trillion, with roughly €4 in benefits for every €1 Union (EU), during the period from 1980 to 2020, invested (Hallegatte, et al., 2019).5 Moreover, the natural disasters affected nearly 50 million people and benefit-cost ratio6 (BCR) of investing in more resilient caused on average an economic loss of roughly €12 infrastructure was found to be higher than 1 in 96% of billion per year (EEA, 2020). The impacts of flood, scenarios, higher than 2 in 77%, and higher than 6 in wildfire, and extreme heat are increasing rapidly, and 25% (Hallegatte, et al., 2019). When targeted to the climate damages could reach €170 billion per year most vulnerable areas and infrastructure, overall according to conservative estimates for a 3 scenario investment needs were found to be an order of unless urgent action is taken now (Szewczyk, et al., magnitude lower than if no targeting was undertaken. 2020). Earthquakes, while rare, have a devastating Similarly, a global report on hydro-meteorological impact on the ageing buildings and infrastructure of early warning systems (EWS) found BCRs ranging from Europe that were constructed prior to modern codes; 4 to 35, dependent upon the assumed and quantified in Bucharest, for example, nearly 90% of the population co-benefits (Hallegatte, et al., 2012). Finally, review of lives in multifamily buildings with pre-modern building disaster risk reduction investments in the United codes3 (Simpson & Markhvida, 2020). Within the EU, States found BCRs of between 2 and 12, with the the top-five countries with the highest annual average highest BCRs attributed to ensuring that all buildings loss to earthquake are Cyprus, Greece, Romania, met the current building codes (NIBS, 2019). Bulgaria, and Croatia, and for floods the top-five countries are Romania, Slovenia, Latvia, Bulgaria, and This study found the economic case for investing in Austria.4 However, disasters do not affect everyone resilience in Europe to be equally robust and clear. equally: poor, elderly, very young, and marginalized This study applied the Triple Dividend of Resilience populations are most affected and least able to recover. approach to assessing economic benefits, which In Romania, Greece, Croatia, and Bulgaria, for example, considers avoided losses and saved lives, unlocked the socio-economic resilience of the poor is on average economic potential as a result of stimulated innovations less than 30% of the national average (World Bank, and bolstered economic activity that arise from the 2020). Moreover, the local and regional administrations reduction in disaster and climate risks, and social, in the poorer and more disadvantaged areas have the environmental, and economic co-benefits that accrue least capacity to design and implement resilience even in the absence of a disaster. More than 100 investments. investments focused on prevention and preparedness were reviewed for this report, with quantitative and The global economic case for investing in prevention qualitative analysis conducted for more than 70 and preparedness is unequivocal and wider benefits investments aimed at reducing the impact of a wide of resilience measures are likely to be substantially range of natural and technological hazards across underestimated. The World Bank’s Lifelines report Europe (Figure 1). 3 For the buildings in this study, pre-modern indicates buildings designed and constructed before the year 2000. 4 Analysis conducted for this report, and the accompanying Report Component 2: Financial Risk and Opportunities to Build Resilience in Europe. 5 Original values in US dollars. 6 The Benefit-Cost Ratio (BCR) is a ratio to summarize results from a Benefit-Cost Analysis (BCA), a process used to identify, measure and analyse the benefits of a project, programme or decision versus the costs associated with it. The ratio summarizes the relationship between benefits and costs and net benefits are positive when the ratio is higher than 1. More details are included in the section Abbreviations or also in the Annex 1 of this report. Executive Summary 13 Figure 1. Overview of case studies analysed under this report Source: World Bank For the case studies analysed here, BCRs almost in seismic strengthening and energy efficiency in always exceeded 1, which shows that the benefits of education facilities across Europe yielded BCRs investment are higher than the costs. BCRs typically ranging from 0.6 to 2.2. Earthquake prevention ranged from 2 to 10, with several investments measures that were accompanied by investments showing BCRs exceeding 20 (Figure 2). Considering in energy efficiency and building modernization different hazards and different intervention types, the provide the greatest BCRs and provide following results were observed: immediate benefits to beneficiaries even if a disaster does not occur. The application of 1. The median BCR for flood prevention and earthquake EWS to automatically shut off critical preparedness was 2.6, with the majority of BCRs systems or provoke rapid action to save lives and found to be greater than 1.5 (with the highest assets—by stopping trains, providing energy BCR calculated at 14.1). Flood investments that protection measures, and so forth—was found to integrate nature-based solutions and early have significant benefits, with a BCR of 7. warning were found to have the greatest benefits, with median BCRs of 4.9 and 2.8, 3. Extreme heat prevention associated with respectively. changing the urban landscape through green and white measures7 ranged from 0.8 to 1.8, with 2. For earthquake risk reduction, structural green measures creating higher BCRs due to the strengthening of existing buildings yielded a BCR numerous co-benefits generated by urban of 1.8 for public buildings and 4.8 for private greening. Heatwave early warnings were found buildings when considering probable maximum to provide significant benefits, with a mean BCR losses. The analysis of hypothetical investments of 131 (range of 48-246). 7 Green measures here refer to green roofs, whereas white measures refer to highly reflective surfaces such as walls, roofs and streets. Executive Summary 14 4. Wildfire prevention and response was found to be depending on the nature of the technological economically very positive, with BCRs ranging hazard and the planned investment. from 1.6 to 39. Measures focused on wildfire prevention, such as managing wildland-urban This study also recognizes the numerous im- interfaces, were found to have BCRs of 2.1 to pediments which, despite knowledge of the net 3.1; addition of fuel breaks in forested areas had benefits of investment in DRM and underinvestment, a BCR of 12. Decision support tools for climate prevent further implementation and enhancing change adaptation and alerting for wildfire risk resilience to disaster risks. These range from reduction yielded BCRs ranging from 5.8 to 39, behavioural biases, information barriers, and distorted while cross-border fire coordination mechanisms incentives to technical and institutional challenges had a BCR of 1.6. (World Bank, 2013). Moreover, although the societal BCAs may yield net benefits, costs and benefits may 5. Case studies on landslides were rare, and the be accumulated by different actors so that public calculated BCRs of 0.1 to 1.1 are considered investment and support are essential. The report underestimations. The most disruptive landslides outlines some of these challenges and has shown are those that affect key highways and novel quantitative estimations as well as presented transportation routes; if this full disruption is qualitative results showing net benefits of investing in calculated, and intervention measures are institutional capacity, preparedness of economic targeted at critical transport sections with limited actors, and collaborative mechanisms. redundancy, BCRs are expected to be greater than 1. A novel analysis was undertaken in this study to assess the benefits of investment by the European 6. For volcanic eruptions, monitoring and EWS have Commission in emergency responders and response significant benefits, especially when linked to coordinators through the Union Civil Protection public awareness and adequate evacuation Mechanism (UCPM) Knowledge Network.10 The routes, but economic analysis was not possible analysis focused on two earthquake disaster due to a paucity of data. interventions, in Albania (November 2019) and Croatia (March 2020). A BCR of 1.9 in Albania was driven by 7. In managing pandemics and public health, there the European Union Civil Protection Team (EUCPT) is a very clear economic argument for pre- -led damage assessments, which expediated a return paredness, as evidenced by the experience of the to long-term accommodation and work. A BCR of 1.1 COVID-19 pandemic. Even a simple step such as in Croatia was driven by international training of stockpiling equipment and supplies can be seen Croatian Civil Protection personnel, showing that to provide a definite benefit, considering that capacity-building benefits can outweigh costs even the cost of personal protective equipment where no international personnel are deployed. (PPE) increased between 200% and 1,500% in 2020 (SHOPP, 2020).8 Moreover, one study of It should be noted that the economic co-benefits of pandemic preparedness determined a BCR of resilience measures are regularly and significantly 13.3 for investing in global pandemic underestimated, and this is also assumed to be the preparedness9 (National Academy of Medicine, case for the benefits presented in this report. 2016). Unfortunately, data on the types of co-benefits available are rarely captured, and it can be difficult to 8. There is a sound economic argument for find data on the increase in property prices or investments to address technological hazards reduction in insurance premiums after flood protection, and clean-up of environmentally degraded the employment provided during construction and areas, which offer BCRs ranging from 1 to 5.8, subsequently through operations and maintenance, 8 Results are for calculations in Euro, original values are in US dollars. 9 Results are for calculations in Euro, original values are in US dollars. 10 The UCPM’s objective is to strengthen cooperation between the EU Member States and 6 Participating States in the field of civil protection, with a view to improve prevention, preparedness and response to disasters. The UCPM Knowledge Network was created in 2019 Network to bring together a number of existing civil protection and disaster management programs under one umbrella to support experts, practitioners, policy-makers, researchers, trainers and volunteers to increase DRM knowledge and its dissemination within the UCPM. Executive Summary 15 biodiversity and amenity improvements, enhanced critical to develop the data and approaches to mental and physical health of beneficiaries, protection monetize these crucial co-benefits for inclusion in of cultural heritage, and so forth. Applied research is future economic analyses. Figure 2. Findings of benefit-cost analysis by hazard: Benefit-cost ratios, excluding extreme values (above) and including extreme values (below) Source: World Bank analysis; based on external data and information; presenting in part results from literature based on World Bank & external reports (4 Flood results from World Bank (2007), Spray (2016), Hölzinger & Haysom (2017), Gauderis, et al. (2005); 2 Earthquake results from World Bank (2018a, 2019c, 2019a, 2019d); 1 Landslide result from Xiong & Alegre (2019); 2 Pandemics/ Epidemics results from Masters, et al. (2017), GHRF Commission (2016); 1 Oil Spill result from European Commission (2020)). Note: The figures show the distribution of benefit-cost ratios (BCRs) for disaster risk management investments by hazard type based on a five-number summary: minimum (shown in orange), first quartile, median (shown in red), third quartile, and maximum (shown in orange). The outliers are shown as dots. Extreme values are excluded from the top figure and included in the bottom figure. Top graph: The top figure represents the range of values found in 28 out of the 30 case studies based on results from quantitative analysis (17 own analysis, 13 from the literature). Two case studies are not included in the graph because though they are quantitatively analysed in the report, they are not assessed by BCA and thus has no data available for display. The various box-plots show the range of value by hazards found, with the red line representing the median value (i.e. the value at 50% of overall results found). The minimum and maximum values are represented by orange lines. The outlier values are shown as dots (i.e., that are much higher than the maximum values). Overall. we can notice in the graph that the range of BCRs found for floods, wildfires, chemicals / oil spills and pandemics is much larger than for earthquakes, heatwaves and landslides but also have a higher median value. The maximum values of BCRs tend to be higher for wildfires and pandemics. These results have to be interpreted with caution given the lack of comparability and differences in number of results/studies between hazards analysed. Bottom graph: Extreme values are included in this graph. Executive Summary 16 Investments aimed at achieving and integrating communicate how much funding has been multiple objectives make technical, financial, and targeted for disaster and climate resilience in the social sense. Achieving reductions in greenhouse gas last 5 to 10 years, and for which preparedness (GHG) emissions through energy efficiency savings in and prevention activities. They likely could not buildings typically does, and rightly should, require a say, for example, what the expenditure for complementary structural strengthening to ensure modernizing fire coordination and response has that buildings constructed prior to modern codes— been in the last decade, how much is planned in most of the European built environment—are resilient the coming decade, or what the expenditure for to snow, wind, and seismic loading and climate change public awareness and preparedness campaigns impacts likely to also exacerbate certain disaster risks. has been. Tracking these funds into the future Similarly, there is opportunity to ensure simultaneous would be very helpful to identify gaps (e.g., improvements in fire safety, modernization, and pandemic preparedness) and target awareness, functionality and to ensure access for people with capacity development, and ultimately financing disabilities. Integration of these objectives saves in these areas. money, reduces disruption, and is more sustainable over the short and long term. This study also highlights 3. Wide promotion and uptake of integrated and the need to accompany early warning systems with novel approaches is needed to build resilience public preparedness, readiness for action, and and maximize co-benefits. For example, while enhanced coordination to achieve the highest return perhaps more complicated to implement, nature- on investment. based solutions provide significantly higher co- benefits than traditional grey flood protection Based on this report, a series of forward-looking solutions. Similarly, investing in green, white, and/ recommendations is highlighted, noting the ambitious or blue11 measures in cities is proven to reduce policy agenda in Europe that is aimed at a substantial extreme heat but also brings enormous benefits increase in disaster and climate resilience: in air quality and increased amenities and liveability for residents. Promoting a single 1. Financing targeted at disaster and climate investment with multiple objectives can save resilience measures needs to be substantially time and money and minimize disruption—for increased for both public and private financing, example, integrated investments can be carried with concomitant support for beneficiaries in out to ensure school buildings are modern, safe, accessing and using these funds. It is expected resilient, energy efficient, inclusive, and that the financing available for disaster and sustainable. climate resilience will increase in Europe in coming years through a variety of programs. 4. Policy reform is required to address the However, it should be noted that authorities asymmetry in preparedness and prevention responsible for disaster risk management may across types of hazards. There was a clear need additional support to advocate for increased asymmetry observed in the availability of case allocations within national and EU budgets, and studies and investments for different types of that sectoral ministries may not prioritize funding hazards, with many more for flood than for for disaster prevention and preparedness wildfire, drought management, extreme heat, and because they lack awareness of the issue which others. In addition to floods being the most can challenge incentives for public finance. common disaster regionally, the EU Floods Moreover, support for authorities to learn about, Directive has been incredibly effective at focusing access, and use different funding sources will be government attention on the need to understand, critical. quantify, and manage flood risks and the Water Framework Directive has also partly promoted 2. Systems to track, monitor, and evaluate disaster the development of drought risk management and climate resilience financing are needed. plans. Unfortunately, similar directives are lacking Right now, it would be difficult for most municipal, for other hazards, and perhaps as a result, national, and European Commission experts to awareness of these risks and prevention and 11 Blue measures include bodies of water such as rivers, ponds and wetlands. Executive Summary 17 preparedness actions in a comprehensive 6. Support to build human capacity to assess, manner are also lacking. prioritize, design, and implement measures aimed at prevention and preparedness needs to 5. There needs to be a regional transformation in be further scaled up. Authorities require the availability of open data, information, and significant capacity to undertake a wide range of knowledge on disaster and climate risks. high-quality, timely prevention and preparedness Compared to other regions of the world, Europe is measures: collecting data on assets and fortunate to have a wealth of data and information infrastructure that may be under risk; developing on disaster and climate risks.12 However, objective and transparent prioritization that stakeholder consultations highlighted issues ensures targeting of scarce financing to areas of associated with accessing a range of data, the greatest vulnerability; undertaking technical, including open, high-quality, and high-resolution financial, and economic studies; ensuring data on historical disaster damages and losses, procurement, permitting, stakeholder con- maps and data on the probability and potential sultation, etc. are completed on time; and impact of the full range of hazards (and their carrying out management and supervision of possible evolution with climate change), data on works as well as long-term operations and exposed assets and populations (and their maintenance. Expertise and experience in these expected change into the future), information on areas are often limited within civil protection replacement costs, information on typical costs agencies, line ministries, and especially for different prevention and preparedness subnational authorities. This capacity can be measures, and data required to assess the range built through a combination of trainings, of resilience co-benefits. The costs of investment workshops, guides/handbooks, hands-on to ensure that these data are open and available implementation, and just-in-time support, and to all users and stakeholders pale in comparison the UCPM Knowledge Network is an excellent to costs of mis-targeting investments away from existing mechanism that can be expanded to the highest-risk areas and assets. provide this support (Parker, et al., 2019). 12 Data and information sources are among others the JRC's Risk Data Hub (https://drmkc.jrc.ec.europa.eu/risk-data-hub#/) and Horizon 2020 (https:// ec.europa.eu/research/infocentre/article_en.cfm?&artid=49761&caller=other). Executive Summary 18 TRIPLE DIVIDEND OF RESILIENCE 1st DIVIDEND 2nd DIVIDEND 2nd Dividend 3rd DIVIDEND Avoiding damages and losses by: Stimulating economy by increasing: Co-Benefits such as: • Saving lives & reducing people a ected • Business and capital investment • Eco system services • Reducing damages to infrastructure • Household & agricultural productivity • Transportation uses • Reducing losses to economic flows • Fiscal stability & access to credit • Productivity gains BENEFIT-COST RATIO VALUES BY HAZARDS WHERE DATA IS AVAILABLE FLOODING Structural Protection Nature-based solutions Flood Early Warning System Property Level Protection (PLP) EARTHQUAKE Seismic strengthening Earthquake Early Warning Systems Responder Capacity-Building EXTREME HEAT Urban heat island mitigation Heat Early Warning Systems WILDFIRE Wildland-Urban Interfaces Fuel Management for Risk Reduction Decision Support Tools & Alerting Cross-border support 4.1 x. 1 ma 5 1 d. 1. 06 0.0 me n. mi LANDSLIDE Preventive investments in road resilience PANDEMIC Return on Investment of National Public Health Programs Equipment for health-related disasters OIL SPILLS Preventive investments in vessels & equipment CHEMICAL Cleaning up hazardous waste MINIMUM, MEDIAN AND MAXIMUM BCR FOR ALL DRM INVESTMENTS REPRESENTED BY THE THREE CIRCLES (extreme values excluded) median value of BCR by type of hazard frequency of occurrence (line thickness ) : Disaster and Climate 1. Introduction Risks Are Growing Despite Robust Economic Arguments for Prevention and Preparedness 1.1. Disaster and Climate Change Impacts Disasters such as earthquakes, droughts, and floods poorer and more vulnerable members of society the can generate large damages and losses and lead to most (Box 1). Earthquakes, while rarer in Europe than tremendous social, economic, and environmental some other parts of the world, have resulted in disruption. In recent years, the losses caused by significant damage and loss in recent years. disasters and hazards have increased as a result of Earthquakes highlight the challenges associated with climate change. From 1980 to 2019, accumulated the European building stock and infrastructure, which losses from disasters due to extreme weather and was mostly constructed prior to modern buildings climate change in the EU Member States (EU-27) codes and renders populations particularly vulnerable reached €446 billion, which accounted for 81% of the (Box 2). Analysis conducted for this report and the economic losses caused by natural hazards in the Component 2 report on the financial cost of disasters region over that period (EEA, 2020). Figure 3 presents identifies the EU MS with the most exposure to flood the economic damage caused by weather- and and seismic risk (Table 1). Technological and health climate-related extreme events in Europe from 1980 disasters are also growing threats, with the COVID-19 to 2019. However, the impacts of disasters go far pandemic a clear manifestation of this risk. beyond the damage to infrastructure, affecting the Introduction 20 Table 1. Top-10 countries for flood and seismic risk, by average annual loss as a percentage of exposure SEISMIC RISK PLUVIAL AND SURFACE WATER FLOOD RISK Rank Country AAL ratio Rank Country AAL ratio 1 Cyprus 0.19% 1 Romania 0.15% 2 Greece 0.18% 2 Slovenia 0.13% 3 Romania 0.12% 3 Latvia 0.13% 4 Italy 0.11% 4 Bulgaria 0.13% 5 Bulgaria 0.07% 5 Austria 0.12% 6 Croatia 0.05% 6 Slovakia 0.11% 7 Slovenia 0.04% 7 Germany 0.10% 8 Austria 0.02% 8 Czech Republic 0.10% 9 Portugal 0.02% 9 Hungary 0.10% 10 Slovakia 0.01% 10 Poland 0.10% Source: World Bank analysis; based on results from GEM (Global Earthquake Model Foundation). 2020. “Regional Risk Modelling and Scenario Analysis for EU Member States: Seismic Risk Analysis and Exposure Data.” Technical report produced for the World Bank. Global Earthquake Model Foundation, Pavia, Italy. JBA Risk Management. 2021. “Flood Risk Analysis for EU Member States: Method Report.” Technical report produced for the World Bank. JBA Risk Management, Skipton, UK Note: AAL = average annual loss. When analysing the costs and impacts of climate particularly urban heat island (UHI) effects, are change, scenarios should also include socio- expected to have severe impacts in coming years and economic parameters that consider a future decades unless action is taken; the benefits of green, potentially different from the present. For example, in white, and blue adaptation options are well some areas, populations and assets continue to grow documented (Box 3). and concentrate, whereas in other regions the trends are depopulation and abandoned infrastructure.The In this context, and in alignment with the Sendai PESETA (Projection of Economic impacts of climate Framework for Disaster Risk Reduction 2015–2030, change in Sectors of the European Union based on it is essential for EU countries to rapidly scale up and bottom-up Analysis) IV EU project by the Joint accelerate investments in disaster risk management Research Centre (JRC) (Feyen, et al., 2020) estimated (DRM) and climate change adaptation to halt the the economic costs of climate change through climate growth of disasters and ultimately decrease the models and socio-economic scenarios that provide losses they cause. Such investments include projections for the future. This analysis revealed the prevention and preparedness measures in areas highly severe consequences and losses due to natural vulnerable to disasters, establishment of early warning hazards associated with climate change if there is no systems (EWS), public awareness raising about investment in adaptation. For instance, the analysis disasters, etc. Economic analysis shows that these reveals that by 2100, river flooding will affect about investments are beneficial and economically desirable half a million people in the EU and UK and will generate (Shreve & Kelman, 2014; Mechler, 2016). They can a loss of €50 billion per year. The EU-funded COACCH reduce the exposure of assets and populations, make research project (COACCH, 2019) also presents countries’ disaster response more efficient and similar outcomes. Using macroeconomic and climate effective, and in turn reduce the economic and social models, the PESETA IV project examined the negative losses of disasters and contribute to the welfare of impacts of climate change and the monetary losses it society. The economic analysis presented here—a generates. The study found that under the warming compilation of analysis conducted for this study or scenarios of 3 °C, 2°C, and 1 °C, the welfare losses for collected from other expert groups—makes the case EU households would be €175, €83, and €42 billion for investing in resilience today rather than waiting per year, respectively (Figure 4). Extreme heat, and until tomorrow. Introduction 21 Figure 3. Economic damage caused by weather- and climate-related extreme events in Europe (1980–2019) Source: EEA (2020) Figure 4. Economic loss from considered hazards and climate impact at warming levels for the EU and UK (for macro regions; billion €) Source: Szewczyk, et al. (2020) Introduction 22 Box 1. Impacts of disasters on poverty and well-being of households in countries from south-eastern Europe Disasters affect not only households’ physical assets, but by earthquakes and floods are Yerevan (Armenia), Tbilisi also their income levels and ability to contribute to the local (Georgia), and Bucharest (Romania). For these two hazards, economy. On a household level, wealthier households may the socio-economic resilience of the entire population in have access to a wide variety of financial and nonfinancial each of the eight countries is less than 50%.13 However, this coping mechanisms that can soften the severity of disaster statistic drops to 15% and below once we separate the shocks - unlike poorer households. These disparities in population in poverty from the national average (see socio-economic status end up affecting the duration of Figure 5). The socio-economic resilience gap between the subsequent recovery and reconstruction efforts. poor and the national average is extremely high in Albania, Romania, and Greece, but relatively lower in Georgia and Among the cities in the eight countries analysed in the Armenia. According to the Overlooked report, implementing Overlooked report (World Bank, 2020b)—Albania, Armenia, policies that reduce vulnerability, increases incomes, and Bulgaria, Croatia, Georgia, Greece, Romania, and Turkey— reduces recovery times would increase countries’ socio- the three cities whose poverty levels would be most affected economic resilience (see Figure 6). Figure 5. Countrywide socio-economic resilience levels for select south-eastern European countries disaggregated by poverty levels (top) and hazard type (bottom) Source: World Bank (2020b) 13 Socioeconomic resilience can be defined as the population’s capacity to mitigate the impact of disaster-related asset losses on welfare, and it is derived by dividing asset losses by welfare losses. A socioeconomic resilience below 50% means that, in the case of a disaster, there will be more than double the amount of welfare losses compared to asset losses. Introduction 23 Figure 6. Comparison of socio-economic resilience with different policies for select south-eastern European countries Source: World Bank (2020b) In this graph, the socioeconomic resilience of select bar). These were then compared to the status quo (grey south-eastern European countries is compared according line), which depicts a country’s socioeconomic resilience to different policies implemented. These policies include without policy intervention. According to the analysis, reducing vulnerability of the poor population by 30% reducing vulnerability and increasing income has the (light blue bar), increasing incomes of the poor population most positive impacts in a country’s development of by 30% (sage green bar), and reducing the post disaster socioeconomic resilience. response and reconstruction times by 30% (navy blue Box 2. Impacts of seismic risks in Europe and Central Asia The impact of seismic risk in multifamily residential housing before 2000, and that most of these buildings are classified is a significant threat in many cities of Europe. Multifamily as either unreinforced masonry or reinforced concrete buildings are commonly found in or near urban areas, and frame buildings—the two building types most expected to many residents living in these dwellings are vulnerable to experience damage in an earthquake. Unreinforced two sets of risks: structural deficiencies caused by the masonry buildings are especially susceptible to earthquakes buildings’ old age increase seismic risk, and the density of and contribute to a significant portion of the direct financial urban areas and other factors such as lack of green public losses, number of fatalities, and number of people who will spaces increase the risk of extreme heat. be permanently displaced, even in regions with lower seismicity. A recent World Bank report (Simpson & Markhvida, 2020) investigated the earthquake risk of multifamily buildings Bucharest is an example of a city whose seismic risk is very constructed before 2000 across 27 cities in 20 countries high: nearly 90% of the total city population lives in pre- within Europe and Central Asia to better understand their 2000 multifamily housing; the largest proportion of its behaviour and potential losses when subjected to population resides in high-risk building types; and the city earthquakes. The report found that on average, is expected to experience €200 million in average annual approximately half of the population in the cities studied losses from future earthquake events, the highest among resided in multifamily residential buildings constructed all the cities investigated (Simpson & Markhvida, 2020). Introduction 24 Box 3. Impacts of urban heat islands in Europe Urban heat island effects make urban centres more even death. Marginalized communities are at especially vulnerable to heatwaves, because cities have reduced air high risk from heat. Residents with restricted mobility circulation, are often built with materials known to store cannot access parks or other areas with cooler heat easily, generally lack vegetation, and concentrate heat temperatures, and poorer residents are hit hardest, as they coming from buildings, factories, and vehicles. These often live in low-income neighbourhoods that are densely effects are starting to be felt more and more due to climate constructed, with few green spaces or water features to change, as 27% of cities were about 0.6°C warmer than the help cool the area. A variety of measures to reduce urban global average between 1950 and 2015 (Estrada, et al., heat, including “green” solutions (i.e., parks), “blue” 2017). Figure 7 presents the number of people annually solutions (i.e., fountains), and “white” solutions (i.e., exposed to a present 50-year heatwave and the projected reflective roofs or roads), are being adopted by many cities changes in human exposure to these events under different in order to promote sustainable urban planning and climate warming scenarios due to climate change. As shown, these change adaption. More immediately, however, investing in extreme heat risks are expected to be most pronounced in emergency preparedness and public communication of cities in Southern Europe. Heatwaves resulting from risk is considered critical to protect vulnerable groups from extreme heat events can cause harmful effects to human extreme heat. health, ranging from dehydration to strokes and possibly Figure 7. Number of people annually exposed to a present 50-year heatwave (top left), and projected changes in human exposure to these events for global warming of 1.5°C, 2°C, and 3°C (bottom left, top right, and bottom right, respectively) Source: Szewczyk, et al. (2020) Introduction 25 1.2. The Global Economic Case for Investment in Resilience Over the past two decades, natural disasters worldwide below). Exclusively focusing on traditional “grey” have affected over 4 billion people, including more infrastructure, which employs steel and concrete, than 1 million people who died as result of disasters, would not only make these development costs higher: and have caused approximately €2.6 trillion in it would also make the SDGs more challenging to meet. economic losses (World Bank, 2019).14 Climate To address this concern, a recent World Bank report change is expected to considerably increase impacts explored the possibility of integrating grey and green and damages to critical infrastructure in Europe in the infrastructure and found that this approach could help next decades (Forzieri, et al., 2018; Feyen, et al., fill the need for climate-resilient 21st-century solutions 2020). The World Bank’s Lifelines report found that (Browder, et al., 2019). Although this approach is still the net benefit of investing in more resilient relatively new, there is mounting evidence that infrastructure in low- and middle-income countries is strategically combining natural systems with grey €3.75 trillion, with roughly €4 in benefits for every €1 infrastructure can provide lower costs and more invested (Hallegatte, et al., 2019).15 Moreover, the resilient services. Implemented properly over time, benefit-cost ratio (BCR) of investing in more resilient integrating green and grey solutions to create climate- infrastructure is higher than 1 in 96% of scenarios, resilient infrastructure has the ability to tackle the higher than 2 in 77%, and higher than 6 in 25% looming financial and environmental crisis facing (Hallegatte, et al., 2019. Targeting investments in the global infrastructure systems, while also offering the most vulnerable areas and infrastructure can potential to help provide water, food, and energy to significantly reduce investment costs (Box 4). growing communities, lift communities out of poverty, Similar findings were observed in a recent US-wide and mitigate climate change. assessment of the benefits of investing in DRM (Box 5). Nature-based solutions (NBS) are gaining momentum It has been stated that “today’s decisions will deter- internationally as a cost-effective, no-regret, and mine tomorrow’s risks” (Surminski, 2020). A report flexible approach to address water resource from the Global Facility for Disaster Risk Reduction management, disaster risk reduction (DRR), and and Recovery (GFDRR) highlights the benefits of using climate change adaptation (EU, 2019). Natural risk assessments to guide decision-makers towards a systems can provide protection from natural hazards resilient future, rather than focus on risks at a single and maintain a steady supply of water and energy, in point in time. Investing in DRM can encourage forward- addition to offering other co-benefits that help looking planning, long-term capital investment, and stimulate the surrounding ecosystem and community. entrepreneurship, which can generate specific An example of NBS is green infrastructure, which is economic, social, and environmental benefits (ODI, defined as a “strategically planned network of natural 2015). and semi-natural areas with other environmental features designed and managed to deliver a wide GREENING INFRASTRUCTURE range of ecosystem services” (EEA, 2015). Other examples of green infrastructure include green roofs, The global infrastructure needs for economic growth, rain gardens, and bioretention areas. jobs, and poverty reduction are extremely high. In developing countries, achieving the infrastructure- MOVING BEYOND “HARD” INVESTMENTS related UN Sustainable Development Goals (SDGs) while staying in line with the Paris Agreement would The importance of “softer” investments cannot be cost between 4.5% and 8% of gross domestic product overstated. The ongoing COVID-19 pandemic has (GDP), depending on how efficiently it is done challenged us to reflect on the systems currently in (Browder, et al., 2019). Moreover, the European Green place and has illuminated the need to focus on Deal and the COVID-19 pandemic also suggest a need investing in ex ante risk reduction and preparedness. for widespread sustainable development (see Box 6 Especially in the context of climate change, employing 14 Original values in US dollars. 15 Original values in US dollars. Introduction 26 a holistic strategy that utilizes financial, human, provides a space for community activities and natural, physical, and social capital is the only way to continued learning, and in many countries serves as a achieve true resilience. Softer investments such as polling station and/or a shelter post-disaster. Many capacity building, coordination mechanisms, or EWS schools in Europe were constructed 50 or even 100 have been proven to yield substantial benefits for years ago, when many of these functions were not relatively low costs, in particular when combined with considered. The age of these buildings means that other complementary infrastructure investments. For they are energy inefficient from a heating/cooling and example, a World Bank working paper estimates that insulation perspective; that they may not meet benefits from upgrading the hydro-meteorological building codes for fire, earthquake, wind, and snow; information and early warning capacity in all developing that they lack spaces for food preparation and countries to developed country standards would yield provision; and that they cannot provide universal benefits of €3.11–28.02 billion per year, with benefit- access for students, teachers, and community cost ratios of 4–35, including co-benefits, depending members with disabilities. Too often, capital on assumptions and scenarios considered (Hallegatte, investments consider only one of these needs at a 2012).16 Furthermore, capacity development for DRM time and therefore miss opportunities for a holistic has been identified as one of the main methods of investment that upgrades building safety, resilience, substantially reducing disaster losses. Holistically climate mitigation and adaptation, sustainability (zero speaking, capacity building should be aimed at waste, water harvesting and grey water recycling, institutional and legal framework development, etc.), and inclusivity. While the example of a school organizational development, and human resource building is given here, the premise applies equally to development (Buss, 2010). buildings providing social, health, administrative, and community functions. Beyond limiting the disruption THE VALUE OF INTEGRATED INVESTMENTS: ONE to building occupants by one intervention focused on INTERVENTION, MANY BENEFITS achieving multiple objectives and benefits, this approach also makes technical and economic sense. It is rare that a building has only one function. A school Box 7 provides a rationale for the joint implementation building, for example, provides education, may of energy efficiency and seismic strengthening provide hot lunches and services for poorer students, objectives. Box 4. Targeting investment to the most vulnerable infrastructure is critical According to the World Bank Lifelines report (Hallegatte, et €3.4 million ($6 million Newzealand dollars) to harden al., 2019), disaster shocks are the leading cause of transmission and distribution infrastructure has resulted in infrastructure damage and disruption in high-income a €17-23 million ($30-40 million Newzealand dollars) countries, especially where maintenance is neglected. reduction in direct asset replacement costs (Kestrel Group, Severe weather events are the most common cause of 2011). However, unless there is a robust understanding of power outages, and transportation issues arise the potential exposure of infrastructure assets to disaster predominantly due to flooding, cyclones, and earthquakes. types, the annual cost of these investments is prohibitive. When considering new infrastructure, the relatively Figure 8 shows that focusing resilience measures in the incremental up-front costs of adding resilience measures areas of highest risk is an order of magnitude less in cost are easily offset by lower maintenance and repair costs. For than making improvements in all areas. The development example, use of earthquake-resistant water supply pipes in of such risk information is easily covered by the savings earthquake-prone areas pays off; in Japan, earthquake- generated, and moreover, such data have value and co- resistant pipes have sustained significant and repeated benefits far beyond targeting of infrastructure investments. ground deformation. In New Zealand it is estimated that 16 Original values in US dollars. Introduction 27 Figure 8. The incremental cost of increasing resilience of future investments is significantly reduced if asset exposure is determined Source: Hallegatte, et al. (2019) Note: “Cost” here is the average annual capital investment cost between 2015 and 2030. The circles represent the median, and the vertical bars represent the full range of possible incremental costs. Box 5. Economic Analysis in the US In the US, benefit-cost analysis (BCA) for disaster risk for many decision-makers across the country. Various reduction investments was initiated early on and mandated institutions have funded and published annual reports on by Congress under the 1936 Flood Control Act. It has been the benefits of DRR, as measured by BCA, such as the used to evaluate DRR investments since the 1950s, has 2019 National Institute of Building Sciences report Natural been standard practice for major organizations such as the Hazard Mitigation Saves, which highlights average BCAs Federal Emergency Management Agency (FEMA), and has for several types of hazards and DRM measures (see been a very important criterion for economic efficiency Figure 9). Figure 9. Benefit-cost ratios of disaster risk reduction investments in the US Source: NIBS (2019), Naumann, et al. (2020), Neagoe (2016) Introduction 28 Box 6. European Green Deal and COVID-19’s catalyst for widespread sustainable development The European Green Deal is an ambitious goal that accomplish the EU’s increased climate ambitions for its comprehensively outlines how Europe will become the first 2030 and 2050 targets, it will need to ensure clean, secure climate-neutral continent by 2050. It has eight elements: energy, energy-efficient and resource-efficient construction (1) increasing the EU’s Climate ambition for 2030 and and renovations, and sustainable and smart mobility. This 2050, (2) supplying clean, affordable and secure energy, will not be possible without smart, green infrastructure, (3) mobilising industry for a clean and circular economy, which has the potential to create jobs while helping to cut (4) building and renovating in an energy and resource continent-wide emissions. The COVID-19 pandemic has efficient way, (5) a zero pollution ambition for a toxic-free demonstrated the need for countries to collaborate—and environment, (6) preserving and restoring ecosystems and their ability to do so; and this cooperative spirit can be biodiversity, (7) from “farm to fork”: a fair, healthy and further amplified to promote green, resilient investments environmentally friendly food system, (8) accelerating the that are also economically sustainable. Unaddressed, shift to sustainable and smart mobility and three cross- global environmental emergencies, such as more intense cutting aspects (financing the transition, leave no one and frequent natural disasters, can cause social and behind - Just Transition - as well as mobilizing research and economic damages far larger than caused by COVID-19. fostering innovation) (European Commission, 2019). To Box 7. Integrating Energy Efficiency and Structural Strengthening Long-term sustainable growth requires a reduction in the According to the World Bank project “Seismic Resilience physical, social, and economic shocks arising from and Energy Efficiency in Public Buildings” (World Bank, geophysical and climate disasters, with a commensurate 2020c), beyond achieving ambitious climate goals, the reduction in greenhouse gas (GHG) emissions and energy integration of structural strengthening and energy efficiency intensity. Buildings with the greatest vulnerability to brings other benefits, including (i) reduction in total cost disasters are typically the most energy inefficient, as these through shared laboura and complementary concurrent buildings pre-date modern building codes. This is the case investments; (ii) improved sustainability of energy efficiency for a vast number of public and private sector buildings improvements through the building lifetime and payback across Europe. For countries with robust regulatory period by ensuring investment in earthquake-resistant frameworks related to the structural safety of the existing buildings;b (iii) functional upgrades such as autonomous building stock—Romania and Italy, for example—it is not energy (e.g., solar panels), which are crucial to ensure possible to improve the energy efficiency of a building energy supply and continuity of service in the aftermath of without assessing and if necessary improving its structural an earthquake, when energy service can be disrupted for strength. In other words, achieving energy savings and the days or weeks; (iv) upgrade to roofs associated with energy concomitant reduction in GHG emissions is not possible if efficiency, which can increase the performance of buildings these buildings are also not structurally strengthened. during an earthquake (e.g., minimize damage to Unfortunately, integrated seismic strengthening and energy nonstructural elements) and in storm events; (v) assess- efficiency interventions have been relatively limited in ment of the full economic case for building improvement Europe, especially when the scale of the challenge is versus demolishing and rebuilding; and (vi) minimization of considered. disruption to building occupants and government services. a. The World Bank analysis “Reducing earthquake risk in large panel multifamily buildings” in Bulgaria (P164887) indicated that over 50% of the cost for the energy efficiency improvements relates to labour. Such a cost can be shared and further optimized if integrated with seismic strengthening. b. The ongoing Energy Efficiency in Public Buildings (EEPEP) project in Turkey (P162762) will target a minimum energy savings of 20%, with a maximum simple payback period of 12 years. Considering the high frequency of damaging earthquakes in Turkey (one event every 1.5 years on average), seismic events are likely to occur during that period, even more so during the life cycle of the buildings. Therefore, adequate seismic performance of structures is crucial to justify the long-term return on investment for energy efficiency works. Introduction 29 2. Economic Analysis and Triple Dividend of Resilience 2.1. Use of Benefit-Cost Analysis to Assess Investments in DRM In disaster risk management, most investments In an ideal situation with perfect information, would appear to be no-regret investments to save identifying total benefits from a DRM investment lives and therefore a priority for public investment. In should adopt a difference-in-difference (DiD) practice, however, preventive investments for framework. Total benefits that can be accrued to the reducing disaster risk are limited. Limited investment investment can be estimated by comparing gross arises from a confluence of challenges. First, the regional product (GRP) in two different locations (i.e., associated benefits of investment may be uncertain, treatment region, where DRM investments took place, especially for rare, high-impact events, and especially and control region, where no such investments took when compared to the often substantial up-front costs place) in two different time periods (i.e., pre-treatment of such investments. In addition, spending public and post-treatment periods). GRP necessarily funds on a disaster that may or may not occur can accounts for all the market transactions relating to the seem a lower priority than meeting the needs that production, exchange, and consumption of final goods clearly exist now - for example, a municipality might and services taking place within a region. The regions not prioritize the purchase of new fire and rescue should ideally be similar before the intervention in equipment over fixing the roads that constituents use terms of GRP and disaster exposure so that they are daily, and might choose to expand different health and comparable. In most cases, however, the DiD approach screening services rather than invest in resilient is not feasible. This may be due to lack of baseline data medical buildings. Moreover, DRM investments often and lack of comparable regions for a counterfactual need to be made by line ministries that are dis- situation. In that case, the approach is to assume a connected from the knowledge of disaster risks and possible alternative investment, undertake scenario- their impacts on infrastructure—knowledge that based analysis, or undertake qualitative analysis to instead may exist within the national civil protection present some of the costs and benefits of the agencies. Finally, and importantly for this publication, intervention. in economic analysis, the neglect of co-benefits or wider impacts of DRR investments has often led to an Two types of analysis can be undertaken through a underestimation of net benefits, which has made benefit-cost analysis (BCA): prospective and investments in prevention and preparedness seem retrospective. A prospective analysis aims to analyse economically infeasible. Recent research and practice the potential benefits of an intervention, either a have therefore focused on developing methodologies hypothetical scenario or a real investment planned. to ensure a more holistic assessment of these This helps determine the added value of the investment investments (Botzen, et al., 2019). compared to alternatives or the status quo and helps Economic Analysis and Triple Dividend of Resilience 30 identify potential challenges that can be addressed by in Table 2. In addition, the Background Report provides a modified project or program design. It is therefore a more information on approaches to economic analysis, main tool of policy and decision-making that has been covering cost-effectiveness analysis, multi-criteria used at regional, national and local levels for decision analysis, robust decision-making under uncertainty, making (see Box 8, Box 9 and Box 10). A retrospective and others (European Commission and World Bank, analysis generally serves the purpose of impact 2021a). Further discussion on economic analysis and evaluation to derive lessons learned and to improve the methodology applied in this report focuses on the the design of potential other interventions, projects, Triple Dividend of Resilience. or policy programs in the future, as well as providing evidence of the net benefits of certain types of The World Bank and Overseas Development Institute interventions. For the latter, however, sufficient (ODI) Triple Dividend of Resilience framework evidence at scale or across several analyses for similar identifies and quantifies three types of benefits investments is necessary to ensure that (dividends) in any DRM investment. These are recommendations can be supported with certain avoiding losses and saving lives during a disaster confidence levels. (dividend 1), unlocking economic potential as a result of stimulated innovations and bolstered economic A typical BCA is generally conducted in 10 steps, all activities that arise from the reduction in background of which include various challenges that should be risks related to disasters (dividend 2), and generating carefully considered (Figure 10); a full practical guide social, environmental, and economic co-benefits of is included in the Background Report (European DRM investments even in the absence of a disaster Commission and World Bank, 2021a). Based on (dividend 3); see Figure 12. A main advantage of the literature reviews and experience developed through Triple Dividend framework is that it presents a broad this study, a series of practical “do’s and don’ts” have business case for reducing and managing disaster and been highlighted for undertaking economic analysis climate change risks. It also promotes cross-sectoral, (Figure 11). For example, it is critical to consider a cross-disciplinary, and multi-hazard reflections that counterfactual: If no investment is made, are injuries are more likely to promote the integrated investments and/or fatalities possible? What could be the cascading essential for achieving the SDGs. The Triple Dividend effects if a road is blocked or emergency response is approach is innovative, and where enough data are hindered due to damage or loss of critical available it enables the full benefit of ex ante communications or lifelines? What are the additional investment in prevention and preparedness to be co-benefits, such as preservation of cultural heritage calculated. It was applied throughout this report in (tangible and intangible) or ensuring the mental health line with the development of this thematic field. A and safety of a population concerned about the summary of main lessons learned from the analysis potential or actual impacts of disasters? Are there co- can be found below in Figure 19 (section 4.1.). More benefits associated with real estate, lower insurance details on the specific calculations and challenges costs, etc.? faced to estimate various dividends can be found by investments and hazards in the Background Report A summary of the main methodologies used for the (European Commission and World Bank, 2021a). economic analysis of DRM investments is highlighted 2.2. Application of the Triple Dividend of Resilience Framework The Triple Dividend of Resilience framework involves a of other benefits beyond avoided losses makes it risk-based assessment to calculate dividend 1, which possible to enhance linkages to other disciplines is important for a thorough economic analysis, as (economics, environmental science, etc.) and furthers outlined in papers critically reviewing the use of BCA the intellectual exercise of thinking about design (Mechler, 2016). However, it also considers other options to maximize co-benefits. Concrete indicators types of benefits typically neglected in the economic for the three dividends are included in Table 3. assessments of DRM investments. The consideration Economic Analysis and Triple Dividend of Resilience 31 DIVIDEND 1: SAVING LIVES AND REDUCING on the realization of a positive second dividend. LOSSES Other factors are essential to consider when aiming This dividend relies on quantifying the impact of to measure benefits in terms of reduced flow losses. resilience measures through risk analysis with and A significant reduction in flow losses - such as losses without the resilience measures (Mechler, 2016). Risk in GDP and employment, as opposed to property analysis provides the estimate of severity and damage - can be obtained after a disaster strikes by frequency of impacts on people, communities, and various types of resilience tactics related to coping their structural and infrastructure assets, as well as the with a disruption of critical inputs such as utility reduction in those impacts due to a set of resilience lifelines, critical materials, and workers. Rose (2007) measures being implemented (Ghesquiere, et al., refers to the use of such tactics as “resilience” to 2006). Disaster risk (or catastrophe) modelling distinguish them from ex ante risk reduction approaches estimate risk in terms of casualties and measures, typically referred to as “mitigation”. direct and indirect economic losses by modelling the Inherent resilience refers to the capabilities intrinsic interaction of hazard, exposure, and vulnerability to an individual business, household, or institution, or (GFDRR, 2014). For example, these modelling the economy as a whole; it can also refer to the build- approaches can be used to adjust the vulnerability of up of resilience capacity by pre-positioning this building stock to represent the impact on the risk of capability for implementation after a disaster strikes. improved building codes or retrofit programmes. The Examples of intrinsic capabilities include resilience dividend can be estimated using scenario events or “tactics” such as substitution (use of dual-fired probabilistically to estimate the impact of the boilers for electricity generation, the ability to intervention on risk metrics such as average annual substitute bottled or trucked water for piped water at loss (AAL) or a loss at a particular return period. When the micro level, or the workings of the price system to a scenario is used to evaluate avoided losses, typically provide signals of changes in resource values for a higher-impact and lower-frequency event is chosen optimal allocation at the market or macroeconomic to illustrate the scale of damages that can occur. level) or the ability to bring excess capacity online However, to understand the range of impacts that when regular capacity is damaged. Examples of pre- disasters can cause, it is important to also consider positioning include the purchase of portable high-frequency and lower-impact events. This can be electricity generators or stockpiling of critical done by considering a loss corresponding to a lower materials. return period or an average loss over a given time period, both of which can be obtained from probabilistic The concept of adaptive resilience (Rose, 2016) is analysis (i.e., an analysis that considers the likelihood also essential to consider for estimating dividend 2. of events). Adaptive resilience refers to improvisations after the disaster has struck, such as identifying conservation DIVIDEND 2: UNLOCKING ECONOMIC POTENTIAL opportunities not previously thought possible, broadening the range of substitution possibilities, Several research projects have attempted to estimate relocating businesses, or effecting technological in practice the wider economic benefits from DRM change. Moreover, all these resilience tactics can investments that arise ex-ante because of changed have lasting effects through learning or improvements expectations of risk from economic actors. One study in the functioning of businesses, households, or other highlighted in Hallegatte et al. (2020) shows the wider institutions to increase the capacity to cope with economic impacts of investments or policies in DRM. future disasters. All of these are short-run tactics that Madajewicz, Tsegay, and Norton (2013) analysed a differ from long-run climate adaptation. An example rural program to provide risk management support to of the difference relates to population movements farmers in Ethiopia, and showed that risk management with regard to disasters and climate change: short- tools such as weather-indexed insurance increased run tactics include population evacuation either farmers’ savings (also an important reserve in case of before or once the disaster has struck, which is floods or droughts) and their investments in productive typically temporary; for climate adaptation, as in the assets. Such type of analysis shows that complemen­ response to sea-level rise, the tactic would likely be tary soft investments for preparedness alongside hard permanent population migration. In short, informing infrastructure measures can have a substantial impact economic actors of the risk may lead to them Economic Analysis and Triple Dividend of Resilience 32 individually investing in enhanced preparedness, the challenges encountered during application of the which will have additional positive economic effects Triple Dividend framework. regardless of whether a disaster will strike. 1. Data requirements are a significant constraint DIVIDEND 3: GENERATING SOCIAL, for in-depth analysis, so it is advisable to ENVIRONMENTAL, AND ECONOMIC undertake baseline data collection (ex ante CO-BENEFITS analysis) and consultations with stakeholders (ex post analysis), as well as to leave sufficient time to A few studies have attempted to quantify some undertake the analysis during preparation/ environmental or ecosystem co-benefits of DRM evaluation (three to six months). investments. An ideal methodology in such quantification requires adopting a production 2. A collaborative and consultative exercise should function method of valuing ecosystem good and be undertaken to think through the potential services (Barbier, 2009). Barbier (2007) considered impacts (positive and negative) of each three broad categories of benefits of ecosystem investment, since investments can differ quite services: “goods” (products obtained from substantially across regions and hazards. ecosystems, such as resource harvests, water, and genetic material), “services” (recreational and tourism 3. The choice of certain parameters or hazard benefits or certain ecological regulatory functions, scenarios can significantly impact the results, such as water purification, climate regulation, erosion so sensitivity analysis and presentation of a range control, etc.), and cultural benefits (spiritual and of results is always advisable. religious, heritage, etc.). A table in the Background Report lists potential economic benefits of ecosystem 4. It is rare to find literature on, and practical services (European Commission and World Bank, analysis of, wider economic impacts (second 2021a). dividend) or distributional impacts of disaster risk management investments, particularly those that Table 3 provides a framework for presenting Triple are case- or hazard-specific. For this reason, the Dividend results that is used in this study, and analysis of those impacts may be underestimated Table 4 highlights some of the key data sets and quantitatively, but they should still be qualitatively considerations for each dividend during preparation addressed and documented. of the economic analysis. The following are some of Box 8. Typical approaches to economic analysis in Europe (2014–2020) BCA is defined in the EU cohesion policy guidelines as “an present value. Moreover, they needed to demonstrate analytical tool to be used to appraise an investment methodological soundness. A risk assessment (sensitivity decision in order to assess the welfare change attributable analysis and qualitative or probabilistic risk analysis) was to to it and, in so doing, the contribution to EU cohesion policy be included if a positive economic net present value was objectives” (EC, 2014). In this framework and according to found. Moreover, the report was to be (i) self-contained legal guidelines, BCA was explicitly required as a basis for (include results of previous studies), (ii) transparent (with decision-making on the co-financing of major projects complete sets of data and sources of evidence), (iii) included in the operational programmes of the European verifiable (assumptions and methods made available for Regional Development Fund (ERDF) and the Cohesion replicability), and (iv) credible (based on well-documented Fund.a The ex-ante assessment of a project’s economic and internationally accepted theoretical approaches and value followed a clear procedure with several criteria. practices). Major projects were found to be eligible for EU funding if (i) In terms of climate change, all major projects had to they needed co-financing, as indicated by a negative undertake an ex ante vulnerability and risk assessment in financial net present value and a financial rate of return order to consider climate change aspects (EC, 2014), as lower than the discount rate used for the analysis (which outlined in the relevant regulation.b They also needed to would indicate that involvement from the private sector was undertake a quantification of greenhouse gas emissions unlikely); and (ii) they were desirable from a socio-economic that could be integrated into the BCA. For major projects, perspective, as demonstrated by a positive economic net there were three climate change requirements: (i) projects Economic Analysis and Triple Dividend of Resilience 33 should be integral to mainstreaming climate action into EU a. Major projects were defined as those where eligible costs policies and funds; (ii) they should be adaptable and exceeded €50 million, or €75 million where the project contributed applicable to a wide range of infrastructure projects; and to thematic objective 52 under Article 9(7), promoting sustainable (iii) they should be designed to be updated and further transport and removing bottlenecks in key network infrastructure. developed based on evolving experience and emerging best practices. b. Commission Implementing Regulation (EU) 2015/207, Article 2 and Annex II. Box 9. Economic analysis in Austria In Austria, legislation requires project implementors to the categories of damage under consideration. Damage to undertake a detailed economic analysis for certain disaster assets assigned a non-use value (such as cultural assets) is prevention investments (BMLFUW, 2009). Protective generally not analysed quantitatively but is discussed partly measures against avalanches, mudflows, and floods must qualitatively. The main impacts analysed are on buildings, be evaluated with a BCA for an investment valued at infrastructure, and agriculture and forestry areas, as well as €110,000 or more. Although the application of BCAs in revenue losses in tourism. Indirect economic losses are Austria is theory-based, the approach has some distinct described in terms of the number of companies and their features from a societal perspective. These mainly concern employees. Box 10. Economic analysis in the Netherlands In the Netherlands, although not legally required, economic These concerns were addressed by drawing up an overview analysis has facilitated and improved public decision- of costs and benefits of the project and by providing making on flood protection and water governance for more additional economic analyses. In the end, this lobby was than a century. A study by Bos and Zwaneveld (2017) successful: the Dutch Parliament agreed on the provides an overview of the evolution of this practice. At construction of the Zuiderzee Works in 1918, and the end of the 19th century, BCA was used for the first construction started in 1927. The role of the BCA was time in Dutch flood risk management and water governance. acknowledged by a cost-benefit table in the draft Act on the A lobby group of citizens and local government wanted Zuiderzee Works of 1901. Results from national to engage the central government in organizing and assessments over the course of a century are summarized financing enclosure of the Zuiderzee and reclamation of in Bos and Zwaneveld (2017); of note is the finding that the major pieces of land. After the enormous technical 1954 investment in the Delta Works (€0.5 billion) was equal challenges of this project had been tackled, public debate to the direct damage in the 1953 floods and has more than about the economic and budgetary consequences began. paid for itself in reduced damage and loss. Figure 10. The 10 steps of a BCA Source: World Bank analysis Note: BC = benefit-cost; IRR = internal rate of return; NPV = net present value. Economic Analysis and Triple Dividend of Resilience 34 Figure 11. The do’s and dont’s of a BCA to assess DRR investments Source: World Bank analysis Figure 12. Triple Dividend of Resilience nd and 3rd Disaster risk management Avoiding damages and losses from disasters, by: Benefits when • Saving lives and reducing people affected disaster strikes (DRM) • Reducing damages to infrastructure and other assets • Reducing losses to economic flows investments Economic Potential Stimulating economic activity due to reduced disaster risk, by increasing: • Business and capital investment • Household and agricultural productivity • Land value from protective infrastructure • Fiscal stability and access to credit Benefits Regardless of disasters DRM investments can serve multiple uses which can be captured as co-benefits such as: Costs and • Eco-system services potential • Transportation uses 15 • Agricultural productivity gains adverse effects of DRM measures Source: Tanner, et al. (2015) Economic Analysis and Triple Dividend of Resilience 35 Table 2. Main methodologies used for the economic analysis of disaster risk reduction investments METHODOLOGY DESCRIPTION Cost-effectiveness Used to identify least-cost options to meet a specific, predefined target or policy objective analysis without necessity of quantifying benefits. Multi-criteria analysis Emphasizes low costs and is organized around objectives, criteria, and indicators that can be compared to the performance of different (policy) options over time in achieving stated objectives. One type of multi-criteria analysis is the criticality analysis, which is used in several contexts for the prioritization of infrastructure projects. Decision-making under Uses a process of robust decision- making to enable the best outcomes under a range of deep uncertainty futures and world views, given that reliable descriptions of the future are not available. This approach considers mostly the broader welfare perspective with large impacts and necessitates dialogue between various stakeholders, given their differing acceptance of risk and uncertainty. Decision making with uncertainties in Climate Change require additional considerations and should be addressed uniquely from other hazards (Christensen, et al., 2018; Dellink, et al., 2018). Benefit-cost analysis Generally focuses on immediate benefits that are linked to the project and that can be (BCA) monetized easily (tangible values). Efforts have been made to use BCAs in a risk-based approach more adapted to the analysis of systemic, integrated, or soft investments. Triple Dividend Aims to estimate a variety of wider benefits potentially arising from investments. It is a framework BCA comprehensive approach but has not been widely applied in the literature given its rather recent development. Source: World Bank analysis Table 3. Triple Dividend benefit-cost analysis template CASE STUDY 1 CASE STUDY 2 FIRST DIVIDEND Lives saved Injuries avoided Avoided direct stock losses Avoided direct flow losses (BI) Avoided indirect flow losses (higher-order effects) Total first dividend SECOND DIVIDEND Increased land values Entrepreneurship and innovation (economic gains from positive risk taking) Higher investment in productive assets (households) Extended planning horizons Cheaper access to credit/ better ratings Total second dividend THIRD DIVIDEND Economic co-benefits (will depend on specific case) Energy efficiency Economic Analysis and Triple Dividend of Resilience 36 Job creation and higher-order economic effects Social co-benefits (will depend on specific case) Improved and secure livelihood Environmental co-benefits (will depend on specific case) Total third dividend Total dividend Total project cost BENEFIT-COST RATIO (BCR) Source: World Bank analysis Note: BI = business interruption. Table 4. Triple Dividend analytical framework: Preliminary summary of data requirements and challenges DIVIDEND DATA REQUIREMENTS CHALLENGES 1. AVOIDED LOSSES (REALIZED WHEN A DISASTER STRIKES) Saving lives Quantification requires disaggregated data Complete numbers may not be available, and reducing on potential number of deaths, injuries, and meaning that conservative estimates are number of people total affected people to calculate total value calculated. Data on VSL and DALY will be affected of statistical life (VSL) and value of disability- another challenge, as these typically are adjusted life years (DALY). It may also be based on national data sets, which reduces important to consider the lives saved and comparability. Aggregating disaggregated people who will be less affected beyond the data may require some weighted direct investment footprint. conversion. Reducing damage to Quantification of direct monetary measure Many direct losses may not be insured, and infrastructure and of total insured losses from disaster there is the possibility of moral hazard other assets exposure, such as properties saved and arising from insurance, given the lack of damage to properties avoided, requires private defensive measures. This situation data on reconstruction costs and increased will make any estimate less precise. insurance premium. However, results might be an underestimation because many losses are not covered by insurance. Reducing losses to Direct monetary measure includes total There can be a moral hazard issue. economic insured losses from disaster exposure, such flows as the avoided losses in labour hours at minimum wage rate. 2. UNLOCKING ECONOMIC POTENTIAL (REALIZED WITHOUT EXPOSURE TO A DISASTER) Business and capital Climate-/disaster-resilient communities will Comparing data on these investments investment attract more business and capital before and after DRM implementation can investments due to greater stability. reveal the benefit. Specific case studies Quantification requires data on changes in and project-/region-level data will be investments before and after DRM and the necessary. Household-level benefits may return from such increased investment. not be available—employment generation through those investments may be considered as location choice instead of pure job creation. If that is the case, societal benefits from working locally can be an indirect measure of additional benefit. The quality of employment, i.e., increased return, can be useful in quantifying these benefits. Economic Analysis and Triple Dividend of Resilience 37 Household Resilient localities will create opportunities Increased production and value addition and agricultural for households to increase their agricultural due to DRM interventions can be quantified productivity productivity through the intensification of by comparing data from before and after activities and better functioning of such interventions. agricultural value chains. Value from The development of DRM measures can Data may come from the local land registry. protective increase land value. Quantification requires Existing studies may also be useful in infrastructure data on land value before and after DRM identifying the impact of DRM on land investments. value. Fiscal stability and DRM measures can increase fiscal stability, Access to credit can increase adaptive access to credit and their strategic implementation can capacity, which may enable businesses increase access to credit, which is a and households to build back better. measure of adaptive capacity. However, such impacts may well be incorporated in other indicators and if not carefully differentiated and accounted for may create a double-counting problem. 3. GENERATING DEVELOPMENT CO-BENEFITS (REALIZED EVEN IF A DISASTER NEVER OCCURS) Environmental and Protecting and preserving ecosystems can It requires adopting a production function ecosystem-based be instrumental in reducing the risk and methods of valuing ecosystem goods and co-benefits harm of disasters. Examples include the services. However, most such services role of Sundarbans (mangrove forests) in have either multiple managements and/or Bangladesh and India in protecting coastal competing uses, making the overall lives and livelihoods from tropical storms quantification challenging. and cyclones. Transportation use Some specific DRM structures can be used as roads and highways that generate additional economic co-benefits. Economic Economic co-benefits most commonly co-benefits emerge from multiple uses of structures built under DRM projects. Social Public health and societal co-benefits may These co-benefits—such as the mental co-benefits emerge from DRM measures. health impacts on children in disasters or the community impacts associated with loss of cultural heritage—may be difficult to quantify. Climate Considering additional adaptation and co-benefits mitigation measures (such as energy efficiency, consideration of future hazards under climate change) at the same time as DRM interventions can significantly increase the benefit without significant cost implications Source: World Bank analysis; based on The Triple Dividend of Resilience: Realising development goals through the multiple benefits of disaster risk management (Tanner, et al., 2015) Economic Analysis and Triple Dividend of Resilience 38 3. Case Study Selection for This Report The analysis presented here highlights the costs and disasters). The case studies focused on Member benefits of a sample of DRM investments funded States and Participating States of the UCPM; on through EU programmes, national funds, and projects funded by national funds, at least partly by EU international financial institutions. Case studies were funds, or by international financial institutions; and selected through a three-step approach to ensure a on major projects17 that aimed predominantly at representation of various hazards, sectors, and reducing disaster risk and increasing prevention and countries (Figure 13). Through these case studies, the preparedness. In a second step, case studies were report offers new insights using the Triple Dividend categorized and reviewed according to their suitability approach, provides an overview of existing benefit- for further analysis, and 74 were included in the final cost analysis, and includes the development of new selection.18 In a third step, analysis was undertaken methodologies, in particular to account for the net for the case studies (17 with full quantitative analysis), benefits of soft investments (capacity building, and relevant international best practices were coordination, etc.). presented. Following an initial review of existing case studies The geographic distribution of the case studies through desk research and extensive consultations collected and analysed is presented in Figure 14. with stakeholders from institutions and the European Moreover, the distribution of case studies by hazard Commission (via virtual meetings, calls, and type is presented in Figure 15 and a detailed overview questionnaires), approximately 100 case studies from is included in Annex 2. This figure reveals the greater a European context were selected. The case studies availability of data and investments for hazards that included a mix of relevant sectors (housing, education, are more frequently studied (such as flood and transport, health, emergency response, early warning earthquake) and highlights the comparative rarity of and lifelines, communication/ICT, energy, and water) investments, and associated analysis, for hazards and involved both natural hazards (floods, droughts, such as volcanic eruption, drought, and landslide. For earthquakes, wildfires, landslides, volcanic eruptions) technological hazards, investments with the potential and technological hazards (oil spills, chemical for economic analysis appeared to be even more pollution, and biological, radiological, or nuclear scarce and difficult to identify. 17 Major projects in the programming period 2014–2020 are defined as operations where eligible costs exceed €50 million, or €75 million for projects that contribute to the thematic objective under Article 9(7) (Article 100, Regulation 1303/2013 from the European Commission). 18 The number is higher than the original list of case studies considered, as some case studies were added in the process based on further recommendations from stakeholders. Case Study Selection for This Report 39 Figure 13. Process for the selection of case studies • 100 case studies General • 74 case studies Identification of case studies Final selection of case studies • 17 case studies (via online research and discussions with the Analysis with quantitative European Commission) own analysis (17), (via data research, extensive (partial) quantitative based consultations, and on the literature (13), consideration of methodologies) and qualitative analysis (44) Source: World Bank analysis Figure 14. Overview of case studies analysed under this report Source: World Bank analysis Case Study Selection for This Report 40 Figure 15. Case studies by hazard and type of analysis Source: World Bank analysis Case Study Selection for This Report 41 4. Overall Findings 4.1. Overall Results In most cases and across the range of investments investments in seismic strengthening and energy and hazard types, the analysis19 reveals positive net efficiency in education facilities across Europe benefits, with benefit-cost ratios higher than 1, yielded BCRs ranging from 0.6 to 2.2. Earthquake positive net present values, and internal / external prevention measures that were accompanied by rates of return higher than threshold values (shown investments in energy efficiency and building respectively in Figure 16, Figure 17, and Figure 18). modernization provided the greatest BCRs and These findings confirm findings from the literature that provide immediate benefit to beneficiaries even benefits from targeted preventive investments in DRM if a disaster does not occur. The application of generally outweigh the costs. However, determining an earthquake EWS to automatically shut off critical average value for a hazard- or sector-specific BCA is systems or provoke rapid action to save lives and not technically sound, as samples were not statistically assets - such as stopping of trains, energy representative, methodological approaches were not protection measures, and so forth - was found to uniform, and investment types/actions varied widely have significant benefits with a BCR of 7. across case studies. However, some key observations were made on the BCRs for different interventions 3. Extreme heat prevention and early warning had a across hazards: wide range of BCRs. BCRs associated with changing the urban landscape through green and 1. There are very clear benefits of investing in flood white measures ranged from 0.82 to 1.79, prevention and preparedness, as the majority of depending on the level of green and white BCRs were found to be greater than 1.5, with a measures introduced. Those scenarios that median of 2.6. Investments that integrate nature- focused only on green measures brought about based solutions and early warning were found to higher BCRs due to the numerous co-benefits have the greatest benefits, with median BCRs of generated by greening of urban space. Heatwave 4.9 and 2.8, respectively. early warnings provide significant benefits, with BCRs from 48 to 246. 2. For earthquake risk reduction, structural strengthening of existing buildings yielded a BCR 4. Wildfire prevention and response was found of 1.8 for public buildings and a BCR of 5 for economically very positive, with BCRs ranging private buildings under probable maximum loss from 1.6 to 39. Measures focused on prevention, (PML) analysis. The analysis of hypothetical such as managing wildland-urban interfaces, 19 Results from this research presented in figures in this report such as boxplots and histograms are presenting results from the 30 case studies (17 own new quantitative analysis and 13 quantitative results from the literature) that have data available for display. In section 4.2. results from own analysis will be indicated by adding a footnote wherever applicable. Overall Findings 42 were found to have BCRs of 2.1 to 3.1, and • In most investments across the range of hazards, addition of fuel breaks in forested areas had BCRs the quantified benefits of investment outweighed of 12. Decision support tools for climate change the costs. These benefits are still considered to be adaptation and alerting for wildfire risk reduction underestimated, as many benefits are difficult to yielded BCRs ranging from 5.8 to 39, while cross- monetize, such as reduced disruption to societal border coordination mechanisms had a BCR of functions, business continuity and production, 1.6. rescue and recovery costs, post-traumatic stresses (and accompanying mental health and loss of 5. Case studies on landslides were comparatively productivity burdens), protection of cultural few, and the calculated BCRs of 0.1 to 1.1 are heritage, and so forth. expected to be underestimated. The most disruptive landslides affect key highway and • Large uncertainty in the vulnerability of exposed transportation routes; if the full disruption can be assets and economic activities to hazards calculated, and the intervention measures complicates the estimation of the real costs of targeted at critical transport areas with limited disasters as well as the benefits of adaptation or redundancy, then the returns on investment for DRR measures, a reason why effective use of such actions will be high. methodological approaches and communication of results is essential. 6. The analysis for volcanic eruptions was significantly limited by the difficulty in finding • In the case studies where the benefits of investment case studies and determining investments, but were assessed as lower, it was generally clear that based on literature it is clear that monitoring and this was an artefact of data availability rather than a early warning systems alongside adequate result of sub-optimal investment selection transportation routes are very sound and compared to the counterfactual of no investment. economically beneficial investments. For example, in one case study, it was evident that the investment would have been characterised as a 7. In managing pandemics and public health, there positive investment economically had it been is a very clear economic argument for possible to quantify all the benefits, such as lower preparedness, including stockpiling of equipment insurance costs, higher property values, stimulated and supplies. This is illustrated by the increase in construction and labour during construction and the cost of personal protective equipment (PPE) through operations and maintenance, etc. In the during the COVID-19 pandemic (Table 12); case where two investment options for disaster risk according to SHOPP (2020), prices increased reduction would be compared, it would be even between 200% and 1,500%.20 Moreover, a recent more essential to ensure having same type and study by the National Academy of Medicine levels of data and information available to allow (2016) determined a BCR of 13.3 for investing in for a true comparison. pandemic preparedness globally.21 • Benefits are maximized (or in some cases economic 8. For technological hazards and clean-up of viability is ensured) when comprehensive and environmentally degraded areas, there is a clear integrated investments are undertaken. Examples economic argument, with BCRs ranging from 1 of such investments are the combination of grey to 5.8 depending on the nature of the and green infrastructure solutions; support for early technological hazard and the planned investment. warning, capacity building, and coordination mechanisms that can also enhance knowledge and The collected case studies and analysis conducted research to inform preventive investments; and here lead to some further conclusions about the low-cost preventive measures that provide benefits and costs of interventions aimed at increasing incentives to and enhance dialogue with the private societal resilience: sector and civil society. Though these investments may be perceived as more complex to implement 20 Results are for calculations in Euro, original values are in US dollars 21 Results are for calculations in Euro, original values are in US dollars Overall Findings 43 than hard preventive infrastructures, they can from the EU and Member States). The qualitative promote many environmental, developmental, and studies for cross-border investments present high climatic co-benefits. benefits, while the quantitative case studies shows net benefits that are likely underestimated • Compared to investments for a single hazard, multi- (European Commission and World Bank, 2021a). hazard investments for prevention and Cross-border mechanisms require additional and preparedness are more complex and generally particular research to estimate the total costs and understudied in terms of economic valuation benefits. However, methodologies to include assessments. This report has conducted and capacity building and other behavioural effects presented results for several qualitative case have been limited for such studies. The methods studies where investments in equipment, capacity, presented in this study could be used as inspiration coordination mechanisms, or infrastructure could to conduct a Triple Dividend benefit analysis for support increased prevention and preparedness, as cross-border investments, paying close attention to well as leverage other co-benefits. In general, these attribution effects. effects tend to be mostly observed for cross-border investments, international support mechanisms, or Additional observations are illustrated in Figure 20, local/urban areas. This result may however be due and the following section elaborates on findings to economies of scale effects and selection bias for further, by hazard and by intervention type. the case studies considered (mostly investments Figure 16. Findings of benefit-cost analysis by hazard: Benefit-cost ratios, excluding extreme values (above) and including extreme values (below) Source: World Bank analysis; based on external data and information; presenting in part results from literature based on World Bank Overall Findings 44 & external reports (4 Flood results from World Bank (2007), Spray (2016), Hölzinger & Haysom (2017), Gauderis, et al. (2005); 2 Earthquake results from World Bank (2018a, 2019c, 2019a, 2019d); 1 Landslide result from Xiong & Alegre (2019); 2 Pandemics/Epidemics results from Master, et al. (2017), GHRF Commission (2016); 1 Oil Spill result from European Commission (2020)). Note: The figures show the distribution of benefit-cost ratios (BCRs) for disaster risk management investments by the different types of hazards, based on a five number summary: minimum (shown in orange), first quartile, median (shown in red), third quartile, and maximum (shown in orange). The outliers are shown as dots. Extreme values are excluded from the top figure and included in the bottom figure. Bottom graph: Extreme values are included in this graph. Figure 17. Findings of benefit-cost analysis by hazard: Net present values (million €) Source: World Bank analysis; based on external data and information; presenting in part results from literature based on World Bank & external reports (5 Flood results from World Bank (2007), Spray (2016), Grossmann & Hartje (2012), Hölzinger & Haysom (2017), Gauderis, et al. (2005); 2 Earthquake results from World Bank (2018a, 2019c, 2019a, 2019d)). Note: The figure shows the distribution of net present value (NPV) for disaster risk management investments by the different types of hazards, based on a five-number summary: minimum (shown in orange), first quartile, median (shown in red), third quartile, and maximum (shown in orange). The outliers are shown as dots. Extreme values are excluded from this graph. Overall Findings 45 Figure 18. Findings of benefit-cost analysis by hazard: external rates of return Source: World Bank analysis; based on external data and information; presenting in part results from literature based on World Bank & external reports (4 Flood results from World Bank (2007), Spray (2016), Hölzinger & Haysom (2017), Gauderis, et al. (2005); 2 Earthquake results from World Bank (2018a, 2019c, 2019a, 2019d) Note: The figure shows the distribution of external rates of return (ERRs) for disaster risk management investments by the different type of hazards, based on a five-number summary: minimum (shown in orange), first quartile, median (shown in red), third quartile, and maximum (shown in orange). The outliers are shown as dots. Extreme values are excluded from this graph. Overall Findings 46 Figure 19. Selected lessons learned, by hazard FLOODS EARTHQUAKES WILDFIRES EXTREME HEAT • Benefits may be un- • The infrequent occur- • There is a scarcity of • An enhanced under- derestimated particular- rence of earthquakes literature on the econo­ standing of urban heat ly for grey infrastructure poses challenges to con- mic benefits of preven- island effects can support given lack of data on real duct BCA and interpreting tive wildfire investments, effective and economical- estate. or communicating results. while these could be es- ly efficient urban strate- sential for preventive, gies (green, white, blue • Net benefits of NBS • Undertaking analysis by cross-­sectoral decision city measures). tend to arise in the building types (including making on programs longer term, and accoun­ ownership), location of • Other specific para­ ting for ecosystem buildings (exposure) and • Wildfire prevention can meters have to be used services for tourism and type of intervention con­- happen at various scales, (value of life year instead recreation can boost ­­si­ dered is essential, as the from the household of value of statistical life). these. variability of results is very level (firebreaks) to a high. govern­ m ent-led land- • More research on Prop- scape manage­­ment pro- erty Level Protection • More research on earth- gram, leading to a variety could be useful to pro- quake EWS would be of methodologies and vide further evidence on beneficial to understand data requirements. net benefits interactions with comple- mentary investments (e.g., public awareness raising). DROUGHTS OTHER HAZARDS MULTI-HAZARD • An enhanced under- • Landslides: Taking into • Research on multi-ha­ standing of There are consideration climate zard investments should practically no studies on change scenarios and be promoted. the economic benefits of seismic risks in assess- preventive drought invest- ments improves analysis • BCA may not be the best ments of preventive investments. tool to assess these bene- fits given often substantial • Droughts are among the • Volcanic eruptions: Most intangible benefits and in- most damaging and least research has been focus- terrelations. understood of all natu- ing on assessments of vol- ral hazards given among canic crisis management. • Capacity building or soft others their slow-onset investments can also be nature. • Technogenic hazards (oil assessed quantitatively spills, nuclear, chemi­cal): when understanding real There is generally a lack of impacts on the ground. research on the economic benefits of such preventive investments. • Epidemics/pandemics: Benefits of investing in high-quality public health systems can be consider- able and should be further analyzed. Source: World Bank analysis Note: BCA = benefit-cost analysis; EWS = early warning systems; NBS = nature-based solutions. Overall Findings 47 4.2. Key Highlights of Findings by Hazard adaptation. An analysis of an urban-focused climate adaptation program in Cascais, Portugal, using participatory methodologies reveals the highest BCRs for reforestation (particularly due to long-term benefits), legislation to promote bioclimatic construction norms, and surveillance systems; BCRs are 4.755, 4.74, and 4.34 respectively (Alves, 2015). The following sections will detail the benefits associated with interventions for a single hazard. MULTI-HAZARD Disasters are not constrained within borders, nor are regions limited to a single type of hazard. Therefore, a cross-cutting approach encompassing disaster risk reduction and climate change adaptation is vital to ensuring a comprehensive and cohesive effort for early warning, rescue and emergency response, and climate adaptation initiatives. A number of investments have been undertaken in Europe to support better decision- making and emergency response in multi-hazard FLOOD prevention, such as the Aegis Intelligent System in Greece (EC, 2020). Meanwhile, multi-purpose green Floods cause the largest share of disaster losses in investments, particularly in urban areas, have been Europe: river flooding results in €7.8 billion of losses shown to yield positive net benefits, including improved per year and impacts more than 170,000 residents, resource efficiency, increased aesthetic values, while the annual cost of damage from coastal flooding enhanced recreational values, improved physical and is €1.4 billion, with around 100,000 people affected mental health and job creation, as exemplified in an (Feyen, et al., 2020). Compared to rural land, cities EU Horizon 2020 research project URBAN GreenUP represent a smaller but increasing share of total (UrbanGreenUp, 2020) or the development of the flood-prone area; yet their higher density of population Budapest City Park Park (Maksimovic, 2017). and asset value results in higher risk levels (EEA, 2017). Over the past 30 years, the number of Quantifying the long-term benefits of investments22 in devastating flood events in Europe has more than multi-hazard prevention is essential to fully present doubled, and there has been a proportional increase in the cost-effectiveness of such investments. Generally, the frequency of flooding events caused by surface there seems to be some indication of net benefits of water flooding due to overwhelmed drainage multi-hazard investments. However, evidence tends to systems, although investments in flood protection be scarce, and BCA may not be the right tool to assess seem to have been effective in reducing flood risk these types of complex investments. For instance, no (Paprotny, et al., 2018). formal benefit-cost analysis can be conducted for the EU project New Vehicles for Voluntary Fire Service The European Commission proposed a Directive with Units, since available research and data are limited on the aim of reducing flood risks and the negative the true benefits of adding new vehicles. On the other impacts of floods by identifying areas at present or hand, participatory methodologies and community- future risk of flood and establishing structural based mitigation approaches serve essential roles in protective measures and green infrastructure the context of sustainability and climate change solutions. The European Commission Directive 22 The analysis comprises the following detailed case studies: - 1 based on results from the literature (Urban-focused participatory climate change adaptation in Cascais , Portugal, ex-post analysis). Overall Findings 48 2007/60 requires Member States to assess their water such as pools, ponds, buffer basins, or water courses and coastlines for risk from flooding; to map courses. Commonly, several elements are the flood extent, assets, and humans at risk in combined in a management plan to create blue- these areas; and to take adequate and coordinated green infrastructure, with the selection determined measures to reduce the risk, such as implementing by the local environment and prevalent flood retention areas and restoring floodplains (EUR-Lex, mechanisms. 2007). Moreover, sustainable flood risk reduction strategies need to account for the effects of climate 3. Early warning systems, which rely on change when planning adaptation measures. It is meteorological forecasts of intense or sustained expected that these strategies will reduce the human rainfall to identify locations with forecast flooding. losses and economic damages of flooding by EWS comprise technical components to detect more than 70% by the end of the century and yield rainfall in advance, estimate flood conditions, and substantial benefits for the environment and disseminate warnings to affected communities, ecosystems (Feyen, et al., 2020). International best but also human/behavioural components practices have also shown the benefits of integrated regarding decisions to activate warnings and strategies for flood prevention (see Box 11 for an respond to warnings. example from the Netherlands or Box 12 for the town of Queensland, Australia). 4. Property-level protection, which comprises protection of individual properties through small- BCAs for flood protection were observed to be scale interventions such as demountable flood highly variable23, as they depend on the scale and type walls and gates at doorways, raising of ground- of investment and on the intersection of localized floor levels, or elevation of door thresholds. hazard and exposed assets. This observation aligns with the findings of the PESETA IV project (Dottori, et In this study, the BCRs were variable between and al., 2020) (Box 13). The challenge is that multiple within each MS, depending on the intervention interventions are possible to manage flood, and the (Figure 20); however, damage reduction measures at benefits can be challenging to capture and monetize. the building level were found to be very positive (BCR Typical flood interventions fall into four categories: ranges from 2.3 to 12.2). In this report, the BCRs associated with EWS and NBS were found to very 1. Structural protection, which comprises favourable, although with wide ranges. For example, a engineered or “hard” defences. These are further landscape restoration project in Scotland aimed at classified as permanent engineered structures reducing flood yielded a range of BCRs from 1.17 (e.g., levees, dikes, walls, dams, flood gates) to 17 depending on the assessment and time scale or temporary or de-mountable infrastructure (e.g., considered. An analysis conducted for Belgium temporary barriers). Physical permanent highlighted that a flood EWS could generate BCRs structures have been found in some cases to exceeding 5.2 if recipients of early warnings transmit disaster risk further downstream. responded and acted in line with the warnings given to ensure the expected reduction in losses (Table 5). 2. Nature-based solutions or natural floodplain A third example, a study from Poland, found a BCR of management, which includes interventions such 5.14, where most of the benefits derived from as floodplain, dune, or wetland restoration; economic opportunities afforded by flood protection planting of green infrastructure (e.g., hedgerows, and a reduction in physical and mental health impacts woodlands, natural grasslands); and blue elements on residents within the flood area. 23 The analysis comprises the following detailed case studies: - 3 based on new analysis under this project (1 on structural protection, Machlanddamm, Austria, ex-post analysis; 1 on flood EWS, Belgium Flandres, ex-post analysis; 1 on property level protection, Italy Milan, ex- ante analysis)- 5 based on results from the literature (1 on structural protection, Poland Odra river, ex-ante and ex-post analysis; 3 on natural floodplain management in Scotland, Eddleston water, ex-ante and ex-post, Germany Elbe river ex-post, UK Chimney Meadows ex-post; 1 on nature-based coastal and tidal protection Sigma Plan Belgium, ex-ante). Overall Findings 49 Figure 20. Findings of benefit-cost analysis for floods (benefit-cost ratios) Source: World Bank analysis; based on external data and information; presenting in part results from literature based on World Bank & external reports (1 structural protection result from World Bank (2007), 3 nature-based solution results from Spray (2016), Hölzinger & Haysom (2017) and Gauderis, et al. (2005) Note: The figure shows the distribution of benefit-cost ratios (BCRs) for flood investments, based on a five-number summary: minimum (shown in orange), first quartile, median (shown in red), third quartile, and maximum (shown in orange). Table 5. Benefit-cost ratio of implementing early warning systems in Flanders by dividend, over 30 years EWS SCENARIO, EWS SCENARIO, EWS SCENARIO, 5% LOSS REDUCTION 25% LOSS REDUCTION 50% LOSS REDUCTION FIRST DIVIDEND Fatalities avoided Negligible Negligible Negligible Annual average property damage avoided €1.5 million €7.8 million €15.5 million Total first dividend (30 years) €29.1 million €151.3 million €300.6 million COSTS First time capital cost of €2.5 million €2.5 million €2.5 million sensors and monitoring system Maintenance cost €0.5 million €0.5 million €0.5 million Total costs (30 years) €58.2 million €58.2 million €58.2 million BCR 0.5 2.6 5.2 NPV - €29.1 million €93.1 million €42.4 million IRR/ERR -100.0 61.54 80.65 Source: World Bank analysis based on external data Note: Future benefits and costs are both discounted by 3.5% a year. BCR = benefit-cost ratio; ERR = external rate of return; EWS = early warning systems; IRR = internal rate of return; NPV = net present value. Overall Findings 50 Box 11. Flood management in the Netherlands The Netherlands has a wide-ranging history of preventive flooding catastrophe, the city initiated the Room for the investments dating back 200 years (Cooper, 2015). Its River Waal project in 2013 to move the Waal dikes 350 m Room for the River Waal project offers an example of an inland and construct an ancillary channel in the floodplains, innovative, preventative investment that promotes both resulting in a unique urban river park island at the heart of flood deterrence and sustainable urban regeneration the city. To connect the new island to both sides of the river, (Climate-ADAPT, 2016). This €344 million ($381.6 million) the city is also building four new bridges. Room for the River project aims to protect the city of Nijmegen from high-water Waal is part of the Netherlands’ national flood prevention flooding. The River Waal bends sharply and narrows near program, Room for the River, in which the Dutch government Nijmegen, and during times of heavy rain, such as occurred is investing €2.3 billion. The project addresses more than in 1993 and 1995, an upsurge in water levels threatens 30 crucial river locations to protect 4 million people who dike breaches and resident evacuation. To prevent such a live on flood-prone territory. Box 12. Managing flood risk in Roma, Australia Roma, a town in Queensland, Australia, is an international consisted of constructing a levee; after its completion in example of how the implementation of flood protection can 2014, Suncorp cut property premiums in the town by an reduce an area’s flood risk status (The Northern Star, average of 45% (Insurance News, 2019). The following 2012). After the area experienced record-breaking stage of the mitigation scheme involved the construction of destructive floods in 2010, 2011, and 2012, Suncorp, the a diversion drain and the extension of the levee built in only flood insurer left in the area, refused to issue stage 1. In 2019, when the project was completed, the new policies to residents unless action was taken to Queensland government announced a downgrade in the mitigate Roma’s flood risk. According to Suncorp, the flood risk for more than 500 properties (Insurance News, average insurance claim following the 2012 floods was 2019). €77,376 (AU$96,000).a a. Original value in Australian dollars. In response Roma undertook a multi-stage €6.69 million b. Original value in Australian dollars. (AU$8.3 million) flood mitigation project.b The first stage Box 13. Comparison of BCR for different adaptation measures across EU Member States The PESETA IV project estimated benefits and costs of EU Member State considering the effect of strengthening different measures across Europe by combining dikes, establishing retentions areas, implementing hydrological simulations with literature-based information property damage reduction measures, and removing on the costs of measures as well as simulation of avoided buildings at future flood risk are shown in Figure 21. damages linked to their implementation. The BCRs for each Overall Findings 51 Figure 21. Benefit-cost ratio values for four adaptation measures for the period 2020–2100, under a 2°C warming scenario Source: (Dottori, et al., 2020) Note: EU country abbreviations are available on the Eurostat website at https://ec.europa.eu/eurostat/statistics-explained/index.php/ Glossary: Country_codes standards (EU, 2018; European Parliament Think Tank, 2016). In addition, as the Green Deal and sustainable development are promoted in Europe, the integration of energy and seismic retrofitting is increasingly being explored (EC, 2020). This approach offers substantial potential benefits with reduced payback periods24, especially in moderate to high seismicity region compare to separate investments (Pohoryles, et al., 2020). The biggest challenge for EU countries with respect to earthquake is the massive EARTHQUAKE amount of building stock and infrastructure constructed prior to modern earthquake codes. After extreme temperatures, earthquakes have been the second deadliest natural disaster in Europe, Co-investment in seismic strengthening and energy causing more than 33,000 deaths and €62 billion in efficiency improvements offers a significant co-benefit losses between 1980 and 2014 (Corbane, 2017). for EU countries. Large portions of European cities Earthquake risk is highest in the Mediterranean and comprise ageing building stock, which often has high Balkan regions, due to the high seismic hazard, aging social, financial, recreational, and cultural value. infrastructure, and concentration of populations and Currently, 80% of existing EU buildings were built assets in high-hazard areas (Figure 21). To reduce the before the 1990s, and of these 40% were built before damage to infrastructures and save human lives, the the 1960s (EC, 2019). These structures tend to be Eurocodes were established to provide guidance on more susceptible to seismically induced damage and the design of structures in seismic zones. They have are candidates for seismic retrofitting, as many of proven a valuable tool beyond the EU, as many them need to be maintained as cultural heritage. At countries are increasingly using Eurocodes as the same time, the EU’s Energy Efficiency Directive 24 The EU is aiming for an emissions reduction target of at least 55% by 2030, with high ambitions for reduction of energy consumption (reduction of 36–37% by 2030), also through energy efficiency measures. Eurocode 8 exists for seismic design. Overall Findings 52 also set a target of reaching a 20% saving in energy conducted for the retrofitting and reconstruction of consumption compared to projections for 2020. 350 schools in Turkey, which yielded a BCR of 1.53. Retrofitting existing buildings so that they are both seismically resistant and energy efficient usually Earthquake early warning systems consist of physical requires high costs (European Commission, 2020) but infrastructure and software that can alert stakeholders international examples such as from New Zealand and about an incoming earthquake seconds to minutes Japan show that these investments pay off when before they experience the resulting strong shaking, implemented effectively (see Box 14 and Box 15). which allows for actions (moving to a safer location, shutting off gas pipelines, shutting down critical Benefit-cost ratios for earthquake investments infrastructure, etc.) to decrease detrimental impacts collected and conducted for this report were found to from shaking. As earthquake early warning has a be positive25, with BCR values generally exceeding 1.5 short lead time (as short as 27 seconds in Bucharest, and exceeding 4 in several case studies related to according to Neagoe (Neagoe, 2016)), its main earthquake structural strengthening and EWS purpose is to prevent loss of life and injuries. For the (Figure 23). It is important to note that earthquake DACEA (Danube Cross-border system for Earthquakes risk reduction can involve a range of interventions, Alert) program in Romania, with conservative from simple and low-cost steps like securing furniture assumptions, a BCR range of 3.4 to 11.1 was and equipment, to full-scale overall strengthening of determined. Although the benefits are likely to be buildings or building demolition and reconstruction. underestimated given lack of information and data, Most benefits yielded in the economic analysis come the actual cost of implementation, especially with from ensuring life safety of building occupants and respect to efforts to build public awareness on safe (where implemented) the benefits associated with actions to take in the event of an earthquake, may integrating energy efficiency measures. The National also be underestimated. Plan for Seismic Risk Prevention in Italy (analysed for this report) yielded respective BCRs of 1.65, 1.66, To analyse benefits and costs for response, a novel and 3.5 for seismic upgrading, demolition and analysis was undertaken of investments in training reconstruction, and local strengthening of public for emergency responders and response coordination buildings. Benefits were also found to vary across through the UCPM in emergency responders and public building type (Table 6). Similarly, three projects response coordinators through the UCPM’s in Romania focusing on the seismic resilience of first Knowledge Network (Figure 25). The analysis focuses response and emergency buildings had BCRs ranging on two earthquake disaster interventions, one in from 1 to 2, an expected underestimation of the Albania (November 2019) and one in Croatia (March benefits given the challenges associated with 2020). The analysis quantified the investments of DG quantifying the second and third dividends. ECHO and those countries that sent responders (training and deployment costs), and also quantified This report also highlights analysis of hypothetical the benefits due to rescues and damage assessments investments in seismic strengthening and energy (Figure 26). This approach required quantitative efficiency in pre-tertiary and tertiary education “what-if” analysis, as well as interviews with a range facilities in earthquake-prone countries in Europe (a of responders. While the nature of the interventions map of seismic countries in the EU by the exposed differed (Albania involved an international value of education facilities is presented in Figure 24). deployment, Croatia was managed solely by in- When seismic strengthening was combined with country personnel), the BCRs were positive in both energy efficiency measures and the most vulnerable cases. A BCR of 1.9 in Albania was driven by the buildings were prioritized, a higher BCR was yielded, damage assessments led by the EU CPM (Civil but nonetheless the range for all countries was Protection Mechanism), which expedited a return to 0.63 to 2.18 (Table 7). Benefits differ across long-term accommodation and work. A BCR of 1.1 in countriesdepending on their seismic risk, climate, and Croatia was driven by international training of energy profile. This finding aligns with analysis Croatian Civil Protection personnel, showing that 25 The analysis comprises the following detailed case studies: - 4 based on new analysis under this project (2 on seismic strenghtening of buildings including national programme in Italy, ex-post analysis and Europe wide investment in educational buildings, ex-ante analysis; 1 on earthquake EWS in Romania Bucharest, ex-post analysis; 1 on responder capacity of UCPM, ex-post).- 2 based on results from the literature (2 on World Bank comprehensive programs in seismic strengthening of buildings including 1 overall program in Romania involving three projects for public sector buildings, ex-ante analysis, and 1 overall program in Turkey in the educational sector, ex-ante analysis). Overall Findings 53 capacity-building benefits can outweigh costs even intangible benefits of training and coordination, could where no international personnel are deployed. This and should be further developed. type of analysis, and the quantification of more Figure 22. Mean seismic hazard map from ESHM13 for the 475-year return period in terms of peak ground acceleration (PGA) Source: (Danciu, et al., 2013) Note: ESHM13 = The 2013 European Seismic Hazard Model. Figure 23. Findings of benefit-cost analysis for earthquakes (benefit-cost ratios) Source: World Bank analysis; based on external data and information; presenting in part results from literature based on external and World Bank reports (2 Seismic strengthening results from World Bank (2018a; 2019c; 2019a; 2019d)) Note: The figure shows the distribution of benefit-cost ratios (BCRs) for earthquake investments based on a five-number summary: minimum (shown in yellow), first quartile, median (shown in red), third quartile, and maximum (shown in yellow). The outliers are shown as dots. Extreme values are excluded from this graph. Overall Findings 54 Figure 24. Map of seismic countries in the EU by exposed value of education facilities Source: World Bank analysis Figure 25. Costs (investments) and benefits considered for quantitative analysis to provide the capacity-building benefit-cost ratio for the Albania (2019) and Croatia (2020) earthquakes Source: World Bank analysis Note: Additional costs/benefits are analysed both quantitatively and qualitatively and discussed in the main report. CP = civil protection; EUCPT = European Union Civil Protection Team; MODEX = module exercises; UCPM = Union Civil Protection Mechanism. Overall Findings 55 Figure 26. Capacity-building costs and benefits for the Albania earthquake (2019) further broken down and ranked for each actor Source: World Bank analysis Note: Costs and benefits are often associated to different actors. DG ECHO = Directorate General for European Civil Protection and Humanitarian Aid Operations; EUCPT = European Union Civil Protection Team. Table 6. Investment in public buildings in Italy: Probable maximum loss analysis (475-year return period) by facility type PUBLIC AD- CIVIL PROTECTION MILITARY & RECREATION & EDUCATIONa HEALTH CAREa MINISTRATION HEAD-QUARTERS FIREFIGHTING SPORTING & CIVIC DIVIDEND 1 Avoided injuries €2.0 M €25.9 M €6.3 M €3.7 M €4.3 M €24.0 M Avoided fatalities €8.6 M €113.1 M €35.5 M € 17.8 M €20.6 M €103.2 M Decrease in repair €3.7 M €27.4 M €14.9 M €7.5 M €3.1 M €66.5 M cost Decrease in losses due to interruption €9.2 M €52.3 M €60.9 M €21.0 M €9.2 M €167.2 M of services Total dividend 1 €23.5 M €218.7 M €117.6 M €49.9 M €37.2 M €360.9 M Total benefits €23.5 M €218.7 M €117.6 M €49.9 M €37.2 M €360.9 M Total costs €10.8 M €119.0 M €73.9 M €22.8 M €11.3 M €223.3 M BCR 2.17 1.84 1.59 2.19 3.29 1.62 NPV €12.7 M €99.7 M €43.7 M €27.1 M €25.9 M €137.6 M ERR 117.59% 83.78% 59.13% 118.86% 229.20% 61.62% Source: World Bank analysis; based on external data and information Note: ERR = external rate of return; NPV = net present value. a. service interruption in education does not include the social losses and childcare costs associated with interruption of education; service interruption in the health care sector does not include casualties associated with loss of hospital functionality, only due to casualties caused by earthquake damage Overall Findings 56 Table 7. Benefit-cost analysis for schools conducted for this report PML ANALYSIS (475-YEAR AUSTRIA BULGARIA CROATIA CYPRUS GREECE ITALY ROMANIA SLOVENIA RETURN PERIOD) DIVIDEND 1 Avoided €1.5 M €43.2 M €5.2 M €27.7 M €105.5 M €150.2 M €35.7 M €13.7 M injuries Avoided €16.7 M €486.6 M €50.6 M €235.0 M €1.2 B €1. 8 B €188.2 M €161.7 M fatalities Decrease in €12.3 M €27.6 M € 6.1 M €141.6 M €478.1 M €590.0 M €56.0 M €67.0 M repair cost Total €30.5 M €557.5 M €62.0 M €404.3 M €1.8 B €2.5 B €280.0 M €242.4 M dividend 1 DIVIDEND 3 Energy €227.7 M €445.3 M €139.9 M €464.5 M €4.4 B €13.5 B €1.4 B €1.6 B savings CO2 savings €49.0 M €334.4 M €47.6 M €444.0 M €7.3 B €4.2 B €998.6 M €380.3 M Total €276.7 M €779.7 M €187.5 M €908.6 M €11.7 B €17.7 B €2.4 B €2 B dividend 3 Total benefits €307.2 M €1.3 B €249.5 M €1.3 B €13.5 B €20.2 B €2.7 B €2.2 B COSTS Seismic €78.0 M €270.2 M €60.9 M €600.9 M €4.8 B €15.5 B €811.8 M €459.8 M retrofit costs Energy efficiency €219.5 M €645.0 M €165.8 M €521.6 M €5.1 B €16.4 B €1.3 B €1 B improvement costs Total costs €297.5 M €915.2 M €226.7 M €1.1 B €9.9 B €32 B €2.1 B €1.5 B BCR 1.03 1.46 1.10 1.17 1.37 0.63 1.30 1.49 NPV €9.7 M €422.0 M €22.8 M €190.4 M €3.7 B - €11.7 B €625 M €733.9 M ERR 3.26% 46.1% 10.1% 17% 37.2% -36.7% 30.2% 48.7% Source: World Bank analysis; based on external data and information Note: PML = probable maximum loss. Box 14. Earthquake experience from New Zealand The 2011 Christchurch earthquake, which caused 39 factors: the aftershocks that struck close to the city’s people to lose their lives, showed the severe failures of central business district, soil liquefaction, and the unreinforced masonry buildings. Prior to this earthquake, unexpected shock to the insurance sector. Christchurch was not considered to have a high earthquake risk because it is not located near any of New Zealand’s Employing the knowledge gained from this experience main fault lines. However, Swiss Re, one of the largest and similar ones overseas, New Zealand passed the reinsurance companies in the world, estimated the Buildings (Earthquake-prone Buildings) Amendment Act economic cost of this disaster at €15.5 billion.a Of this, the in 2016 and introduced major changes to the way cost incurred to the insurance sector was €12.4 billion earthquake-prone buildings are identified and managed. (Grollimund, 2014).b Such high costs are due to several This national system went into effect on July 1, 2017. The Overall Findings 57 country is categorized into three seismic risk areas—high, or death to persons in or near the building or on any other medium, and low—which allows territorial authorities to property, or damage to any other property” (Building determine the time frame for identifying, assessing, and Performance - New Zealand Government, 2020). Buildings conducting seismic work for earthquake-prone buildings that are considered earthquake-prone are issued an EPB using the EPB methodology (MBIE, 2017). According to notice that must be clearly displayed, and information on Building Performance, an entity of the New Zealand buildings’ seismic risk status is available to the public via government, a building or part of a building is deemed the EPB register. earthquake-prone if “it will have its ultimate capacity exceeded in a moderate earthquake, and if it were to a. Original values in US dollars. collapse, would do so in a way that is likely to cause injury b. Original values in US dollars. Box 15. Comprehensive earthquake risk prevention in Japan Japan has had many destructive earthquakes due to its In the wake of the 2011 event, known in Japan as the Great topography. Most notably, Japan experienced a 9.0 East Japan Earthquake and Tsunami, the country improved magnitude earthquake off the coast of Tōhoku in 2011, its already-robust earthquake preparedness and response nearly one month after the Christchurch Earthquake in efforts to prevent future damages. Efforts to promote New Zealand. This created a series of far-reaching disaster risk reduction and resilience in Japan include hazardous effects, including a tsunami, which claimed the making buildings earthquake-resistant and trains majority of the 15,848 lives lost as a result of the earthquake-ready. Most buildings in Tokyo have been found earthquake, and an accident at the Fukushima nuclear to be earthquake-resistant during past events and the power plant, which was reported as a potential Public seismic resistance of public buildings has increased over Health Emergency of International Concern (WHO, 2011). time (World Bank, 2018); one prominent example of According to a report published by the Brookings Japanese anti-seismic construction using base isolation is Institution, a Washington, DC–based think tank, this the Tokyo Skytree broadcasting tower. Japan’s bullet trains “Triple Disaster” was the most expensive disaster in (shinkansen) and electric trains (densha) are equipped human history: 138,000 buildings were destroyed and with earthquake sensors that can be triggered to freeze €259 billion in economic losses were incurred (Ferris & every moving train in the country in the event of an Solis, 2013).a earthquake. a. Original values in US dollars. low-income populations, and outdoor workers, are more susceptible to developing heat-related illnesses. Higher temperatures also contribute to the build-up of harmful air pollutants, which causes respiratory problems. Intense heatwaves throughout Europe in June and July of 2019 highlighted the growing risk of extreme heat events if no adaptation measures are implemented (Figure 7). According to JRC’s PESETA IV, by 2050 the number of EU and UK residents exposed to heatwaves will grow from 10 million people EXTREME HEAT per year to over 180 million people per year under a scenario of 2°C global average warming warming Extreme heat not only has catastrophic effects on our (Naumann, et al., 2020). Without adaptation, that environment, but it can also be detrimental to public could result in about 52,000 fatalities per year, health. Extreme heat events can trigger heat stroke, compared to the current statistic of 2,750 deaths per in which the body’s temperature rises rapidly and year (Table 8). International examples show that may be unable to regulate and cool down. Without preventive measures particularly to support the emergency treatment, this condition can lead to vulnerable in case of heatwaves can be highly death or permanent disability. Marginalized beneficial to reduce fatalities and harmful effects (see communities and vulnerable people, such as small the example of Philadelphia, USA in Box 16). children, the elderly, people with chronic diseases, Overall Findings 58 The UHI effect is a result of a high coverage by BCRs26 of heat EWS tend to be very high. Recent impermeable surfaces, a lack of vegetation, and dense studies have highlighted BCRs ranging from 23 in concentration of structures that absorb and re-emit London to 1,375 in Madrid (Hunt, et al., 2017) the sun’s heat more slowly than natural landscapes depending on the climate of the city, effects of climate such as forests (Oke, 1982). The UHI effect can have change, socio-demographic change, and the approach detrimental consequences for urban populations, to valuing reduced mortality (i.e., premature versus including increased heat-related mortality (Dang, displaced deaths; see (Chiabai, et al., 2018). For et al., 2018). Several EU initiatives such as mitigating UHI effects, cost-benefit analyses of city- LifeMedGreenRoof (EU+Life) and Urban GreenUP wide application of green and white solutions are rare; project (Horizon 2020) have promoted the research the only published study found BCRs of combined and development of solutions to the UHI effect. green and white solutions to range between 1.3 and Mitigating the impacts of UHI includes solutions such 2.7 for small and medium-size cities in Austria as greening roofs to increase vegetation (green (Johnson, et al., 2020). In the current report, a new solutions), modifying buildings to have higher analysis for Vienna, Austria, highlighted a positive BCR reflectivity of sealed surfaces (white solutions), and of 1.8 for green solutions. An analysis was also increasing the coverage by water for cooling effects undertaken considering a national program for (blue solutions) (World Bank, 2020d). It is important to heatwave early warning systems in France (Table 9 take costs and benefits of these solutions into and see Box 17 for more details), which yielded a very consideration, as city-wide implementation efforts can high BCR of 131; even with sensitivity analysis incur significant sums. However, other solutions can the lowest BCR was found to be 48, which be implemented that are more integrated in other demonstrates the significant value of these systems interventions and can therefore yield substantial co- for reducing heat wave mortality and morbidity. benefits, such as the Life+ Programme co-funded by the EU (LIFE, 2020). Table 8. Projected changes in exposure and fatalities related to heat and cold extremes: EU and UK Source: Naumann, et al. (2020) 26 The analysis comprises the following detailed case studies: - 2 based on new analysis under this project (1 on interventions tackling Urban Heat Island effects in Vienna Austria, ex-ante analysis and 1 on heatwave EWS with a national program in France, ex-post analysis). Overall Findings 59 Table 9. Benefit-cost ratio for heatwave early warning systems in France, by dividend HEAT EARLY WARNING SYSTEMS FIRST DIVIDEND Reduced heat-related mortality €1.8 B Reduced heat-related hospitalizations €63.8 M Reduced time spent in the hospital €25.7 M Total first dividend €1.9 M THIRD DIVIDEND Economic co-benefits: Improved productivity of outdoor labourers through (qualitative) knowledge of heat-related health effects Social co-benefits: Improved awareness of heat-related health effects and (qualitative) potential for individual adaptation to increase heat stress Total for both dividends €1.9 B Total cost €14.4 M BCR 131 NPV €1.9 B ERR 12,967% Source: World Bank analysis; based on external data and information Note: BCR = benefit-cost ratio; ERR = external rate of return; NPV = net present value. Box 16. Heatwave impact prevention in the US In regions that are unprepared to deal with sustained During the summer months of 1995–1998, warnings were episodes of summer heat, the death toll can be substantial. issued for 45 days; considering the effect of warnings over This was the case in the eastern part of the United States the three-day lag after the initial warning was released, the during the first half of July 1993: between July 6 and 14, the estimated total number of lives saved was 117. Assuming a Medical Examiner’s Office in Philadelphia, Pennsylvania, value of statistical life (VSL) of $4 million (i.e., €3.6 million determined that 118 deaths were heat related. However, in 1998) among people who are 65 years of age or older in this is considered to be an underestimate because heat Philadelphia, Ebi et al. (2004) found that the gross benefits can cause an onslaught of fatal and nonfatal conditions, of the PWWS totalled $468 million over the three-year such as cardiovascular diseases, cerebrovascular diseases, period, which is equivalent to €417 million. On the costs and respiratory diseases. These diseases respectively side, if the direct wage costs of the Heatline (i.e., a service account for 13–90%, 6–52%, and 0–14% of the increase in Philadelphia providing information and counselling on in overall morbidity. In 2005, partly in response to the heat avoiding heat stress) and additional emergency medical waves in 1993 and 1994, the Philadelphia Hot Weather service crews do not exceed €8,920 per day, the total Health Watch/Warning System (PWWS) was developed to cost of implementing this system for the 21 days that a alert the city’s population when weather conditions, such heatwave warning was issued during the three-year as abnormally high temperatures, pose risks to health. period was €187,316. Thus the benefits of lives saved by Through this system, radio and TV announcements warn this system far outweigh its costs. Because of how effective the public about risks and suggest that residents check on this system was, it has become the blueprint for more than vulnerable neighbours; hours of operation in senior centres 20 other heat-health warning systems instituted in cities with air conditioning are extended; and emergency medical around the world. teams’ shifts are lengthened. Overall Findings 60 Box 17. Heatwave impact prevention in France The 2003 heatwave that swept across Europe was excess mortality during heatwaves. The core of the plan estimated to have claimed the lives of around 30,000 was the implementation of a heat early warning system people people (UNEP, 2003). In just one hospital in Paris, (HEWS) to alert vulnerable groups of the ensuing high 2400 additional emergency care visits and 1900 excess temperatures in order to have better preparedness. The hospital emissions were recorded during the heatwave aim was to provide a system of alerting authorities of (Åström, et al., 2013), and it has been estimated that the ensuing extreme heat events in order to set up preventive number of excess deaths that occurred in due to the 2003 measures that address vulnerable groups. The system is heatwave in France to total 14,800 (Bouchama, 2003). based on threshold temperatures that lead to an excess of Given that numerous heatwaves in the past have led to mortality when reached and is active between June 1st and considerable excess mortality in France, there is significant August 31st. In the event that the 3-day averaged minimum concern for the human health-related impacts of extreme and maximum forecasted temperatures are likely to reach heat. These concerns are further compounded when predefined thresholds, warnings are issued, and information considering the future impact of climate change on is disseminated to the media and general population. If temperatures and how projections of heat-related mortality high levels of the system are activated, specific advice is show rising rates in many cities across the globe (Gasparrini, provided to vulnerable groups (e.g., schools, hospitals, and et al., 2017). businesses). Studies have shown that the France HEWS has provided positive effects of HEWS in reducing Due to the high societal losses in the 2003 heatwave, (Bouchama, 2003) heat-related mortality since its in­ France put forward a plan to help prevent further high ception and implementation (Bassil & Cole, 2010). agricultural losses, and damage to buildings and infrastructure due to soil subsidence, are not monetized. With the effect of climate change and global warming, the negative impact and damages of droughts are expected to increase dramatically, according to the PESETA IV report on droughts. Under the scenario with 3 °C global warming, the annual economic losses DROUGHT from droughts would increase from €9.4 billion to €45 billion. The Mediterranean and Atlantic regions of Drought, commonly defined as an extended period Europe will be more vulnerable to droughts because of during which a region is affected by a deficiency in the increase in droughts' duration, frequency, and water supply, negatively affects the economy by intensity (see Figure 27). With climate change causing agricultural failure, reducing power supply, mitigation, however, the damage caused by droughts and causing shipping interruptions (Cammalleri, et is expected to be only half in comparison to the al., 2020). The drought sensitivity of an area is scenarios with no mitigation (Cammalleri, et al., 2020). determined by two important factors: (i) the population living in the area and the number of activities Benefit-cost ratios27 have generally not been calcula­ undertaken in the area that rely on the land (e.g., ted for this type of disaster. Droughts are among the livestock farming); and (ii) the health status, amount least understood and quantified of all natural hazards of poverty, and economic conditions of the area. The due to their multi-faceted nature, which makes the damage caused by droughts in the European Union is economic analysis of preventive investments estimated to be between €7.4 and €14.2 billion per inherently difficult (Pulwarty & Sivakumar, 2014). In year (Cammalleri, et al., 2020). Drought conditions addition, models need to be adapted to the type of often remain unnoticed until water shortages become investment analysed. Generally, estimation of severe and impose adverse impacts on the (predicted) “average” soil moisture is essential to environment, and therefore the consequences to be able to conduct economic analysis and research ecosystems, such as limited public water supplies, on droughts. Irrigation and water provision systems 27 The analysis comprises the following detailed case studies: - 1 based on results from the literature (Drought prevention program in the Jucar River Basin in Spain, ex-post analysis). Overall Findings 61 constitute preventive investments against droughts. drought rehabilitation and relief efforts - beyond These investments include structural improvements saving lives and preserving health and productivity. and interventions in water supplies as well as irrigation Examples include the large-scale water project systems providing civilians with access to improved Ligação Pisão-Roxo in south Portugal, which water resources and enhanced water and food systematically improved the water supply system (EC, security. Preventive investments, such as drought 2011) and see Box 18, or early warning systems such wells, dams, and efficient irrigation, have a variety of as the DriDanube project (Interreg Danube, 2020) benefits, as they reduce the need for high-cost post- (see Box 19). Figure 27. Fractions of area expose to drought risks under three global warming scenarios (1.5°C, 2 °C, and 3°C) Source: Cammalleri, et al. (2020) Box 18. Improving water security in Portugal Structural improvements to the water security system can canal extension of 23.13 km. The project was implemented directly benefit civilians and lead to positive economic at a total cost of €65,181,300, and it was expected to impacts (EC, 2011). In southern Portugal, a large-scale provide increased supplies of water for the region and its water project called Ligação Pisão-Roxo was launched with residents. An analysis of the project’s benefits and impacts the objective to improve the water supply system of the shows that the improved water system benefits an Guadiana River. As a part of the Alqueva Dam Project, the estimated 44,486 people and also generates economic Ligação Pisão-Roxo included investments in construction benefits through the creation of 40 new jobs. of a new dam to form part of a larger water network with a Box 19. Early warning and preparedness in the Danube Early warning and monitoring systems can yield benefits in be better prepared and more efficient in responding to terms of disaster risk reduction (Interreg Danube, 2020). drought emergencies. At a cost of €1,974,750, the project With the objective of increasing the capacity to manage accomplished its goal with the output Drought User Service, drought-related risks, the DriDanube project in the which allows efficient and accurate monitoring and early Danube region was launched in 2017. The Danube is a warnings of droughts. This in turn enables better river region that experiences droughts frequently, which cooperation between agencies and improves emergency leads to water scarcity and negative impacts on the responses to droughts, which decrease the loss of life and economy and welfare of the people. The DriDanube project damage when a drought occurs. helps all stakeholders involved in drought management to Overall Findings 62 There are initiatives at the European supranational level to understand the impacts of forest fires. For example, collaboration between European countries and the European Commission developed the European Fire Database, the largest repository of information on individual fire events and forest fires in Europe. In addition, the PESETA IV report analysed how fire danger in most of Europe would increase under different global warming scenarios (1.5°C, 2 °C, and 3°C) (See Figure 28). Under the 3°C warming WILDFIRE scenario, it is estimated that the number of people exposed to high-to-extreme fire danger levels for at Globally, the impacts of wildfires on humans, the least 10 days annually would increase by 24% from environment, and the economy are extensive. In the now. Southern European countries would experience past few years, there has been an unprecedented the most fire risks as those countries have already number of severe wildfires globally, in places such as experienced severe and frequent wildfires in the Portugal, Greece, and Sweden, along with the United present (Costa, et al., 2020). States, Australia, the Amazon, and parts of the Arctic. Climate change is causing the increase in the weather Benefit-costs assessments28 of wildfire risk reduction conditions that can trigger and amplify wildfires, and investments yield net benefits (Figure 29); median these effects are only anticipated to get worse without BCRs exceeding 10 are found for decision support proper environmental conservation efforts so that tools, alerting systems, and fuel management. Cross- some governments have taken extensive measures for border collaboration tools and management of the wildfire prevention (see Box 20 for more information wildland-urban interface also yield positive benefits. about programs in Australia). Research has also found Two case studies on the management of wildland- that wildfires are a major driver of greenhouse gas urban interface in Portugal were undertaken for this emissions and are also responsible for 5–8% of the 3.3 report and produced BCRs of 2.1 and 3.1, and a third million annual premature deaths (i.e., 165,000 to study on fuel management in Portugal that focused on 264,000 deaths) due to poor air quality (Lelieveld, et the addition of fuel breaks yielded a BCR of 11.9 al., 2015). Factors that contribute to forest fire (Table 10). A forest decision support system for small occurrence include the moisture content of the forest forest owners in Austria was assessed with a BCR of surface and climate variables, such as wind speed. 5.8. Two hypothetical warning systems and public Increased moisture impedes potential spreading of a preparedness programs were considered for fire and the ease of ignition, while wind speed can Portugal and Greece, yielding BCRs of 11 and 39.3, affect the rate of spread following ignition. In the respectively. Finally, a BCR of 1.6 was found for an southern parts of Europe near the Mediterranean, investment in an information exchange system moisture levels of forests are the lowest. As a result, designed to reduce forest fire risks in the border area the countries with the highest danger of wildfires are between Portugal and Spain. More generally cross- Spain, Portugal, and Turkey. Greece, part of central border cooperation programs to enhance common and southern Italy, Mediterranean France, and the response to wildfire and build capacity have appeared coastal region of the Balkans are also susceptible to beneficial (see Box 21). increased danger. 28 The analysis comprises the following detailed case studies: - 7 based on new analysis under this project (2 on Wildlife Urban Interface investments in Pedrógão Grande Portugal, ex-ante analysis and Oliveira de Hospital Portugal, ex-ante analysis; 1 on Fuel Management in the Central region of Portugal, ex-post analysis; 1 on a Decision Support System in Carinthia region Austria, ex-post analysis; 2 on Wildifre EWS in Centro region Portugal, ex-ante and Attica region, Greece ex-ante respectively for firms and households to inform fuel management; 1 on corodination mechanism cross-border with the Spitfire tool, ex-ante analysis). Overall Findings 63 Figure 28. Forest fire danger in the present, and under two climate change scenarios, according to two different climate models (1.5°C, 2 °C, and 3°C) Source: Costa, et al. (2020) Note: The climate models were selected to demonstrate the effects of the different models. Figure 29. Findings of benefit-cost analysis for wildfires (benefit-cost ratios) Source: World Bank analysis; based on external data and information Note: The figure shows the distribution of benefit-cost ratios (BCRs) for wildfire investments. Extreme values are excluded from this graph. Overall Findings 64 Table 10. Expanded triple dividend cost-benefit ratio calculation of fuel management for wildfire risk reduction in central region of Portugal FUEL MANAGEMENT FIRST DIVIDEND Reduction of lives lost €5 M Reduction of injuries €0.55 M Fire damage prevented (industries) €0.23 M Losses of timber production (trees not planted in the fuel break) (–) €0.88 M Reduction of losses to forestry €8.8 M Reduction in deaths related to cardiorespiratory problems €2.6 M Reduction in treatment costs related to cardiorespiratory problems €0.032 M Cost of CO2 avoided €0.87 M Avoided loss of property values €0.63 M Avoided loss of tourism income €2.8 M Cost of sheltering/displacement avoided—lodging €0.0033 M Cost of sheltering/displacement avoided—productivity €0.0042 M Soil erosion costs avoided €0.035 M Fire suppression, operational costs, lowered with fuel breaks €2.8 M Total first dividend €23.3 M SECOND DIVIDEND Economic value-add from sale of cork (indirect/induced) €0.088 M Security/reduced volatility from mitigation/risk perception €2.4 M Increase in land purchases €0.13 M Total second dividend €2.7 M THIRD DIVIDEND Economic co-benefits Fire suppression, fixed costs, lowered with wildland-urban interface management €0.049 M Carbon sequestration €0.11 M Sale of cork €0.19 M Total third dividend €0.35 M TOTAL DIVIDEND €26.3 M Total cost €2.2 M BCR 11.9 Source: World Bank analysis; based on external data and information Overall Findings 65 Box 20. Wildfire prevention in Australia In Australia, wildfires—or “bushfires” as they are called— Despite this, some estimates state that the economic are a common occurrence. Nonetheless, the 2019–2020 impact may be greater than the 2009 Black Saturday fires, bushfire season wreaked significantly more havoc than a which cost €2.73 billion.b typical season due to increased temperatures and a prolonged drought. By the time all the fires were contained Without the wildfire management policies implemented in March 2020, they had burned more than 46 million by the Australian government in the wake of the Black acres, destroyed thousands of homes and buildings, and Saturday fires, the impacts of the 2019–2020 bushfires killed 34 people (Center for Disaster Philanthropy, 2019). could have been a lot worse. The Country Fire Authority Insured claims of bushfire losses between November 2019 (CFA) in Victoria developed the Bushfire Safety System to and February 2020 are estimated at €1.18 billion according address issues within its community preparedness to Aon (Martin, 2020).a Fully calculating the overall programs (see Figure 30). This structure was the first of its economic impact of these wildfire incidents, however, is kind, and it emphasized two things: (i) there is no one-size- difficult because the evaluation of intangible losses (e.g., fits-all solution to creating safer communities, and (ii) loss of income and productivity) is not standardized, and building a safer environment requires a strong relationship because the COVID-19 pandemic overlapped with the fires. between government, community, and individuals. Figure 30. Bushfire Safety System in Victoria, Australia Source: (Sturzenegger, et al., 2010); cited in (Sturzenegger & Hayes, 2011) a. Original values in Australian dollars. b. Original values in Australian dollars. Box 21. Enhanced wildfire response in Europe A review of investments in capacity building for wildfire In the Czech Republic, wildfires caused 155 injuries and 12 prevention and response across Europe provided several fatalities over the past decade (Velinger, 2015), and lessons and inspiring achievements. A common theme is economic costs could be substantial given that 34% of the that a combination of equipment, coordinated trainings, country is covered by forests (Baranovskiy, 2019). A €58 and peer learning, along with the human resources to million project (€50 million financed by the EU) was carried address fires and other disasters, seems to ensure the out from 2007 to 2013 with the goal of enhancing the greatest benefits in terms of effectiveness of response capacity of the Fire Services to engage in activities for during disasters. flooding situations, including intervention management, rescue operations, emergency survival for the population, Overall Findings 66 and salvage operations—in all parts of the country. with high fire risk. This centre now covers 11 municipalities and 150,000 residents and has resulted in improved Another project, called Safe Borderlands (EU, 2021), has equipment and cooperation in projects that enhance forest aimed to strengthen the cooperation between fire and management, training, and awareness raising. Another rescue services and other emergency response units project, the Interreg España-Portugal project, facilitates (police, medical rescue, public health authorities, etc.) on collaboration between over 15 institutions located in the the shared border of the Czech Republic and Poland, where cross-border regions of Spain and Portugal, promoting more than 7 million people live. Firefighters and other exchanges of knowledge and good practices. Both Spain emergency response personnel hold organized conferences and Portugal are highly vulnerable to wildfire hazards, and and trainings, take language courses, purchase special there is a long history of institutions fighting forest fires equipment, and exchange data with each other in order to along the cross-border area. One result of the project is the maintain smooth communication between the two establishment of the Iberian Centre for Research and Fight countries’ emergency response service providers. This Against Forest Fires (CLIFO), which aims to serve as a helps to ensure that there is cohesion between the different regional and international model in the fight against forest countries during fires, floods, and other disasters, especially fires, increase response capacity to forest fires, and reduce important given the possibility for these to occur more the economic cost of fires (CILIFO, 2020). While it may be frequently due to climate change. difficult to measure the impacts of this investment using a benefit-cost analysis, it is important to reference The EU supported the establishment of a defence centre to qualitatively because this case study exemplifies the fight forest fires in in Andalusia, Spain (EC, 2016), region impacts of improving capacity. Results of the benefit-cost analysis29 indicate potential economic benefits of preventive investments, with prioritization of infrastructure such as road assets critical to maximise returns. Low-cost land management solutions seem to be quite effective. Although BCRs found were small or close to 1, it is expected that societal benefits were underestimated. A study in Albania on reducing transport disruptions from landslide found BCRs of between 0.1 and 1.1, with the highest returns on investment in main MASS MOVEMENT/LANDSLIDE transport corridors (Xiong & Alegre, 2019); see Figure 31 for a map showing the primary network Landslides—including rockfalls, debris avalanche, considered for the project and Table 11 for the BCR debris flows, creep, and snow avalanches—pose risk results. However, it is very likely that BCRs are to life, property, and infrastructure in mountainous underestimated, given the full cost of disruption to regions of Europe (EC, 2020). Steep coastal areas are critical transport networks where there is limited also subject to unstable slopes, putting coastal redundancy. Other studies on landslides and properties and infrastructure at risk of slope creep and avalanches prevention using drainage and landscape cliff collapse. A variety of mitigation options is available management approaches show some potential net to manage landslide risk, including engineered and benefits of such interventions (see Box 22 and natural slope stabilization, control of flooding or runoff Box 23 for examples from Italy and Switzerland that destabilizes slopes, and debris capture or respectively). diversion. 29 The analysis comprises the following detailed case studies: - 1 based on results from the literature (1 on World Bank investment in Alabania in road retrofitting, ex-ante analysis. Overall Findings 67 Figure 31. Primary network considered in Albania study on reducing transport disruptions from landslide Source: Xiong & Espinet Alegre (2019) Note: The colours indicate the various corridors within the primary road network. Table 11. Benefit-cost ratio for landslide measures implemented, by corridor CORRIDOR NUMBER AND NAME INVESTMENT (MILLION €) BENEFITS (MILLION €) BENEFIT-COST RATIO 1 Milot–Morine New 15.0 4.2 0.3 5 Durres–Vlore 6.3 6.7 1.1 6 Tirana–Elbasan-Pogradec 7.4 6.0 0.8 13 Milot–Peshkopi 32.1 2.6 0.1 14 Vlore–Sarande 11.0 2.3 0.2 Source: Xiong & Alegre (2019) Box 22. Economics of prevention versus response for landslides in Italy A study on the costs and benefits of landslide management to 2010 would have been effective in preventing the approaches was conducted at detailed scale and large landslide. BCA showed that compared to €57,000 in scale for a case of rotational/translational slides and earth remediation costs, installing a drainage channel and flows that occurred in 2010 in Vicenza, located in Italy’s maintaining it over 20 years would have saved 30% of the Veneto region (Salbego, et al., 2015a). A detailed numerical remediation cost, leading to a benefit of €17,000 (Salbego, model found that incorporating a drainage trench (aiming et al., 2015b). to reduce the water table, therefore slope instability) prior Overall Findings 68 Box 23. Economics of prevention versus response for landslides in Switzerland As a country in the Alpine region, Switzerland is highly mainstream interventions that attempt to reduce the risk of vulnerable to avalanches and landslides due to climate avalanches in Switzerland, such as technical, organizational, change and other factors, such as geology and rainfall and land use planning measures (Fuchs, et al., 2007). The persistence (Climate Change Post, 2020). Since 1936, 24 study shows that for direct costs, the most cost-effective people on average have died in avalanches annually risk reduction measures are interventions with snow fences (WSL, 2020). Several cost-effectiveness analysis on and land use planning, though for avalanche mitigation the landslide prevention have been conducted, with the best scale of benefit is highly dependent on the number of snow interventions in terms of net benefits being identified. In fences deployed. Davos, an economic analysis was carried out for different monitoring system for volcanic activity through European collaboration and to enhance understanding of and preparedness for volcanic eruptions (FUTUREVOLC, 2016). In Italy, EU-funded investments have been made to establish resilient/ escape routes in the case of volcanic eruptions (see Box 24). As a quantitative method, benefit-cost analysis of volcanic hazard assists authorities in making key VOLCANIC ERUPTION decisions that reduce the risks and impact of volcanic eruptions. A study that examined four volcanic Volcanic hazards can lead to fatalities and widespread hazards (Wilson, et al., 2014) and their damages to homelessness, while volcanic ash fall has a negative infrastructures stresses that it is crucial to have impact on health, infrastructure, transportation quantitative vulnerability assessments for under- networks, and agriculture. It is estimated that in the standing the risks and economic impacts of volcanic 20th century, volcanic eruptions caused more than hazards . Another analysis of volcanic risk suggests the 90,000 fatalities and affected around 5.6 million importance of BCA in decision-making as a way to people (Loughlin, 2013). The 2010 eruption of segment affected populations according to the cost of Eyjafjallajökull in Iceland, a small-moderate volcanic evacuation during a volcanic crisis (Woo, 2015). hazard, caused disruption for around 10 million people and total loss of €3.9 billion (EC, 2014b). In recent During a volcanic eruption, effective roads and years, the number of people exposed to volcanic transportation networks are crucial for rescuing and risk has increased as a result of increasing global evacuation. However, transportation networks are population and urban area expansions. vulnerable to volcanic activity, as they can be damaged or blocked during eruptions and also disturbed by The European Commission has made attempts to volcanic ash, which can cover road markings and reduce volcanic risks by monitoring volcanic activity reduce visibility and skid resistance (Blake, et al., and enhancing preparedness and response. The 2017). Hence, investments in improving road resilience European Spatial Planning Observation Network and advance planning of escape routes can enhance (ESPON) provides a digital volcanic hazard map that the efficiency of evacuation when an eruption occurs, traces dangerous volcanoes and eruption activities leading to fewer fatalities and injuries. In Europe, during the last 10,000 years and that identifies economic assessments have been undertaken to countries vulnerable to volcanic risks (ESPON, 2003). quantify the impacts and losses due to volcanic In 2012, the EU-funded project FUTUREVOLC eruptions and identify the direct and indirect benefits was launched, with the goal to create an integrated of investing in evacuation and escape routes. Overall Findings 69 Box 24. Evacuation routes in volcanic areas of Italy In Italy, investments have been made to establish resilient zone” 72 hours ahead of an impending eruption, has escape routes in the case of volcanic eruptions. Though proposed compensation for people to relocate (Pasha- volcanic eruptions rarely occur, some Italian urban areas Robinson, 2016), and has created a national park around are highly vulnerable to these destructive natural disasters. the volcano to avoid illegal building. However, the plan to In the past few decades, vulnerability has increased evacuate has received slow uptake and been met with because of rising population density in cities and related limited enthusiasm, given that the region is a considerable complex infrastructure. Scientists warn that the impacts tourist attraction with related economic opportunities. of a Vesuvius eruption (Hofmann, 2010) could be Under the Redeveloped Road to Upgrade Volcano Escape catastrophic given the proximity of Naples, with its Route project financed by the EU during the programming population of 3 million people. A 2010 analysis estimated period 2007–2013 (EC, 2013), works were carried out on that €55 billion of residential property is exposed to the the national road north of Mount Vesuvius to improve potential impacts of a Vesuvius eruption (Hofmann, 2010). regional accessibility and create a better escape route for The highly active and dangerous volcano Campi Flegrei is local people in the event of a volcanic eruption or also in close proximity, with an estimated likelihood of earthquake. Total investment was €53.4 million, of which medium-term eruption (De Natale, et al., 2017). Because €26.7 million was financed by the EU. This can be seen as of the imminent—and unpredictable—threat, the Italian a no-regret investment, as it enhances both connectivity government has devised a plan to evacuate a defined “red and disaster prevention. planning and measures to mitigate and control outbreaks in post-disaster settings. Given such studies and ongoing lessons from the pandemic, it is clear that preparedness planning and supply chain stockpiling and management are essential to reduce the negative impacts of epidemics and natural hazards on health and well-being, and that these steps are most effective when carried out well ahead of any slow- or fast-onset event. Benefit-cost ratios30 for investments in public EPIDEMIC AND DISASTER HEALTH health systems and preparedness planning at local PREPAREDNESS and national levels reveal that such investments generate significant benefits in reducing negative The COVID-19 pandemic has shown the health outcomes, with a median BCR of 8.3 found for consequences of systematically underinvesting in public health interventions (Masters, et al., 2017). pandemic preparedness (the different levels of Moreover, it has been documented that essential pandemic preparedness for countries in Europe and personal protective equipment (PPE) and other Central Asia are shown in Figure 32). Suk et al. (2020) required equipment rose dramatically in price due to found that the cascading effect of disasters, such as supply shortages during the COVID-19 pandemic, with earthquakes and floods in the EU, have led to the increases ranging from 184% to 2,000% (SHOPP outbreak of infectious diseases. The projection that 2020); see Table 12. A study by the National Academy climate change related extreme weather events will of Medicine (2016) determined a BCR of 13.3 for increase in Europe in the coming century highlights investing in pandemic preparedness globally. the importance of strengthening preparedness 30 The analysis comprises the following detailed case studies: - 2 based on results from the literature (1 on public health interventions in high-income countries, ex-post; 1 on pandemic preparedness interventions in the EU, ex-post). Overall Findings 70 Figure 32. Pandemic preparedness: Preparation of countries in Europe and select other regions for infectious disease before COVID-19 Source: World Bank (2020a), drawing on Kandel, et al. (2020) Note: Details on the methodology and index definition are in Kandel, et al. (2020). Table 12. Cost of PPE supplies in the United States: Before and during COVID19 ITEM PRE-COVID-19 COST COST DURING COVID-19 PRICE MARKUP PERCENTAGE MARKUP Vinyl exam €0.02 €0.05 €0.04 300% gloves Latex gloves €0.03 €0.07 €0.05 267% Nitryl gloves €0.05 €0.09 €0.05 200% Three-ply €0.05 €0.68 €0.63 1500% masks K95 masks Not applicable €3.60 Not applicable Not applicable N95 masks €0.34 €5.18 €4.83 1513% 3M N95 masks €0.10 €6.08 €5.98 6136% Hand sanitizer €0.23 €0.50 €0.27 215% Isolation gowns €0.23 €4.50 €4.28 2000% Face shields €0.45 €4.05 €3.60 900% Soap €0.17 €0.32 €0.14 188% Source: SHOPP 2020 Note: Values are as of April 7, 2020. Original values in US dollars. Overall Findings 71 long-term impacts on human health, including radiation sickness, thyroid cancer, and leukaemia (European Parliament Think Tank 2016), and also affects ecosystems (especially forests and freshwater bodies). It also negatively affects the economy, in particular by disturbing the agricultural sector and generating market losses due to food product contamination. Benefit-cost analysis is rare for nuclear investments. While costs on installation, maintenance, and waste management can be quantified for OIL SPILLS AND NUCLEAR AND CHEMICAL investments in improving the sustainability and safety RISKS31 of nuclear power plants in Europe, no studies could be found undertaking a full benefit-cost analysis for such International seaborne oil trade has grown steadily projects. Nonetheless, qualitative analysis has shown since the 1970s (Holleman, 2004), and the risk of oil benefits in nuclear risk prevention and remediation of spills has increased, leading to damage to the marine risks related to uranium leakage. Investments in environment and coastal areas as well as huge nuclear safety tend to be highly beneficial from a long- economic losses in industries like fisheries and term perspective, as the potential impacts of unsafe tourism. In Spain, the 2002 Prestige oil spill was nuclear plants can be major. estimated to have caused a loss of €770.58 million, including cleaning and recovery costs, losses in A chemical incident is defined as the “uncontrollable economic sectors affected, and environmental losses release of a toxic substance, potentially resulting in (Loureiro, et al., 2006). The benefits of preventing oil harm to public health and the environment” (World spills can be analysed through the modelling of the Health Organization, 2020). This term encompasses a effect of a catastrophic oil spill. The frequency and variety of anthropogenic and technogenic events, such spill size volume of hypothesized oil spills are often as an oil spill, a factory explosion, a disease outbreak taken into consideration as essential factors that associated with chemical exposure, and even a storage affect the modelling and the result. However, the unit leak during transportation. Calculating the BCA or quantification of the avoided costs is often challenging. conducting economic analysis for the risk of chemical While it is easy to calculate the response and clean-up incidents is important because chemical incidents costs, the risked social and environmental costs - such often have a multitude of domino effects and may as the losses in commercial fishing and ecosystems - spawn serious consequences, including mass usually do not have common standards and are thus casualties, health impacts, property losses, and difficult to quantify . Typically estimates of BCRs for oil environmental pollution. These incidents also have spill prevention and preparedness are positive but major direct economic consequences, such as property low, but the benefits are typically viewed as damage that requires facility repair and replacement, underestimates. An ex ante analysis of a preventive lost wages, business interruption, clean-up costs, and investment against oil spills in Estonia reveals a BCR chemical supply chain disruption. Under this report, of 1, yet this is likely an underestimate since it does new analysis was conducted for a remediation not include the quantification of benefits of reducing investment in Latvia aimed at cleaning up sulphuric potential oil spills and other co-benefits for the acid tar lagoons that once operated as waste dump ecosystem. sites. This investment yielded positive net benefits (BCR of 5.8) where the direct impacts could be Nuclear safety and liability have been important calculated (particularly on the environment), and also concerns in Europe since the Chernobyl accident, as unlocked economic potential through increased land people became aware of the tremendous damage and value, construction investments, and linked jobs losses that nuclear accidents can cause (PACE, 2018). created (Table 13). Future case studies could take this A nuclear accident causes considerable short- and analysis further by considering the long-term impacts 31 The analysis comprises the following detailed case studies: - 1 based on new analysis under this project (Environmental remediation against acid tar lagoons in Latvia, ex-post analysis).- 1 based on results from the literature (Multi-functional ship against oil spills in Estonia, ex-ante analysis). Overall Findings 72 on human health, productivity losses from agriculture avoided, or CO2 emissions avoided, among other effects. Table 13. Expanded Triple Dividend cost-benefit ratio calculation for cleaning up hazardous waste in Latvia ACID TAR LAGOON CLEAN-UP FIRST DIVIDEND Lives saved due to remediation of site (long-term estimation) €114.1 M Health costs avoided €5.54 M Livestock loss avoided €0.12 M Total first dividend €119.75 M SECOND DIVIDEND Reduction in land value avoided €48.43 M Input-output to economy from construction investment €12.17 M Jobs added €1.46 M Environmental damage avoided €0.38 M Total second dividend €62.45 M Total dividend €182.2 M Total cost €31.4 M BCR 5.8 NPV €150.79 M ERR 480.17% Source: World Bank analysis; based on external data and information Note: BCR = benefit-cost analysis; ERR = external rate of return; NPV = net present value. Overall Findings 73 4.3. Conclusions This study and its preparation have reinforced the found BCRs of between 2 and 12, with the highest economic case for disaster preparedness and BCRs attributed to ensuring that all buildings met prevention in Europe, with findings in line with global the current building codes (NIBS, 2019). research. Investments in disaster and climate resilience are almost always no-regret from an 3. Integrated investments aimed at achieving economic perspective and offer many co-benefits to multiple objectives make technical, financial, society beyond disaster risk management. There are and social sense. Many examples showcased in many findings relevant to specific stakeholder groups this report have highlighted the societal value of or for specific hazards within this report and its achieving multiple benefits with a single background papers, but the major conclusions for a integrated investment. Achieving reductions in wide range of stakeholders are presented here: GHG emissions through energy efficiency savings in buildings also typically requires a 1. The physical, financial, and social impacts of complementary structural strengthening to disasters are growing and will continue to grow ensure that buildings constructed prior to modern unless urgent actions are taken.32 The impacts of codes—the majority of the European built flood, wildfire, and extreme heat in Europe are environment—are resilient to snow, wind, and increasing rapidly, and climate damages could seismic loading, meet modern fire safety reach €170 billion per year according to standards, and ensure inclusion for people with conservative estimates for a 3° scenario disabilities. Integration of these objectives saves (Szewczyk, et al., 2020) unless urgent action is money, reduces disruption, and is more taken now. Earthquakes, while rare, have a sustainable over the short and long term. This devastating impact on the ageing and pre-code study also highlighted the higher returns on buildings and infrastructure of Europe. However, investment that result from combining EWS with disasters do not affect everyone equally: poor, efforts to ensure public preparedness and elderly, very young, and marginalized populations readiness for action and promote coordination. are most affected and least able to recover, and municipalities in the poorer and more 4. Reduction in disaster and climate risks requires disadvantaged areas have the least capacity to action across a wide range of authorities at design and implement resilience investments. national and subnational level. Many of the case studies included in this report looked at 2. The positive economic case for investing in investments undertaken by national authorities resilience in Europe is mirrored by research and civil protection agencies; but the internationally. This report showed benefit-cost management of disaster and climate risk is often ratios that almost always exceeded 1, and a municipal responsibility. Even if municipal typically ranged from 2 to 10, for resilience authorities are aware of the potential risks, they investments in Europe, with BCRs often face many obstacles to reducing risks - related to exceeding 20. The World Bank’s Lifelines report prioritization issues, limited access to capital, concluded that roughly €4 in benefits accrued limited capacity to prepare technical and for every €1 invested in critical infrastructure, economic assessments, and issues with and in 96% of scenarios analysed, BCRs greater permitting, procurement, and project than 1 were achieved (Hallegatte, et al., 2019). management. Even at the national level, line Similarly, a global report on hydro-meteorological ministries in transport, energy, health, education, early warning systems found BCRs of 4 to 35, and so forth may not be sufficiently aware of depending on the co-benefits and assumptions potential disaster risks and their responsibility used (Hallegatte, 2012). Finally, review of and mandate for action. disaster risk reduction investments in the US 32 Several case studies present impact results in both absolute and relative terms, depending on the methodology applied. In general, relative losses (with respect GDP, for example) can be estimated with a financial growth model which has not been included in the scope of this Component. Overall Findings 74 5. Targeting investments in resilience to the areas cultural heritage, increased investments due to and assets under the highest risk vastly reduces (actual and perceived) reduced disaster volatility, costs and increases benefits. Access to high- and so forth. Applied research is critical to resolution and up-to-date data and information develop the data and approaches to monetize on disaster and climate risks, and on the assets these crucial co-benefits for inclusion in future exposed to these risks, requires investment of economic analyses. public funds. However, the returns on this relatively modest investment are significant, 7. Ensuring that authorities can make the economic given the savings they make possible by more case for prevention and preparedness itself accurate targeting of resilience investments to requires investment. Undertaking benefit-cost the criteria mentioned above. The Lifelines report analysis for different types of investments is a noted that the savings from targeting significant undertaking, involving data collection, infrastructure assets that are most exposed to modelling and analysis, and reporting and hazards appear to be orders of magnitude larger communication of findings. Unfortunately, there than the costs of data collection and modelling are significant gaps in data availability, especially that would be required to improve knowledge of for less studied hazards such as wildfire, drought, current and future hazards. The report also shows volcanic eruption, and technological hazards, that building more resilient infrastructure assets and for calculation of co-benefits (as noted may be costlier, but the incremental cost is small above). Moreover, authorities responsible for especially if countries use data and criticality undertaking such analysis at national or analysis to prioritize investments (Hallegatte, et subnational levels rarely have the needed al., 2019). Similarly, analysis conducted for this expertise or experience, and in this regard report showed that targeting education facilities significant capacity development is needed. with the highest vulnerability to damage or collapse in earthquake resulted in significantly 8. There is insufficient research and reporting that higher BCRs, at a portfolio level. captures the benefits of preparedness and prevention, either prospectively or retro­ 6. The economic co-benefits of resilience measures spectively, also linked to underreporting of are regularly and significantly underestimated. disaster damages. At the onset of this study, an Economic analysis often focuses on the reduction extensive review of literature (published and in direct damage, such as the reduction in unpublished) was undertaken, and consultations damage to buildings and infrastructure protected were held with many stakeholders at commission from flood; but such an approach is insufficient to and national levels. Ultimately only about 100 capture measures’ full benefits. The Triple cases were found for which there was a modicum Dividend of Resilience approach used in this of information available for economic analysis. Of report aims to capture avoided losses and lives these, only a third of cases had enough data for saved, unlocked economic potential, and the quantitative or semi-quantitative analysis. The social, environmental, and economic co-benefits benefits of “softer” measures around human that are generated even in the absence of a capacity to respond and coordinate during disaster. Unfortunately, data on these types of co- disasters are even less well understood and less benefits are rarely captured, and it can be difficult likely to be quantified, but this report conclusively to find data on co-benefits such as the increase in demonstrates the value and positive economic property prices or reduction in insurance case for activities provided under UCPM. Given premiums after flood protection, the employment the difficulty faced by authorities seeking to provided during construction and subsequently advocate for investment in preparedness and through operations and maintenance, biodiversity prevention for the disaster that has not yet and amenity improvements, enhanced mental happened (Figure 33), it is even more critical to and physical health of beneficiaries, protection of develop a solid evidence base. Overall Findings 75 Figure 33. Difficulty of funding investments in disaster risk reduction Source: Paul Bisca (Carton Collections) Overall Findings 76 5. Recommendations Moving Forward This report has made the economic case to invest in has been spent on awareness and preparedness preparation and preparedness in Europe to halt the campaigns. Tracking these funds into the future steep increase in the physical, social, and economic would be very helpful to identify gaps (e.g., losses from disasters and climate change. Ultimately, pandemic preparedness) and target awareness, however, to build a resilient Europe it is critical to capacity development, and ultimately financing achieve the following: in these areas. 1. A substantial increase in the financing targeted 3. Wide promotion and uptake of integrated and for disaster and climate resilience, along with novel approaches to build resilience and ways to ensure that potential beneficiaries can maximize co-benefits. This point has been access it. It is expected that the financing reiterated many times in this report, but it is available for disaster and climate resilience will important and bears repeating. While such increase in Europe in coming years through a approaches are perhaps more complicated to variety of funding sources. However, it should be implement than traditional approaches, they noted that authorities responsible for disaster often provide significantly higher co-benefits. For risk management may need additional support to example, nature-based solutions yield greater co- advocate for increased allocations within national benefits than traditional grey flood protection budgets, since sectoral ministries may not solutions. Similarly, investing in green, white, and/ prioritize funding for disaster prevention and or blue solutions in cities is proven to reduce preparedness over other more immediate needs. extreme heat and also brings enormous benefits Moreover, as noted during consultations with civil in air quality, amenities, and liveability for protection authorities, there is a lack of clarity residents. Finally, promoting a single investment around different potential funding sources, and with multiple objectives—for example, combining hence a need for support in identifying and energy efficiency measures with structural targeting different funds. strengthening (if needed) to create resilient, inclusive, and sustainable schools—can save 2. Systems to track, monitor, and evaluate disaster time and money and minimize disruption. and climate resilience financing. It is difficult to track how much funding has been spent, or will 4. Policy reforms to address the asymmetry in be spent, for disaster and climate resilience preparedness and prevention across types of without systems in place to follow investment in hazards. There was a clear asymmetry observed this area. Currently it would be difficult or in the availability of case studies and investments potentially impossible to track how much funding for hazards such as flood, as compared to wildfire, has been used for modernizing fire coordination drought management, extreme heat, and others. and response in the last decade, or how much is The EU Floods Directive has been incredibly planned in the coming decade, or the how much effective at focusing government attention on the Recommendations Moving Forward 77 need to understand, quantify, and manage flood risk; development of objective and transparent risks. Unfortunately, similar directives are lacking prioritization to ensure targeting of scarce for other hazards, and perhaps as a result, financing to areas of the greatest vulnerability; awareness of these risks and prevention and conduct of technical, financial, and economic preparedness actions are also lacking. For studies; steps to ensure that procurement, example, it may be appropriate to consider permitting, stakeholder consultations, etc. are appropriate legislation for prevention and completed on time; management and supervision preparedness that is operationalized and of works; and long-term operations and enforceable. This is critical for uniform risk maintenance. Expertise and experience in these reduction, such as fire breaks to reduce wildfire areas are often limited within civil protection or steps to move beyond emergency management agencies, line ministries, and especially towards disaster prevention and preparedness. subnational authorities. This capacity can be built through a combination of training, workshops, 5. Scaled-up availability of, and access to, data, guides/handbooks, hands-on implementation, information, and knowledge on disaster and and just-in-time support. climate risks. Compared to other regions of the world, Europe is fortunate to have a range of data All these proposed measures are aligned with some and information on disaster and climate risks. As objectives of the EU Green Deal, in particular its noted by all stakeholders during consultations, initiatives related to DRM such as the recent EU however, there are issues associated with Adaptation Strategy from 2021 or the Renovation accessing a range of data, including open, high- Wave (EC, 2016). The analysis of this report highlights quality, and high-resolution data on historical the need to build physical resilience to natural disaster damages and losses, maps and data on disasters. However, as demonstrated in the the probability and potential impact of the full Component 2 report (European Commission and range of hazards (and how they may change with World Bank, 2021b), there is a complementary need climate change), data on exposed assets and to build financial resilience at household, sovereign, populations (and their expected change into the and regional levels—in particular through improving future), replacement costs, typical costs for access to, and uptake of, insurance for private and different prevention and preparedness measures, public assets. A holistic approach should be developed and of course the multitude of co-benefits of to foster physical and financial resilience to disaster resilience. The costs of investment to ensure that risk, such as was presented in The Adaptation these data are open and available to all users and Principles: A Guide for Designing Strategies for Climate stakeholders pales in comparison to costs of mis- Change Adaptation and Resilience (Hallegatte, et al., targeting investments away from the highest-risk 2020). Component 3 (European Commission and areas and assets. World Bank, 2021c) also highlighted the challenges of securing financial resources and building human 6. Increased human capacity to assess, prioritize, capacity for mitigation, adaptation, and response to design, and implement measures aimed at large-scale events. By developing a combined prevention and preparedness. There is a approach and “greening the EU”, the European clear and urgent need to build the capacity of Commission could send a clear message that this is a experts and authorities to undertake a range of priority and that resources will be dedicated to the prevention and preparedness measures: collection holistic approach for its implementation. of data on assets and infrastructure that may be at Recommendations Moving Forward 78 6. References Alves, F., 2015. Benefit-Cost Analysis in Climate Change Adaptation: The Use of Participatory Methodologies, s.l.: Universidade NOVA de Lisboa. Åström, C. et al., 2013. Heat-related respiratory hospital admissions in Europe in a changing climate: a health impact assessment. BMJ Open. Baranovskiy, N. V., 2019. Predicting, Monitoring, and Assessing Forest Fire Dangers and Risks. s.l.:IGI Global. Barbier, E., 2007. Valuing Ecosystem Services as Productive Inputs. Economic Policy, Volume 49, p. 178–229. Barbier, E., 2009. Ecosystems as Natural Assets. Foundations and Trends in Microeconomics, Volume 4 (8), p. 611–81. Bassil, K. L. & Cole, D. C., 2010. Effectiveness of Public Health Interventions in Reducing Morbidity and Mortality during Heat Episodes: a Structured Review. International Journal of Environmental Research and Public Health, 7(3), pp. 991-1001. Blake, D. et al., 2017. Impact of Volcanic Ash on Road and Airfield Surface Skid Resistance, s.l.: Sustainability. 9. 1389. 10.3390/su9081389. BMLFUW, 2009. Untersuchungen im Schutzwasserbau Richtlinie, KNU gemäß § 3 Abs. 2 Ziffer 3 Wasserbautenförderungsgesetz, BMLFUW (Federal Ministry of Agriculture, Forestry, Environment and Water Management), s.l.: s.n. Bos, F. & Zwaneveld, P., 2017. Cost-Benefit Analysis for Flood Risk Management and Water Governance in the Netherlands: An Overview of One Century. SSRN Electronic Journal. Botzen, W. J., Deschenes, O. & Sanders, M., 2019. The Economic Impacts of Natural Disasters: A Review of Models and Empirical Studies. Review of Environmental Economics and Policy, Volume 13(2), p. 167–88. Bouchama, A., 2003. The 2003 European heat wave. Intensive Care Medicine, 30(1). Browder, G. et al., 2019. Integrating Green and Gray : Creating Next Generation Infrastructure, Washington, DC: World Bank and World Resources Institute. Building Performance - New Zealand Government, 2020. Managing Earthquake Prone Buildings. [Online] Available at: https://www.building.govt.nz/managing-buildings/managing-earthquake-prone-buildings/ Bureau of Ocean Energy Management, 2016. Economic Analysis Methodology for the 2017-2022 Outer Continental Shelf Oil and Gas Leasing Program. [Online] Available at: https://www.boem.gov/sites/default/files/oil-and-gas-energy-program/Leasing/Five-Year- Program/2017-2022/Economic-Analysis-Methodology.pdf Buss, I., 2010. Best Practices in Capacity Building Approaches: Recommendations for the Design of a Long- Term Capacity Building Strategy for the Wind and Solar Sectors by the MEF Working Group, s.l.: Frankfurt, Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ). Cammalleri, C. et al., 2020. Global Warming and Drought Impacts in the EU, Luxembourg: Publications Office of the European Union. Center for Disaster Philanthropy, 2019. 2019-2020 Australian Bushfires. [Online] Available at: https://disasterphilanthropy.org/disaster/2019-australian-wildfires/ Chiabai, A. S., Spadaro, J. V. & Neumann, M. B., 2018. Valuing Deaths or Years of Life Lost? Economic Benefits of Avoided Mortality from Early Heat Warning SYstems. Mitigation and Adaptation Strategies for Global CHange, 23(7), pp. 1159-76. Christensen, P., Gillingham, K. & Nordhaus, W., 2018. Uncertainty in forecasts of long-run economic growth. Proceedings of the National Academy of Sciences, Volume 115(21), pp. 5409-5414. References 79 CILIFO, 2020. CILIFO website, s.l.: s.n. Climate Change Post, 2020. Avalanches, Landslides and Rock Fall Switzerland, s.l.: s.n. Climate-ADAPT, 2016. Room for the River Waal: Protecting the City of Nijmegen. [Online] Available at: https://climate-adapt.eea.europa.eu/metadata/case-studies/room-for-the-river-waal-2013- protecting-the-city-of-nijmegen COACCH, 2019. The Economic Cost of Climate Change in Europe: Synthesis Report on COACCH Interim Results, s.l.: s.n. Cooper, K., 2015. Flood Prevention Scheme in the Netherlands Creates Unique Byproduct: An Urban River Park Island. The Architect’s Newspaper. Corbane, C., 2017. Pan-European seismic risk assessment: a proof of concept using the Earthquake Loss Estimation Routine (ELER). Bulletin of Earthquake Engineering, Volume 15(3), pp. 1057-1083. Costa, H. et al., 2020. European wildfire danger and vulnerability in a changing climate: towards integrating risk dimensions, Luxembourg: Publications Office of the European Union, Luxembourg. Danciu, L., Woessner, J. & Giardini, D., 2013. A community-based probabilistic seismic hazard maps for the Euro- Mediterranean Region. Congress on Recent Advances in Earthquake Engineering and Structural Dynamics, Vienna, Austria; SHARE Consortium. Dang, T. V. et al., 2018. Green Space and Deaths Attributable to the Urban Heat Island Effect in Ho Chi Minh City. American Journal of Public Health, 108(S2), pp. S137-S143. De Natale, G. et al., 2017. Understanding Volcanic Hazard at the Most Populated Caldera in the World: Campi Flegrei Southern Italy. Geochemsitry, Geophysics, Geosystems, 18(5), pp. 2004-08. Dellink, R., Chateau, J., Lanzi, E. & Magné, B., 2018. Long-term economic growth projections in the Shared Socioeconomic Pathways. Global Environmental Change, Volume 42, pp. 200-214. Dottori, F. et al., 2020. Adapting to Rising River Flood Risk in the EU under Climate Change, Luxembourg: Publications Office of the European Union. Ebi, K. L. et al., 2004. Hest Watch/Warning Systems Save Lives: Estimated Costs and Benefits for Philadelphia 1995-98. American Meteorological Society, 85(8), pp. 1067-1074. EC, 2011. Capturing River Flows to Improve Water Supplies, EC (European Commission). [Online] Available at: https://ec.europa.eu/regional_policy/en/projects/major/portugal/capturing-river-flows-to- improve-water-supplies EC, 2013. Redeveloped Road to Upgrade Volcano Escape Route, EC (European Commission), s.l.: s.n. EC, 2014b. Increasing our Understanding of Volcanic Eruoptions. European Commission. [Online] Available at: https://ec.europa.eu/programmes/horizon2020/en/news/increasing-our-understanding- volcanic-eruptions EC, 2014. Guide to Benefit-Cost Analysis of Investment Projects, Economic Appraisal Tool For Cohesion Policy 2014–2020, EC (European Commission), Luxembourg: Publications Office of the European Union. EC, 2016. Climate Change and Major Projects. European Commission, EC (European Commission), s.l.: s.n. EC, 2016. EU Adaptation Strategy - Climate Strategy, EC (European Commission). [Online] Available at: https://ec.europa.eu/clima/policies/adaptation/what_en EC, 2016. Funding Opportunities to Support Disaster Risk Prevention in the Cohesion Policy 2014-2020 Period, EC (European Commission). [Online] Available at: https://ec.europa.eu/regional_policy/sources/docgener/informat/factsheet_disaster_risk_ prevention_03.pdf EC, 2019. iRESIST+ - innovative seismic and energy retrofitting of the existing building stock, EC (European References 80 Commission). [Online] Available at: https://ec.europa.eu/jrc/en/research-topic/improving-safety-construction/i-resist-plus. EC, 2020. Greek Project Develops Intelligent System for Better Disaster Responses, EC (European Commission). [Online] Available at: https://ec.europa.eu/regional_policy/en/projects/Greece/Greek-project-develops-intelligent- system-for-better-disaster-response EC, 2020. Integrated Techniques for the Seismic Strengthening and Energy Efficiency of Existing Buildings, EC (European Commission). [Online] Available at: https://ec.europa.eu/jrc/en/event/webinar/integrated-techniques-seismic-strengthening- and-energy-efficiency-existing-buildings EC, 2020. Landslides, EC (European Commission): Joint Research Centre–European Soil Data Centre (ESDAC). [Online] Available at: https://esdac.jrc.ec.europa.eu/themes/landslides EEA, 2015. Exploring Nature-Based Solutions: The Role of Green Infrastructure in Mitigating the Impacts of Weather- and Climate Change–Related Natural Hazards, s.l.: European Environment Agency. EEA, 2017. Green Infrastructure and Flood Management: Promoting Cost-Efficient Flood Risk Reduction via Green Infrastructure Solutions, s.l.: EEA Report 14/2017. EEA, 2020. Economic Losses from Climate-Related Extremes in Europe. [Online] Available at: https://www.eea.europa.eu/data-and-maps/indicators/direct-losses-from-weather- disasters-3/assessment-2. ESPON, 2003. Europe Volcanic Hazard Map, European Spatial Planning Observation Network. [Online] Available at: https://www.preventionweb.net/english/professional/maps/v.php?id=3832 Estrada, F., Botzen, W. & Tol, R., 2017. A global economic assessment of city policies to reduce climate change impacts. Nature Clim Change, Volume 7, pp. 403-406. EU, 2018. The Eurocode Map, EU (European Union). [Online] Available at: https://www.preventionweb.net/english/professional/maps/v.php?id=67979 EU, 2019. GRETA - GReen infrastructure: Enhancing biodiversity and ecosysTem services for territoriAl development. Final Report 08/08/2019. https://www.espon.eu/green-infrastructure EU, 2021. Safe Borderland, Keep EU, s.l.: s.n. EUR-Lex, 2007. Directive 2007/60/EC of the European Parliament and of the Council of 23 October 2007 on the assessment and management of flood risks (Text with EEA relevance) OJ L 288, s.l.: s.n. European Commission, 2019. A European Green Deal: Striving to be the first climate-neutral continent. Available at: https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal_en#policy- areas European Commission and World Bank, 2021a. Economic of prevention and preparedness: investment in disaster risk management in Europe makes economic sense – Background Report, s.l.: European Commission and World Bank. European Commission and World Bank, 2021b. Financial RIsk and Opportunities to Build Resilience - Economic Analysis of Prevention and Preparedness in European Union Member States and Countries under EU Civil Protection Mechanism, s.l.: s.n. European Commission and World Bank, 2021c. Understanding the Needs of Civil Protection Agencies and Opportunities to Support Scaling up of Investments in Disaster Prevention and Preparedness, s.l.: s.n. European Parliament Think Tank, 2016. Chernobyl 30 Years On: Environmental and Health Effects. [Online] Available at: https://assembly.coe.int/nw/xml/XRef/Xref-XML2HTML-en.asp?fileid=25050&lang=en Eurostat Database, 2021. Exchange and interest rates. [Online] Available at: https://ec.europa.eu/eurostat/web/exchange-and-interest-rates References 81 Ferris, E. & Solis, M., 2013. Earthquake, Tsunami, Meltdown: The Triple Disaster‘s Impact on Japan, Impact on the World – Brookings Institution. [Online] Available at: https://www.brookings.edu/blog/up-front/2013/03/11/earthquake-tsunami-meltdown-the- triple-disasters-impact-on-japan-impact-on-the-world/ Feyen, L. et al., 2020. Climate Change Impacts and Adaptation in Europe: JRC PESETA IV Final Report, Luxembourg: Publications Office of the European Union. Forzieri, G. et al., 2018. Escalating impacts of climate extremes on critical infrastructures in Europe. Global Environmental Change, Volume 48, pp. 97-107. Fuchs, S., Thoeni, M. & McAlpin, M. C., 2007. Avalanche Hazard Mitigation Strategies Assessed by Cost Effectiveness Analyses and COst Benefit Analyses–Evidence from Davos, Switzerland. Natural Hazards, Volume 41, pp. 113-29. FUTUREVOLC, 2016. Final report, s.l.: s.n. Gasparrini, A. et al., 2017. Projections of temperature-related excess mortality under climate change scenarios. The Lancet Planetary Health, 1(9), pp. 360-367. GFDRR, 2014. Understanding Risk in an Evolving World: Emerging Best Practices in Natural Disaster Risk Assessment, GFDRR (Global Facility for Disaster Reduction and Recovery), Washington, DC: World Bank. GFDRR, 2019. The Making of a Riskier Future: How Our Decisions Are Shaping Future Disaster Risk, GFDRR (Global Facility for Disaster Reduction and Recovery), Washington, DC: GFDRR. Ghesquiere, F. M., Mahul, O. & Jamin, L., 2006. Earthquake Vulnerability Reduction Program in Colombia: A Probabilistic Benefit-Cost Analysis. Policy Research Working Paper, p. 3939. Gollier, C. & Hammitt, J., 2014. The Long-Run Discount Rate Controversy. Annual Review of Resource Economics, Volume 6, pp. 273-295. Grollimund, B., 2014. Small Quakes, Big Impact: Lessons Learned from Christchurch, s.l.: Swiss Re. Hallegatte, S., 2012. A Cost Effective Solution to Reduce Disaster Losses in Developing Countries: Hydro- Meteorological Services, Early Warning, and Evacuation. Policy Research Working Paper, p. 6058. Hallegatte, S., Rentschler, J. & Rozenberg, J., 2019. Lifelines: The Resilient Infrastructure Opportunity, Washington, DC: World Bank. Hallegatte, S., Rentschler, J. & Rozenberg, J., 2020. Adaptation Principles: A Guide for Designing Strategies for Climate Change Adaptation and Resilience, Washington D.C.: World Bank. Hallegatte, S. et al., 2020. From Poverty to Disaster and Back: A Review of the Literature. Economics of Disasters and Climate Change, pp. 223-47. Hoeppner, E., 2019. Surface Water Flooding: A Growing Risk in Europe – JBA Risk Management. [Online] Available at: https://www.jbarisk.com/news-blogs/surface-water-flooding-a-growing-risk-in-europe/ Hofmann, M., 2010. Mount Vesuvius Europe‘s most dangerous volcano: Study, s.l.: s.n. Holleman, M. A., 2004. Lingering Lessons of the Exxon Valdez Oil Spill, Seattle, WA: Seattle Times. Hunt, A. F. et al., 2017. Climate and Weather Service Provision: Economic Appraisal of Adaptation to Health Impacts. Climate Services, Volume 7, pp. 78-86. Insurance News, 2019. Roma Gets a Flood Risk Tick after Mitigation Works. [Online] Available at: https://insurancenews.com.au/daily/roma-gets-a-flood-risk-tick-after-mitigation-works Interreg Danube, 2020. DRIDANUBE–Drought Risk in the Danube Region. [Online] Available at: http://www.interreg-danube.eu/approved-projects/dridanube Johnson, D. S. et al., 2020. A Cost-Benefit Analysis of Implementing Urban Heat Island Adaptation Measures in Small and Medium-Sized Cities in Austria. Environment and Planning B: Urban Analytics and City References 82 Science. Kandel, N., Chungong, S., Omaar, A. & Xing, J., 2020. Health Security Capacities in the Context of COVID-19 Outbreak: An Analysis of International Health Regulations Annual Report Data from 192 Countries. The Lancet, Volume 395, pp. 1047-53. Kestrel Group, 2011. Resilience Lessons: Orion‘s 2010 and 2011 Earthquake Experience: Independent Report, Wellington: Kestrel Group. Lelieveld, J. E. et al., 2015. The Contribution of Outdoor Air Polution Sources to Premature Mortality on a Global Scale. Nature, Volume 525, pp. 367-71. LIFE, 2015. LIFE+ Climate-Proofing Social Housing Landscapes. [Online] Available at: https://ec.europa.eu/environment/life/project/Projects/index.cfm?fuseaction=home. showFile&rep=file&fil=LIFE12_ENV_UK_001133_LAYMAN.pdf Loughlin, S. C., 2013. Volcanoes and Volcanic Eruptions. In: P. T. Bobrowsky, ed. Encyclopedia of Natural Hazards. s.l.:s.n. Loureiro, M. L., Ribas, A., Lopez, E. & Ojea, E., 2006. Estimated Costs and Admissible Claims Linked to the Prestige Oil SPill. Ecological Economies, 59(1), pp. 48-63. Madajewicz, M., Tsegay, A. & Norton, M., 2013. Managing Risks to Agricultural Livelihoods: Impact Evaluation of the Harita Program in Tigray, Ethiopia, 2009–2012, London: Oxfam: s.n. Maksimovic, C., 2017. Blue Green Solution: A Systems Approach to Sustainable, Resilent, and Cost-Efficient Urban Development, s.l.: Climate-KIC. Martin, M., 2020. Aon Reveals Impact of the Australia Fires on Reinsurance – Insurance Business Australia. [Online] Available at: https://www.insurancebusinessmag.com/au/news/breaking-news/aon-reveals-impact-of- the-australia-fires-on-reinsurance-210475.aspx. Masters, R. et al., 2017. Return on Investment of Public Health Interventions: A Systematic Review. Journal of Epidemiological Community Health, Volume 71, pp. 827-34. MBIE, 2017. EPB Methodology: The Methodology to Identify Earthquake-Prone Buildings, MBIE (Ministry of Business, Innovation, and Employment). [Online] Available at: https://www.building.govt.nz/assets/Uploads/building-code-compliance/b-stability/b1- structure/epb-methodology.pdf Mechler, R., 2016. Reviewing Estimates of the Economic Efficiency of Disaster Risk Management: Opportunities and Limitations of Using Risk-Based Cost-Benefit Analysis. Natural Hazards, Volume 81, p. 2121–47. National Academy of Medicine, 2016. The Case for Investing in Pandemic Preparedness. In: The Neglected Dimension of Global Security: A Framework to Counter Infectious Disease Crises. Washington, DC: National Academies Press. Naumann, G. et al., 2020. Global Warming and Human Impacts of Heat and Cold Extremes in the EU, Luxembourg: Publications Office of the European Union. Neagoe, C., 2016. Romanian Seismic Network. Dubrovnik, Croatia, October 25-28 2016. NIBS, 2019. Natural Hazard Mitigation Saves: 2019 Report, NIBS (National Institute of Building Sciences), Washington, DC: National Institute of Building Sciences. ODI, 2015. Why All Development Finance Should Be Risk-Informed, ODI (Overseas Development Institute), s.l.: s.n. Oke, T., 1982. “The Energetic Basis of the Urban Heat Island.”. Quarterly Journal of the Royal Meteorological Society 108, 455(1-24). References 83 PACE, 2018. Nuclear Safety and Security in Europe, Doc. 14622. September 24, 2018: Committee on Social Affairs, Health and Sustainable Development, PACE (Parliamentary Assembly of the Council of Europe). Paprotny, D., Sebastian, A., O., M.-N. & Jonkman, S. N., 2018. Trends in flood losses in Europe over the past 150 years. Nature Communications, Volume 9 (1985), pp. 1 - 12. Parker, C., Persson, T. & Widmalm, S., 2019. The effectiveness of national and EU-level civil protection systems: evidence from 17 member states. Journal of European Public Policy, Volume 26(9), pp. 1312- 1334. Pasha-Robinson, L., 2016. Mount Vesuvius Eruption Risk: Emergency Plans to Evacuate 700,000 Finalised, October 14, 2016: Independent. Pohoryles, D. A., Madutab, C., Bournasa, D. A. & Kourisa, L. A., 2020. Energy Performance of Existing Residential Buildings in Europe: A Novel Approach Combining Energy with Seismic Retrofitting, Energy and Buildings 223: s.n., Prevention Web, 2020. “Europe - Disaster Statistics.”, s.l.: s.n. Pulwarty, R. S. & Sivakumar, M. V. K., 2014. Information Systems in a Changing Climate: Early Warnings and Drought Risk Management, s.l.: Weather and Climate Extremes 3. Rose, A., 2007. Economic Resilience to Disasters: Multidisciplinary Origins and Contextual Dimensions. Environmental Hazards: Human and Social Dimensions, Volume 4, p. 383–98. Rose, A., 2016. Capturing the Co-benefits of Disaster Risk Management in the Private Sector. In: S. S. & T. Tanner, eds. Realising the ‚Triple Dividend of Resilience‘: A New Business Case for Disaster Risk Management. s.l.:s.n., p. 105–27. Salbego, G., Floris, M., Busnardo, E. & Toaldo, M., 2015a. A Multi-scale Approach to Cost/Benefit Analyses of Landslide Prevention, s.l.: Natural Hazards and Earth System Sciences 3: 1329–55. Salbego, G. et al., 2015b. Detailed and Large-Scale Cost/Benefit Analyses of Landslide Prevention vs. Post- Event Actions, s.l.: Natural Hazards Earth System Sciences 15: 2461–72. SHOPP, 2020. SHOPP COVID PPD Cost Analysis, s.l.: Society for Healthcare Organization Procurement Professionals. Shreve, C. & Kelman, I., 2014. Does Mitigation Save? Reviewing Cost-Benefit Analyses of Disaster Risk Reduction. International Journal of Disaster Risk Reduction, Volume 10(A), p. 213–235. Simpson, A. & Markhvida, M., 2020. Earthquake Risk in Multifamily Residential Buildings: Europe and Central Asia Region, Washington, DC: World Bank. Sturzenegger, L., Hayes, T., Brennan, G. & Holland, M., 2010. Bushfire Safety System.” Abstract presented at the International Association of Wildland Fire on Human Dimensions, San Antonio, Texas, April 27, 2010.: s.n. Sturzenegger, L. & Hayes, T., 2011. Post Black Saturday: Development of a Bushfire Safety System, Australian Institute for Disaster Resilience, s.l.: s.n. Surminski, S., 2020. A new mindset for resilience in the face of concurrent climate and health risks, s.l.: San Antonio, Texas,. Szewczyk, W. et al., 2020. Economic analysis of selected climate impacts JRC PESETA IV project – Task 14, Luxembourg: Publications Office of the European Union. Tanner, T. et al., 2015. The Triple Dividend of Resilience: Realizing Development Goals through the Multiple Benefits of Disaster Risk Management, London and Washington, DC:: Overseas Development Institute and World Bank. The Northern Star, 2012. Roma and Mitchell Hardest Hit by Flood Insurance Claim Costs, s.l.: s.n. References 84 UNEP, 2003. Environment Alert Bulletin. [Online] Available at: https://www.unisdr.org/files/1145_ewheatwave.en.pdf UrbanGreenUp, 2020. Need a Hand With Finding the Right Green Solutions for Your City?, s.l.: s.n. Velinger, J., 2015. More Than 100 Died Due to Fires in the Czech Republic Last Year.” Czech Radio, s.l.: s.n. Weitzman, M. L., 2011. Fat-Tailed Uncertainty in the Economics of Catastrophic Climate Change. Review of Environmental Economics and Policy, Volume 5(2), pp. 275-292. WHO, 2011. Great East Japan Earthquake, s.l.: s.n. Wilson, G., Wilson, T. M., Deligne, N. I. & Cole, J. W., 2014. Volcanic Hazard Impacts to Critical Infrastructure: A Review, s.l.: Journal of Volcanology and Geothermal Research 286: 148–82. Woo, G., 2015. Cost–Benefit Analysis in Volcanic Risk, s.l.: In Volcanic Hazards, Risks and Disasters, edited by John F. Shroder and Paolo Papale, 289–300. Elsevier. World Bank, 2013. World Development Report 2014 : Risk and Opportunity—Managing Risk for Development, Washington, D.C.: World Bank. World Bank, 2016. Discounting Costs and Benefits in Economic Analysis of World Bank Projects, Washington D.C.: World Bank. World Bank, 2018. Converting disaster experience into a safer built environment: the case of Japan, Washington, D.C.: The World Bank. World Bank, 2019. Nature-Based Solutions: A Cost-Effective Approach for Disaster Risk and Water Resource Management, Washington D.C.: World Bank. World Bank, 2020a. COVID-19 and Human Capital.” Europe and Central Asia Economic Update (Fall), Washington, DC: World Bank. doi: 10.1596/978-1-4648-1643-7. World Bank, 2020b. Overlooked: Examining the Impact of Disasters and Climate Shocks on Poverty in the Europe and Central Asia Region, Washington, DC:: World Bank. World Bank, 2020c. Seismic Resilience and Energy Efficiency in Public Buildings Project Information Document, Washington, DC: World Bank. World Bank. 2020d. Analysis of Heat Waves and Urban Heat Island Effects in Central European Cities and Implications for Urban Planning. World Bank, Washington, DC. https://openknowledge.worldbank.org/ handle/10986/34335 World Health Organization, 2020. Chemical Incidents, s.l.: s.n. WSL, 2020. Long-Term Statistics, s.l.: WSL Institute for Snow and Avalanche Research. Xiong, J. & Alegre, E. X., 2019. Climate Resilient Road Assets in Albania, Washington, DC.: World Bank. References 85 7. Annexes 7.1. Annex 1: A step-by-step practitioner report on applying the Triple Dividend BCA This part includes a detailed description of methods counterfactual in addition to the limitation of panel and approaches used at each step of the Triple data were challenges that limited our analysis to more Dividend BCA as well as lessons learned. It can be fact-finding than sophisticated econometric or used as a guide as it outlines many of the practical statistical estimation. Second and third dividends are difficulties that may be faced when undertaking Triple often overlapping, and the possibility of confounding Dividend BCA with limited resources (time, budgets, effects of other unrelated interventions made the data) and with the objective of covering a large number assessment particularly difficult. of investments to review. Existing data and literature allowed us to directly 1) DEFINING THE GOALS AND OBJECTIVES OF THE identify the first dividend (that is, lives saved) of a PROJECT project in most cases, but only in some cases or partly the second and third dividends. Although the third For this particular analysis, the goals and objectives dividend of investments can be multi-faceted, we were described for each investment were the ones described able to quantify only a handful of those benefits. in project documentation for EU and World Bank Therefore, our calculation of BCRs is necessarily a projects. The case studies that were mostly considered lower bound estimate rather than overestimation. for more in-depth analysis were those that had goals Despite the limitations, we were able to identify and objectives closely related to DRR investments. benefits beyond the first dividend often using the best Otherwise, additional objectives of the investments available yet coarse data. were outlined qualitatively and were considered as much as possible in the analysis as co-benefits to 2) LIST ALTERNATIVE PROJECTS ensure that costs considered would be in line with the scope of benefits. Due to the unavailability of data, we mainly focused on a retroactive analysis of investments without using a The overarching goal of each of the projects evaluated DiD approach. A theoretical best practice approach using the triple dividend BCA is disaster risk reduction with a perfect counterfactual was mostly not possible and ultimately building resilience. This can occur in this analysis. However, some analysis was either directly (for example, building dams and EWS) undertaken with theoretical investments so that the or indirectly (for example, school retrofit program). counterfactual could reasonably be assumed, which Examples of disasters include floods, earthquakes, also served as theoretical synthetic controls. heatwaves, wildfires, and storms. Investment in each of these projects is pre-defined, and the consequent Unlike the private sector investment projects, DRM/ objectives and benefits are well perceived. However, DRR projects generally are managed and funded by most of the benefits are often qualitative, and often the public sector and therefore seldom have range between direct financial and indirect societal alternatives. Aimed at maximizing societal benefits, benefits. Under the triple dividend approach, we such investment projects often do not have alternatives, capture and quantify as many of these benefits as meaning that we have to resort to BCA of a given possible using a combination of robust methodologies. project instead of additionally identifying the cost- effectiveness of alternative projects with same goals We identified DiDs as being theoretically the best and objectives (that is, with similar benefits) but with methodology to calculate the benefits of DRM/DRR different benefits. Under this simplified scenario, we investments. However, identifying a suitable only considered specific projects undertaken for Annexes 86 disaster risk reduction in the EU and neighbouring DRR investments (specifically Dividend 1) is based on countries. risk assessments. There are alternative approaches to calculating the direct benefits of DRM when disasters 3) LIST STAKEHOLDERS (THAT IS, BENEFICIARIES) strike outlined below. The report has aimed to model future risk as much as possible as the other options Difficulties were faced in defining the beneficiaries were not considered given lack of data, information that could be reasonably assumed for certain types of and scope of the study. investments with broader potential reach or high positive spillover effects. While all the economic • Modelling future risks. This is the direct approach subsectors are interconnected, separating out the – projecting the future risks will allow us to identify impacts of an investment on all economic subsectors how much damages and losses would have been across different regions requires detailed input-output avoided from DRM investments. data. In the absence of such an ideal set of data and information, we rather took a conservative approach • Existing case studies. Indirect approach. Especially and assumed beneficiaries would be those outlined as case studies conducted by the WB can be useful in direct beneficiaries of intervention. However, some this regard. Assuming all necessary data and notable exceptions were made, for instance for EWS. information are available, we can then extract them to calculate TD and conduct the BCA. Selection of 4) SELECT AND MEASURE ALL COST AND BENEFIT case studies will be a tricky matter – we need a ELEMENTS comparable DRM project for this purpose. Overall, we only included what could be a certain • Past disasters and DRM investments. This is benefit and with sufficient evidence available in order another indirect approach to calculate the first to avoid overestimation. The selection of possible costs dividend. If we have data on past investments, and and benefits was based on a review of literature, also have a DiD set up (that is,, pre- and post-DRM discussion with senior experts, consultations and data from treatment and control regions), then we brainstorming within the team. The major component can calculate the first dividend using DiD of cost comes directly from project documents where econometric method. direct investments are listed. In addition, we also identified other operational costs associated with the Risk analytics supported the estimation of avoided implementation of the said project. Wherever possible, losses and lives saved through comparing impacts we matched costs with each dividend. However, some with and without interventions. The principle was to costs such as direct investments are overlapping assess the lives lost and losses incurred in a case study across dividends and we do not categorize them by location, with and without the intervention being dividends. studied, using a combination of recorded impacts and simulated impacts. For instance, in areas where an In particular, first and third dividends are reasonably engineered structure is expected to have an impact on outlined and quantified. For the first dividend, replicable physical processes (for example, flood economic benefits stem from quantifying the value of protection impact on flood extent), we would propose lives saved due to interventions. On the other hand, to model the effect of that protection adjusting the the third dividend, whenever identified, comes from frequency of flooding using a suitable model (for quantifying the co-benefits of such interventions. example, a disaster risk model). In the case of non- engineered interventions, other exposures or impact However, the literature around the broader economic analysis on a scenario basis were considered, with benefits of DRR investments (second dividend) is less attention to how multiple factors might affect the established. In addition to the common challenges of impact beyond the limits of the intervention itself. attribution and data for management, there were also difficulties in determining the benefits that could be 5) PREDICT OUTCOME OF COSTS AND BENEFITS reasonably considered for disaster risk investments OVER THE RELEVANT TIME PERIOD under the second dividend. For the prediction of costs and benefits over a relevant The basis for the prediction of benefits and costs in time period, two parameters are particularly important Annexes 87 to consider including i) lifespan of infrastructure/ and possible with data available for assessing certain measure considered and ii) valuation of lives saved. investments such as heatwaves. We will also be using QALYs, which is more common and used in BCAs as a In this report, the selection of lifespan varied for various proxy for time spent in hospitals due to heat. types of investments given different lifetimes of infrastructure, also dependent on the type of Alternative approaches or values considered for intervention (retrofitting, building, and so on). The time estimating the value of lives saved were as follows: period used in the economic analysis of projects should reflect reasonable estimates of the full duration • PESETA III report value with a VSL of €1.3 million of costs and benefits associated with the project, per person rather than be capped at 20 years or some arbitrary cut-off date. • OECD VSL US$1.8–5.4 million (median of US$3.6 million) World Bank’s investments in DRM consider that prevention saves lives, so that BCAs associate some • VSL of €400,000 per fatality and €65,000 per injury numerical estimate to the value of life, the so-called as per 2014 European Commission BCA guidelines VSL. The literature (Braathen et al. 2009; David 2000) outlines problems with using VSL for valuation of lives • Adjusting the US VSL US$9.7 million with income saved. In fact, high VSLs tend to bias impacts and risks elasticities (Viscusi and Masterson (2017) values) upwards, leading to leading to overestimation of benefits relative to costs. Moreover, country VSLs are • DALYs that can be used for health impact relative to GDP, so that any analyses focusing at assessments globally but are generally not used as different than country levels would need to consider an economic measure. how to resolve this/what value to apply (such as average/median EU GDP and so on) 6) CONVERT ALL COSTS AND BENEFITS INTO A COMMON CURRENCY After multiple considerations, this report has undertaken a consistent approach to the calculation For comparison purposes, it is important to convert all of the VSL. The choice of valuation of lives saved to costs and benefits into a common currency. Given the estimate the first dividend required an in-depth review regional focus of this analysis, we express all monetary of the literature and approaches of different institutions values in the Euro currency. For this purpose, we use (for example, EC, OECD, and the World Bank) as well the official annual average exchange rates as reported as discussions with the client and advisors to ensure in the World Bank’s World Development Indicators. an approach that would apply methodological best practices, ensure the relevance of estimations to the Since the BCR is unitless but sensitive to currency EU context and ensure least possible controversy over year, we made sure to express both the costs and estimated values. benefits in the same fiscal year. When necessary, we use consumer price index (2010 base year, that is, This report has used country-specific BCAs based on 2010 = 100) for converting monetary values from one an average value for upper income countries year to another. We employ the same strategy for all (considered suitable for EU countries). For non-EU historical monetary data. countries under consideration, we have adjusted the VSL for relative income (that is, the ratio of per capita 7) APPLY THE DISCOUNT RATE GDP of the country of interest to the average per capita GDP in the EU) and income elasticity of VSL (set at 1 Standard economic analysis links social discount rates which is consistent with the suggestion that the income to the long-term growth prospects of the country where elasticity of VSL is slightly above 1 for non-US the project takes place. Higher (lower) growth countries). These values are all based on research by prospects would normally imply a higher (lower) Viscusi and Masterman (2017) for VSL or Chiabai, discount rate for a particular country. Given reasonable Spadaro, and Neumann (2018) for VOLY (Value Of Life parameters for the other variables in the standard Years) approach would be used wherever applicable Ramsey formula linking discount rates to growth rates, Annexes 88 a 3 percent per capita growth rate translates into a 6 where P and F denote present and future values, t percent discount rate, and per capita growth rates of denotes time and τ denotes time difference between 1–5 percent yield discount rates of 2–10 percent present and future. Finally, r denotes the discount rate. (World Bank 2016). In addition, we calculate the net present benefits The literature (Gollier and Hammitt 2014) outlines (NPV) of an investment according to challenges associated with the choice of discount rates. This applies particularly for investments that are mainly addressing future challenges with high uncertainty but substantial negative impacts (Weitzman 2011). It was even argued by some to apply a very low discount rate, or close to zero. Considering NPV is the difference between the present values of the debate whether the discount rate should be zero benefits (B_t) and costs (C_t) from all the future years. for environmental investments, we resort a low value of When all the economic benefits are accounted for, a social discount rate. project is economically/socially beneficial if NPV>0. World Bank financed projects consider that economic Finally, we calculate the ERR which provides the analysis should link social discount rates to long-term estimated rate of return equating the present values of growth prospects of the country where the project benefits and costs. That is, the rate of return at which takes place. Given reasonable parameters for the other the DRM project will be equally beneficial to a market- variables, the standard Ramsey discount rate formula based investment project. This is calculated as is generally used. The discount rate is relative to GDP, so that any analyses focusing at different than country levels would need to consider what value to apply (such as average/median EU GDP and so on). It is noted that the JRC also applies specific discount rates, and it is important to understand differences between 9) PERFORM SENSITIVITY ANALYSIS sectors as DRM investments are cross-sectoral. Regardless of the choice of different parameters, it is This report applies varied discount rates aligned with good practice to provide a sensitivity analysis. This appropriate values for social DRR investments but also analysis is undertaken with respect to model market values. Given the controversy over discount parameters that are based on judgement and expert rates but also the tendency for economists to apply opinions instead of established practices. In this discount rates aligned with market values, the report analysis, since the choice of discount rate is somewhat includes country-specific discount rates ranging from arbitrary, it is important to investigate how sensitive 1.5 percent (which is suggested by the UK treasury for the results of this analysis are to different discount health-related assessments) to 5 percent (which is rates. In particular, we perform sensitivity analysis for consistent with the Imperial College’s suggested 4 the range of discount rates from 1.5 percent to 5 percent discount rate). Specialized discount rates are percent. used for example for environmental investments. Generally, net benefits calculated tend to be quite 8) CALCULATE THE NPV OF THE PROJECT UNDER sensitive to the choice of valuation of lives in particular CONSIDERATION and lifespan (as related to different disaster scenarios). This is also linked to the choice of disaster risk All the projects under consideration have streams of scenarios and therefore these parameters should future benefits. These needs, for the sake of generally always be included in a sensitivity analysis. comparison, to be valued at current prices. That is, we converted all future monetary values to present 10) OUTLINE POTENTIAL EQUITY ISSUES monetary value using the appropriate discount rate. For this purpose, we use the standard formula: It is widely recognized that most DRM projects have positive net benefits, but the concrete distributional effects of such projects are mostly unknown. A known Annexes 89 fact is that the impacts of disasters disproportionately have, positive and negative, in terms of environmental affect poorer households (World Bank 2020a) and it externalities or climate change. Whenever data is would therefore be of crucial importance to assess the missing, these equity, environmental and differential impacts of DRR investments as the value of intergenerational factors could be considered and avoided losses in terms of developmental impacts and addressed through scoring/rating based on qualitative reduced recovery times may differ depending on the analysis. characteristics of individuals or households benefitting from it. However, an investigation into the distributional 11) SUMMARY AND RECOMMENDATIONS effects of DRM investments will require quantile regression analysis based on detailed household level The triple dividend approach to identifying additional survey data, which is not available for our analysis. societal benefits is becoming increasingly popular, especially for environmental project appraisals in Equitable distribution of benefits intrinsically depends recent years. While the multi-faceted benefits were on the capacity of local communities to capitalize on qualitatively justified, this analysis quantifies as many the employment opportunities created in the process of them as possible using the best possible approach. of project implementation. For example, construction In addition to the educational value of this analysis, we of large DRM infrastructures requires labour, who can also identified important caveats in conducting a full- be locally recruited. One potential way of ensuring this scale triple dividend BCA for DRM projects. could be to include local communities in the implementation of the project, either through allocating Available information enabled us to identify the first property rights or through legally binding contracts dividend in all the cases, and the third dividend in most with local authorities. However, such policies might of the cases. However, the complicacy remains around have their own costs and benefits, and require more identifying and quantifying the second dividend. Most focused analysis. of the benefit items under the second dividend may arise from alternative sources, implying that a Moreover, employment opportunities furthered by dedicated investigation with the scope of primary large DRR investments may not be permanent. Local survey is necessary for identifying those benefits, workers with the experience of working in those which is beyond the scope of this analysis. projects will have to seek future employment elsewhere instead of locally. It is possible that experienced While the report has aimed to further as much as workers may not be available locally, which will possible comprehensive analysis, many caveats still complicate the project appraisal even further. remain. In addition to difficulties of estimating more intangible benefits included in the third dividend such Environmental factors should be covered by Triple as environmental benefits or externalities, distributional Dividend 3 considerations. However, those have not impacts in terms of poverty and employment growth been estimated it is worth at least qualitatively could also not be estimated. This will remain as a describing the potential impacts the investment could limitation, and a potential future scope of investigation. Annexes 90 7.2. Annex 2: Overview of case studies reviewed as part of background research COUNTRIES TOTAL VALUE IMPLE- CASE FUNDING TYPE OF HAZARD35 (INCL. CROSS-BORDER TYPES OF INVESTMENTS SECTORS COVERED OF PROJECTS MENTATION STUDIES SOURCES ANALYSIS AND AREAS) (EUR) PERIOD NATURAL HAZARDS Floods 28 United Kingdom, Structural protection (8); Industry, 8.965 billion EU, 2006- Quantitative, Portugal, Spain, Nature based solutions (14); Early Warning, Water, World Bank, 2023 own analysis (3); Greece, Cyprus, Early Warning (5); Property Agriculture, National Partial Poland, Netherlands, Level Protection (1) Housing and public Quantitative / Austria, Croatia, buildings, literature (5); Serbia, Malta, Spain, Water, response & Qualitative (20) Bulgaria, Denmark, equipment, Recreation Belgium, Germany, Italy, Europe Droughts and 6 United Kingdom, Urban Heat Island Effects Housing and public 100.18 million EU, 2013 - Quantitative, extreme heat France, (2); Early Warning (1); buildings; National 2022 own analysis (2); Spain, Portugal, Irrigation and water provision Early warning; Partial Austria system (2); early warning and Water; Agriculture Quantitative / capacity building for literature (1); droughts preparedness (1) Qualitative (3) Earthquake 7 Italy, Romania, Seismic Retrofitting (5); Early Housing and public 59.22 billion EIB, 2015 - Quantitative, Turkey, Albania, Warning (1); Capacity buildings; National, EU, 2025 own analysis (4); Croatia, Europe Building (2) Education; Health; World Bank Partial Early warning; Quantitative / Emergency response; literature (2); Cultural heritage Qualitative (1) Wildfires 10 Czech Republic, Wildland-urban interfaces Emergency response, 149.24 million EU, 2013 - Quantitative, Poland, Spain, (2); Fuel Management for Early warning, National 2022 own analysis (7); Portugal, Greece wildfire prevention (1); Early Forestry Qualitative (3) Warning (3); Cross-border support, coordination mechanisms and capacity building (4) Annexes 91 Mass 6 Switzerland, Croatia, Information System and Agriculture, 20.6 million EU, 2019 - Partial movement / BiH, Montenegro, cooperation mechanism (3); Recreation, National, 2020 Quantitative / landslides/ France, Spain, Resilient Road (1); Landslide Transportation, World Bank literature (1); avalanches Albania, Italy prevention and response Early Warning Qualitative (5) investments (2) Volcanic 2 Italy, Spain Preventive Investment (2) Transport, 55 million EU, 2013 - Qualitative (2) Early warning National 2020 TECHNOLOGICAL HAZARDS AND CROSS-CUTTING Oil spills 1 Estonia Oil Spills Prevention (1) Water, 33 million EU, 2013 Partial Fishery National Quantitative / literature (1) Chemical 1 Latvia Cleaning up hazardous waste Water 29 million EU, 2013 Quantitative, (1) National own analysis (1) Epidemic 2 Italy, United Return on Investment of Health 4.5 billion EU, 2021 Partial Kingdom, Sweden, National Public Health National Quantitative / Netherlands, Europe Program (1); Equipment for literature (2) health-related disasters (1) Nuclear/ 3 Czech Republic, France Security of nuclear power Energy, 24.34 billion EU, 2018 and Qualitive (3) Radiological plant (2); Cleaning up Emergency response & National on-going Uranium (1) equipment, Water All disasters 8 Croatia, Serbia, Rescue and emergency Education, 730.93 million World Bank, 2006 - Partial Romania, Europe and response equipment (1); Transport, EU, 2020 Quantitative / Central Asia, Finland, Early Warning (4); Emergency response, National literature (1); Poland, Italy, Latvia, climate change adaptation Early warning, Qualitative (7) France, Europe and (3) Communication/ICT, Central Asia, Greece, recreation, Malta, Switzerland, houses and public United Kingdom, buildings Hungary Annexes 92 © 2021 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433