Benefits and Costs of Seismic Mitigation CREW Benefit-Cost Analysis Forum Portland State University January 19th, 2011 Bryce Ward, Ph.D. Ed MacMullan
Jan 13, 2016
Benefits and Costs of Seismic Mitigation
CREW Benefit-Cost Analysis ForumPortland State University
January 19th, 2011
Bryce Ward, Ph.D. Ed MacMullan
Overview
Part I : Intro To Benefit-Cost Analysis
(BCA)
How many feel about BCA
The problem
Mitigation activities are good!
Resources are limited.
How do we decide what to do?
Benefit-Cost Analysis
Photo credits: Getty Images
Simple Illustration
Today Tomorrow A
B
Costs minus $X
Benefits minus $Y
BCA Rule #1: Define Fair Alternatives
BCA Rule #2: Establish Point of View
» If we compare world with mitigation to world without …
• Who might be affected?
• Which of these people do we care about?
Photo credits: Getty Images
BCA Rule #3: Establish a Decision Rule
» At the end of the analysis, how will we decide?
• $ value of benefits > $ value of costs?
• Does distribution of benefits and costs matter?
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BCA Rule #4: Describe Costs
Costs minus $X
»Costs = opportunity costs = what else would we have done with the resources spent on mitigation.
»Don’t leave anyone out.
BCA Rule #5: Describe Benefits
Benefits minus $Y
»Benefits = Willingness-To-Pay
»Don’t leave anyone out
BCA Rule #6: Establish Timing and Select Discount Rate
When will we incur benefits and costs?
How should we value dollars gained/lost at different points in the future?
BCA Rule #7: Describe Uncertainty
» We don’t know when earthquake will occur.
» We don’t know how large it will be.
» We don’t know exactly who will be affected.
Photo credits: Getty Images
BCA Rule #8: Conduct Sensitivity Analysis
» BCA typically built on lots of assumptions
» BCA of earthquake mitigation rely on more.
• What are people WTP for mitigation?
• What will actually occur and when?
» How might results change if we employ different assumptions.
BCA Rule #9: Don’t Commit Common Mistakes
» Don’t count transfers as benefits or costs!
» Jobs created by mitigation project are costs not benefits!
» Don’t double count!
Photo credits: Getty Images
Part II : Economic Benefits of Seismic
Mitigation
Set Up
» Earthquake Happens
» But We’ve Mitigated
» Examples of Economic Benefits of Mitigation
» How Do We Measure These Benefits?
Photo credit: Getty Images
Who Benefits
» Benefits from Whose Perspective?
» Step Back
» Portland-Area Economy
Photo credits: Flikr, neighborhood notes pdx & kencf0618 | WikiCommons
Benefit Examples
»The Port of Portland
»School Building
»A Large Manufacturing Facility
Photo credits: Getty Images
Port Example
»Port Buildings and Infrastructure »What’s The Stream Of Affected Economic Benefits?
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School Example
»School Buildings»What’s The Stream Of Affected Economic Benefits?
Photo credits: Getty Images
Manufacturing Example
»Manufacturing Facility
»What’s The Stream Of Affected Economic Benefits?
Photo credits: Getty Images
Regional Economy
» Earthquakes and Short-Term Economic Growth
» Economic Forces and Trends
» Economic Resiliency
» Taint Effect
» “Lifeline” Infrastructure
Discussion Points
» Economic Benefits In FEMA’s B-C Analysis for Mitigation Grants
» Building-Specific Focus vs. Local or Regional Economy Focus
» Transportation, Electricity, and Other “Lifeline” Utilities
» Account for Benefits of Mitigating Harm To Ecosystem Services