cost benefit analysis lessons from practice: towards climate change resilient cities fawad khan...
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Cost Benefit Analysis
Lessons from Practice: Towards Climate Change
Resilient CitiesFawad Khan
Senior Associate, ISET
World Urban ForumRio de Janeiro, Brazil
23 March 2010
Overview
• CBA of Climate Resilience
• How to do a CBA– Qualitative – Quantitative
• Issues and learning
Risk and Potential Impacts
Risk
Economic
Social
Macroeconomice.g. loss of GDP
Direct
Loss of assets
Indirect
e.g. business interruption
Environmental
Hazard
Vulnerability
• Elements exposed
• Fragility
Loss of lifePopulation affected
eg. Loss of habitats
e.g.increase in diseasesDisaster
Event
eg. effect on biodiversity
CBA
Integrated flood protection in Semarang, Indonesia
City subject to seaside inundation due to land subsidence and riverine flooding in rainy season Land subsidence caused by (illegal) groundwater extraction
Elevation in 2003
Elevation in 2013 (scenario)
Costs and Benefits of the proposed Resilience Actions in Semarang City
Proposed Resilience
ActionsCOSTS BENEFITS
Economic Social Environmental
Other Economic Social Environmental
Other
Check dam Land acquisition
Landholder resistency
Risk of water distribution
Create little impact to
environment
Provide new livelihood in
fisheries sector
Provide water stock in drought
seasson
Create new ecosystem
Polder system High OM
prevent accessibilit
y to sea
Encroachment
Increase tension in
areas with no polder system
Coastal ecosystem
degradation
Support economic
activity of the regions
Provide public space
for city
Reduce impact of Sea
Level Rise
Credits Unpaid credits
Community burden to pay monthly pay (physicologic
al stress)
Economic productivity
Reduce loss of asset
Increase health and amenity
Index Ranking of Benefits and Costs Rank from 1 to 10, with 10 being the highest cost or best benefit AND 1 being the lowest cost or least
benefit
Proposed Resilience
ActionCOSTS BENEFITS
B/C Ratio Compariso
n
Economic Social Env’t OtherTOTAL
CEconomic Social Env’t Other
TOTAL
B
17 6 2 14 6 7 7 20 1.40
28 8 5 21 9 6 9 24 1.14
3.5 3 0 8 4 6 0 10 1.25
.
Quantitative Methodology
+inventory of assets
Methodology
+inventory of assets
Methodology
+inventory of assets
Quantitative Methodology
+inventory of assets
Structural Measures
Loss-Frequency Curve
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40
Cumulative Frequency
Lo
ss
(m
illio
ns
PK
R)
Current Conditions
Planned Highway
Best Estimate and Sensitivity Analysis
Best estimate No exposure
increase No subsidence
increase
No exposure and subsidence
increase NPV (million Rupiah) 369 296 330 257
C/B ratio 2.3 2.0 2.2 1.9 IRR 23% 19% 21% 18%
Qualitative vs. Quantitative
• Wrong Question!
• Data limitation vs. reality check
• Distributional vs. financial feasibility
• Qualitative for range of choices
• Quantitative for financing/investing
• Multi-criteria analysis
Multi-criteria Analysis
THANK YOU
For more Information on CBA:
www.I-s-e-t.org