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Special lecture: Economic Special lecture: Economic aspects of disastersaspects of disasters
Ricardo Zapata-MartiRicardo Zapata-MartiRegional AdvisorRegional Advisor
Focal Point for Disaster Evaluation, ECLACFocal Point for Disaster Evaluation, ECLAC
Task Force for Emergency Preparedness Task Force for Emergency Preparedness Second Emergency Management CEO Second Emergency Management CEO
SeminarSeminarAugust 12-14August 12-14
Lima, Perú Lima, Perú
The bottom lineThe bottom line• Experience over the recent years both in Latin America and Southeast Asia Experience over the recent years both in Latin America and Southeast Asia
supports the notion that supports the notion that a comprehensive socioeconomic and a comprehensive socioeconomic and environmental assessment of disasters leads to a profiling of environmental assessment of disasters leads to a profiling of disastersdisasters that enables the formulation of reconstruction of affected that enables the formulation of reconstruction of affected infrastructures (including the protection of critical infrastructures, with infrastructures (including the protection of critical infrastructures, with particular reference to public security in sectors such as health, water and particular reference to public security in sectors such as health, water and sanitation, food security, energy, etc.).sanitation, food security, energy, etc.).
• A comprehensive analysis of damage (physical destruction of assets in all A comprehensive analysis of damage (physical destruction of assets in all sectors of a society, community or economy valued at replacement costs) and sectors of a society, community or economy valued at replacement costs) and losses (income lost, production not realized, employment reduction, budget losses (income lost, production not realized, employment reduction, budget deficits associated wih post-event emergency and recovery expenditures and deficits associated wih post-event emergency and recovery expenditures and tax revenue losses incurred) allows tax revenue losses incurred) allows – a perspective on cross-cutting themes such as gender and disasters, ethics a perspective on cross-cutting themes such as gender and disasters, ethics
in risk management, environmental risk and the issues of governance, in risk management, environmental risk and the issues of governance, – risk dialogue and consensus building based on assessments, and the risk dialogue and consensus building based on assessments, and the
mobilisation of resources for risk reductionmobilisation of resources for risk reduction
International International standards orstandards orDevelopment Development goalsgoals(such as MDGs)(such as MDGs)
Recovery Recovery ObjectivesObjectives
Post disaster Post disaster situationsituation
An additional deficit is created An additional deficit is created from the pre-existing gap from the pre-existing gap between the prevalent between the prevalent situation vis-à-vis the situation vis-à-vis the development goals and the development goals and the emerging recovery objectives.emerging recovery objectives.
NewNewGapGap
1
10
100
Past CurrentIn the medium term In the long termAS ALTERED BY DISASTERS
HUMANHUMAN
Health Health EducationEducationLivelihoodsLivelihoodsHousing and shelterHousing and shelterCultural identityCultural identity
NATURE / ENVIRONMENTNATURE / ENVIRONMENT
Clean water, wage disposal and Clean water, wage disposal and sanitationsanitation
Clean airClean air
Biodiversity and integrity of Biodiversity and integrity of ecosystemsecosystems
Climate variability and changeClimate variability and change
PHYSICAL INFRASTRUCTUREPHYSICAL INFRASTRUCTURE
Quality and resilience of Quality and resilience of human built environment human built environment
(settlements and rural/urban (settlements and rural/urban planning) planning)
Transport and Transport and communications, energy and communications, energy and
other basic lifelinesother basic lifelines
Productive infrastructureProductive infrastructure
Other built infrastructure Other built infrastructure (public services, government (public services, government
buildings)buildings)
SOCIALSOCIAL
Social capital and social Social capital and social networks (solidarity and networks (solidarity and
equity) equity)
Family ties, gender Family ties, gender perspective and extended perspective and extended family networks and linksfamily networks and links
Violence, security and rightsViolence, security and rights
POLITICALPOLITICALGovernanceGovernanceTransparencyTransparency
Participation, inclusion and Participation, inclusion and political rightspolitical rights
Access to informationAccess to information
FINANCIALFINANCIALAccess to creditAccess to credit
Land tenure, legal rightsLand tenure, legal rightsCompensatory mechanisms and fundsCompensatory mechanisms and funds
Insurance and financial protectionInsurance and financial protection
Risk management and Risk management and adaptationadaptation
Damage and costsDamage and costs
HAZARDSHAZARDSBaselineBaseline
modified modified by by
variabilityvariability and and
changechange
RISKRISKMulti stressesMulti stresses
More severely affectedMore severely affected by vulnerability by vulnerability but aggravatedbut aggravated
by changesby changes in hazardsin hazards patternspatterns
MANAGEMENT, MANAGEMENT, TRANSFER ANDTRANSFER AND
REDUCTIONREDUCTION
MITIGATIONMITIGATION
ADAPTATIONADAPTATION
EVOLUTIONEVOLUTIONRESILIENCERESILIENCE
VULNERABILITYVULNERABILITYDiverse, localDiverse, local
Sector specificSector specific
Socioeconomic Socioeconomic development pathsdevelopment paths
Economic growthEconomic growthTechnologyTechnologyPopulationPopulation
GovernanceGovernance
An integrated framework, a systemic An integrated framework, a systemic perspectiveperspective
EMISSIONS AND EMISSIONS AND CONCENTRATIONSCONCENTRATIONS
Greenhouse gasesGreenhouse gasesPollution (air, Pollution (air,
water, soil, sea)water, soil, sea)
CLIMATE CHANGECLIMATE CHANGETemperature riseTemperature rise
Sea level riseSea level risePrecipitation changePrecipitation changeDroughts and floodsDroughts and floods
IMPACTS ON NATURAL IMPACTS ON NATURAL NAD HUMAN SYSTEMSNAD HUMAN SYSTEMSFood and water resourcesFood and water resources
Ecosystems and Ecosystems and biodiversitybiodiversity
Human settlements Human settlements Human healthHuman health
Unwanted evolutionUnwanted evolutionAdaptation
and Mitigation
AdaptationAdaptation
Current Current paradigmparadigm
Reasons for the increase in natural Reasons for the increase in natural catastrophes and natural catastrophes and natural
catastrophe lossescatastrophe losses• Global population growth (exponential development); in 1800, for Global population growth (exponential development); in 1800, for
example, there were one billion people living on the earth, today there example, there were one billion people living on the earth, today there are 6.3 billion. are 6.3 billion.
• The rising standard of living in nearly all countries of the world The rising standard of living in nearly all countries of the world produces growing accumulations of wealth which are hit in the event produces growing accumulations of wealth which are hit in the event of a catastrophe. of a catastrophe.
• Concentration of population and values in conurbations: the Concentration of population and values in conurbations: the emergence of numerous mega cities - even in exposed regions (e.g. emergence of numerous mega cities - even in exposed regions (e.g. Tokyo: 30 million inhabitants) Tokyo: 30 million inhabitants)
• Settlement and industrialisation of very exposed regions, especially Settlement and industrialisation of very exposed regions, especially coasts and river basins, tourism in danger zones, e.g. Florida coasts and river basins, tourism in danger zones, e.g. Florida
• Vulnerability of modern societies and technologies, structural Vulnerability of modern societies and technologies, structural engineering, devices and equipment, networks; problems involving engineering, devices and equipment, networks; problems involving suppliers too suppliers too
• Increasing insurance penetration throughout the world, i.e. the Increasing insurance penetration throughout the world, i.e. the proportion of insured goods is mounting globally. Consequently, proportion of insured goods is mounting globally. Consequently, insured losses are escalating even faster. insured losses are escalating even faster.
• Global changes in environmental conditions, climate change, water Global changes in environmental conditions, climate change, water scarcity, loss of biodiversityscarcity, loss of biodiversity
0
500
1000
1500
2000
2500
3000
1900-09
1910-19
1920-29
1930-39
1940-49
1950-59
1960-69
1970-79
1980-89
1990-99
2000-2005
Number of events recorded
Historical distribution of disasters, by origin
Hydrometeorological Geological Biological
TOTAL AMOUNT OF ECONOMIC DAMAGE BY REGIONS
Americas36.1%
Asia48.4%
Europe13.3%
Oceania1.3% Africa
0.8%
0.00
100.00
200.00
300.00
400.00
500.00
600.00
Africa Americas Asia Europe Oceania
Hydrometeorological Geological Biological
ECLAC´s disaster assessments ECLAC´s disaster assessments over the yearsover the years
PeriodPeriod AFFECTED POULATIONAFFECTED POULATION TOTAL DAMAGE TOTAL DAMAGE AND LOSSESAND LOSSES
DeathsDeaths Primary Primary affected affected
population population
(millions of US (millions of US dollars, at 2004 dollars, at 2004
value)value)
1972-19801972-1980 38,04238,042 4,229,2604,229,260 78,08578,085
1980-19901980-1990 34,20234,202 5,442,5005,442,500 101,251101,251
1990-19991990-1999 32,64832,648 2,518,5082,518,508 31,36731,367
2000-2010 2000-2010 (estimated)(estimated)
18,03218,032 35,478,47035,478,470 50,05050,050
1972-20051972-2005 122,924122,924 47,668,73847,668,738 260,753260,753
Yearly averageYearly average 3,7253,725 1,444,5071,444,507 7,9027,902
Of which of Of which of meteorological meteorological
or climatic or climatic naturenature
50,06750,067 22,929,19822,929,198 127,923127,923
Source: ECLAC led assessments since 1973Source: ECLAC led assessments since 1973
Total insurance growth, penetration and density by region
Appropriation of risk needed to Appropriation of risk needed to promote risk reduction:promote risk reduction:
• Need for institutional and regulatory Need for institutional and regulatory changeschanges
• Use of market to value (“price”) riskUse of market to value (“price”) risk• Need for social policies for Need for social policies for
compensation and promotion (provide compensation and promotion (provide gender, age, ethnic sensitive gender, age, ethnic sensitive instruments) instruments)
• See risk reduction as a business See risk reduction as a business opportunityopportunity
Imperfect or inactive markets require Imperfect or inactive markets require government action / interventiongovernment action / intervention
LEVEL OF DISASTER IMPACTLEVEL OF DISASTER IMPACT• Indicates coping and adapative capacityIndicates coping and adapative capacity
110
1001000
10000100000
100000010000000
1000000001000000000
10000000000100000000000
100-500
50-100 25-500 10-25 5-10 1-5
Amount of macro impactProbabilityPotencial (Amount of macro impact)
Risk to be covered (financial gap)Risk to be covered (financial gap)
““Acceptable risk”Acceptable risk”
Excedence (residual or excedent risk)Excedence (residual or excedent risk)
ESTABLISHING RISK FINANCING NEEDSESTABLISHING RISK FINANCING NEEDS
Probability or return periodProbability or return period Risk typeRisk type
Resource Resource gapgap
Reserve fundsReserve funds
2-3 years2-3 years
20-30 years20-30 years
50-200 years50-200 years
Recurrent multi-Recurrent multi-hazard riskshazard risks
Catastrophic risksCatastrophic risks
Parametric Parametric coveragecoverage
Contingency Contingency fundsfunds
Budget constraintBudget constraint
CATCAT bondsbonds
Policy implicationsPolicy implications
• Exposure to disaster risks is not unlike Exposure to disaster risks is not unlike exposure to other risks (financial, exposure to other risks (financial, commercial, social, political)commercial, social, political)
• Exposure to risk has a positive correlation Exposure to risk has a positive correlation with poverty: disasters impacts are not with poverty: disasters impacts are not distributed homogeneously neither in distributed homogeneously neither in location nor in impactlocation nor in impact
• Social impact is regressive: direct linkage Social impact is regressive: direct linkage between vulnerability and poverty, between vulnerability and poverty, vulnerability and marginalization, vulnerability and marginalization, vulnerability and gender or ethnicityvulnerability and gender or ethnicity
Appropriation to promote Appropriation to promote reduction of risk reduction of risk
(in the face of extreme events and (in the face of extreme events and climate change)climate change)
– Need for regulatory and Need for regulatory and institutional changesinstitutional changes
– Markets as clearing houses to price Markets as clearing houses to price risk (beyond insurance)risk (beyond insurance)
– Need for social policies for Need for social policies for compensation, promotion and compensation, promotion and solidaritysolidarity
– Risk management is an Risk management is an investment / business opportunityinvestment / business opportunity
• Imperfect markets require Imperfect markets require governmental interventiongovernmental intervention
The role of ECLAC – in respect of The role of ECLAC – in respect of disaster assessment and risk reductiondisaster assessment and risk reduction
• In response to its member countries, has over 35 In response to its member countries, has over 35 years assessed disasters’ socioeconomic impactyears assessed disasters’ socioeconomic impact
• Developed a methodological tool for damage and loss Developed a methodological tool for damage and loss assessment (DALA), now recognized as the assessment (DALA), now recognized as the international standard for post-disaster assessmentinternational standard for post-disaster assessment
• Has accumulated quantitative evidence that allows for Has accumulated quantitative evidence that allows for economic analysis of risk, which may be extrapolated economic analysis of risk, which may be extrapolated for disaster’s future impact and could be used to for disaster’s future impact and could be used to quantify partially the socioeconomic implications of quantify partially the socioeconomic implications of climate change and approach the valuation of climate change and approach the valuation of adaptation costsadaptation costs
• Has increased national capabilities and contributed to Has increased national capabilities and contributed to policy changes in Latin America and the Caribbean policy changes in Latin America and the Caribbean and in other regions, namely South East Asia in and in other regions, namely South East Asia in cooperation with ESCAP and the World Bank’s cooperation with ESCAP and the World Bank’s GFDRRGFDRR
Thank you!Thank you!
http://www.eclac.org/ http://www.eclac.org/ http://gfdrr.org/ http://gfdrr.org/
http://www.proventionconsortium.org/http://www.proventionconsortium.org/http://groups.google.com/group/pdna-for-recoveryhttp://groups.google.com/group/pdna-for-recovery
http://www.recoveryplatform.org http://www.recoveryplatform.org http://www.undp.org/cpr/iaschttp://www.undp.org/cpr/iasc