An assessment of the potential impact of climate change on flood risk in Mumbai

Abstract

Managing risks from extreme events will be a crucial component of climate change adaptation. In this study, we demonstrate an approach to assess future risks and quantify the benefits of adaptation options at a city-scale, with application to flood risk in Mumbai. In 2005, Mumbai experienced unprecedented flooding, causing direct economic damages estimated at almost two billion USD and 500 fatalities. scenario could see the likelihood of a 2005-like event more than double. We estimate that total losses (direct plus indirect) associated with a 1-in-100 year event could triple compared with current situation (to $690-$1,890 million USD), due to climate change alone. Continued rapid urbanisation could further increase the risk level. The analysis also demonstrates that adaptation could significantly reduce future losses; for example, estimates suggest that by improving the drainage system in Mumbai, losses associated with a 1-in-100 year flood event today could be reduced by as much as 70%. We show that assessing the indirect costs of extreme events is an important component of an adaptation assessment, both in ensuring the analysis captures the full economic benefits of adaptation and also identifying options that can help to manage indirect risks of disasters. For example, we show that by extending insurance to 100% penetration, the indirect effects of flooding could be almost halved. We conclude that, while this study explores only the upper-bound climate scenario, the risk-assessment core demonstrated in this study could form an important quantitative tool in developing city-scale adaptation strategies. We provide a discussion of sources of uncertainty and risk-based tools could be linked with decision-making approaches to inform adaptation plans that are robust to climate change.

Flood insurance schemes and climate adaptation in developing countries

“…In its most basic form insurance is a mechanism where risks or part of a risk are transferred from the insured to the insurer in return for a premium payment. This reduction in uncertainty is widely seen as an important mechanism driving our economic systems: without insurance many activities and processes would be deemed too risky and would not be undertaken, and those affected by a loss might struggle to recover [14]. The main aim of this financial risk transfer is the compensation for damages and funding of recovery efforts, but it is widely understood that the role of insurance can go further: if correctly designed and implemented insurance can foster prevention efforts, thus leading to an overall reduction of physical risks 1 .…”

“…Suarez and Linnerooth -Bayer [27] summarize the potential links between risk financing (including insurance) and risk reduction for developing countries, illustrating the wide range of ways in which insurance can influence behavior and physical risk reduction: either in a moral hazard context, where insurance can lead to a more risky behavior, or as an incentive, where insurance can trigger risk reduction investments, or the implementation of prevention measures and improved building standards. The key message emerging from this literature is that the design and implementation of a risk transfer scheme will determine the promotion of risk reduction and the level or moral hazard [14].…”

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“…Climate of Mumbai is predominantly hot and humid. Average recorded ambient air temperature in this region varies from 25 to 42 degree Celsius, (Ranger et al, 2011) whereas relative humidity ranges from 54.5% to 85.5% (MPCB, 2005). Mumbai receives rains due to south-west monsoon during the months of June to September.…”

“…Average annual rainfall in this are aranges between 1500 -2000 mm. (Gupta, 2005;Ranger et al, 2011).…”

Regional economic impacts of natural hazards – the case of the 2005 Alpine flood event in Tyrol (Austria)

“…Hallegatte et al (2010) as well as Ranger et al (2011) use the Adaptive Regional InputOutput (ARIO) model provided by Hallegatte (2008) to assess the economic effects of climate change. Rose and Liao (2005) focus on business resilience of water supply disruptions using a CGE model in the aftermath of a fictitious earthquake in the US to analyse the regional economic impacts for different economic sectors.…”