Cost-Benefit Analysis for Flood Risk Management and Water Governance in the Netherlands: An Overview of One Century

Bos, Frits; Zwaneveld, Peter

doi:10.2139/ssrn.3023983

Cited by 18 publications

(25 citation statements)

References 21 publications

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“…The case study, however, suggest that taking uncertainty into account leads to more robust dike designs and would improve the economic efficiency of room for the river options, although benefit‐cost ratios for room for the river are likely to remain below unity. We also note that the conclusion that room for the river is unlikely to be efficient was also reached in earlier studies that used a standard CBA approach, see Ebregt et al () and Bos and Zwaneveld ().…”

Section: Results Of the Ijssel Case Studysupporting

confidence: 78%

“…But ROA also requires a considerable effort, difficult assumptions and a pile of information. Even in the Netherlands, a country internationally highly appreciated for its cost efficient, future oriented and adaptive flood risk management (OECD, ), ROA has never been used to support a real decision on flood risk management (Bos & Zwaneveld, ). Our case study also shows that conducting a flood risk ROA in the Netherlands is difficult, requiring uncertainties to be recognized and quantified, expert opinion and subjective choices.…”

Section: Discussionmentioning

confidence: 99%

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Benefits and Limitations of Real Options Analysis for the Practice of River Flood Risk Management

Kind

Baayen

Botzen

2018

Water Resources Research

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Decisions on long‐lived flood risk management (FRM) investments are complex because the future is uncertain. Flexibility and robustness can be used to deal with future uncertainty. Real options analysis (ROA) provides a welfare‐economics framework to design and evaluate robust and flexible FRM strategies under risk or uncertainty. Although its potential benefits are large, ROA is hardly used in todays' FRM practice. In this paper, we investigate benefits and limitations of a ROA, by applying it to a realistic FRM case study for an entire river branch. We illustrate how ROA identifies optimal short‐term investments and values future options. We develop robust dike investment strategies and value the flexibility offered by additional room for the river measures. We benchmark the results of ROA against those of a standard cost‐benefit analysis and show ROA's potential policy implications. The ROA for a realistic case requires a high level of geographical detail, a large ensemble of scenarios, and the inclusion of stakeholders' preferences. We found several limitations of applying the ROA. It is complex. In particular, relevant sources of uncertainty need to be recognized, quantified, integrated, and discretized in scenarios, requiring subjective choices and expert judgment. Decision trees have to be generated and stakeholders' preferences have to be translated into decision rules. On basis of this study, we give general recommendations to use high discharge scenarios for the design of measures with high fixed costs and few alternatives. Lower scenarios may be used when alternatives offer future flexibility.

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Section: Results Of the Ijssel Case Studysupporting

confidence: 78%

Section: Discussionmentioning

confidence: 99%

Benefits and Limitations of Real Options Analysis for the Practice of River Flood Risk Management

Kind

Baayen

Botzen

2018

Water Resources Research

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“…One professor served as chairman, the Ministry of Finance and CPB provided the secretaries and CPB provided also research support. An overview on cost-benefit analysis in the Netherlands is provided by Bos and Zwaneveld (2017). On the role of cost-benefit analysis in the Dutch fiscal framework, see Bos (2008and Bos and Teulings (2012.…”

Section: Introductionmentioning

confidence: 99%

Should CBA's Include a Correction for the Marginal Excess Burden of Taxation?

2018

Self Cite

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According to economic theory, taxation drives a wedge between private and public benefits, which distorts labour supply, consumption and investment and leads to loss of welfare. One would therefore expect that in cost-benefit analysis (CBA) of public expenditure a correction is made for the costs of taxation, i.e. for the marginal excess burden of taxation (MEB). However, looking at CBA practice all over the world, textbooks on CBA and various specific CBA guidelines no consensus exists about such a correction. This paper provides for the first time an overview of the theoretical, empirical and practical arguments in favor or against a MEB correction. It argues that in general the best approach for CBA's is to assume that the MEB is broadly counterbalanced by the benefits of redistribution of these taxes. This assumption is consistent with the preferences for equality in a country's current tax system and is a simple, pragmatic and politically neutral assumption. This assumption does not imply that the tax system is optimal or that CBA's should be distributionally weighted. As a consequence, the preferred approach is to assume in general that the marginal cost of public funds is equal to one and then no correction is needed in CBAs for the MEB. Choosing an alternative source of financing, i.e. other than general tax revenues, should be regarded as a separate policy measure that should be analysed separately in a CBA.

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“…Costbenefit analysis (CBA) is widely used to evaluate the economic desirability of a DRR project (Jonkman et al 2004;Mechler 2016;Price 2018). CBA helps decision-makers in evaluating the efficacy of different adaptation options (Kind 2014;Bos and Zwaneveld 2017).…”

mentioning

confidence: 99%

Cost-benefit analysis of coastal flood defence measures in the North Adriatic Sea

Amadio¹,

Essenfelder²,

Bagli³

et al. 2021

Preprint

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Abstract. The combined effect of global sea level rise and local subsidence phenomena poses a major threat to coastal settlements. Flooding events are expected to grow in frequency and magnitude, increasing the potential economic losses and costs of adaptation. In Italy, a large share of the population and economic activities are located along the coast of the peninsula, although risk of inundation is not uniformly distributed. The low-lying coastal plain of Northeast Italy is the most sensitive to relative sea level changes. Over the last half a century, the entire north-eastern Italian coast has experienced a significant rise in relative sea level, the main component of which was land subsidence. In the forthcoming decades, sea level rise is expected to become the first driver of coastal inundation hazard. We propose an assessment of flood hazard and risk linked with extreme sea level scenarios, both under historical conditions and sea level rise projections at 2050 and 2100. We run a hydrodynamic inundation model on two pilot sites located in the North Adriatic Sea along the Emilia-Romagna coast: Rimini and Cesenatico. Here, we compare alternative risk scenarios accounting for the effect of planned and hypothetical seaside renovation projects against the historical baseline. We apply a flood damage model developed for Italy to estimate the potential economic damage linked to flood scenarios and we calculate the change in expected annual damage according to changes in the relative sea level. Finally, damage reduction benefits are evaluated by means of cost-benefit analysis. Results suggest an overall profitability of the investigated projects over time, with increasing benefits due to increased probability of intense flooding in the next future.

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Cost-Benefit Analysis for Flood Risk Management and Water Governance in the Netherlands: An Overview of One Century

Cited by 18 publications

References 21 publications

Benefits and Limitations of Real Options Analysis for the Practice of River Flood Risk Management

Benefits and Limitations of Real Options Analysis for the Practice of River Flood Risk Management

Should CBA's Include a Correction for the Marginal Excess Burden of Taxation?

Cost-benefit analysis of coastal flood defence measures in the North Adriatic Sea

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