Transcript Weather Information Value Chain

Socio-economic Benefits
of Weather Information
Jeffrey K. Lazo
Societal Impacts Program
National Center for Atmospheric Research
Boulder CO
43rd plenary session of CGMS
May 22, 2015
Welcome to Boulder …
Source: https://www.google.com/search?q=picture+of+boulder+colorado&biw=1669&bih=964&tbm=isch&tbo=u&source=univ&sa=X&ei=LhtdVaUAYKqyATN3YG4BA&ved=0CDIQ7Ak#imgrc=FMvYgJz12IuJNM%253A%3B85vnDBWx7QftIM%3Bhttp%253A%252F%252Fkkofirm.com%252Fimages%252Fhome_backgrounds%252Fred_sky_flatirons_boulder.jpg%3Bhttp%253A%252F%252Fkkofirm.c
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Why economics?
• Because economists need jobs too!
• Program evaluation / program justification
• Study of human behavior / decision making
What kind of economics?
• Depends on purpose of the study …
– Back-of-the envelope
– Academic exercise
– OMB Reviewed for program justification
Benchmarking Exercise
US GDP = 16.77 trillion USD (2013)
% average annual reduction in GDP caused by weather Annual
$16.77 trillion x __________ % = __________ USD Weather
Damages
% unmitigated without weather information
_______ USD x __________ % = __________ USD
Value of
Weather
Information
% of wx info benefit attributable to satellites
Value of
_______ USD x __________ % = __________ USD Weather
Satellites
Benchmarking Exercise
US GDP = 16.77 trillion USD (2013)
% average annual reduction in GDP caused by weather
$16.77 trillion x ____0.5____ % = __83.85 B_ USD
% unmitigated without weather information
__83.85 B_ USD x __5.0____ % = ___4.19 B_ USD
% of wx info benefit attributable to satellites
___4.19 B_ USD x ___10.0__ % = __419.25 M_ USD
Conceptual Framework
“Weather Information Value Chain”
• Tell the story of the process of information
creation, dissemination, communication, use, and
value
• Example from USAID/WMO/World Bank SEB book
• My weather information value chain
• DOE Solar Weather Information Value Chain
Weather Information Value
Chain
Components of the Service Production and
Delivery System of NMHSs
Weather Information Value
Chain
Simplified schematic of the met/hydro services “value
chain”
Weather Information Value
Chain
Economic values are the result of a complex process
• Value can be added or lost at each step
• Not a linear process
• Ultimately value of weather information is a function
of the ability of decision makers to receive,
understand, and act on information on uncertain
future events.
Weather Information Value
Chain
National Hydro-Meteorological
Services (e.g., NWS)
Weather
Monitoring
Observation
Modeling
Forecasting
Media /
Broadcasters
Emergency Managers /
Public Officials
Vendors / Private Sector
Meteorology
Dissemination
Communication
Economic Sectors /
Stakeholders
Perception
Interpretation
Information Use
/ Decision
Making
Economic
Values
Weather Information Value
Chain
Key Economic Concepts
• Value of information
• Decision making under uncertainty
• Public goods
Valuation of benefits
• Economics has the methods and theories
• Do not need to develop new methods!
• We don’t have many applications
Overview of economic
valuation methods
Sector Specific / Benchmarking / Expert Elicitation
Non-market valuation techniques
• Stated preference methods
• Revealed preference methods
Economic decision modelling
• Decision analysis
• Equilibrium models
• Econometric models
Avoided cost/damage assessments
• including avoided mortality and morbidity
impacts
Benefits transfer
Some resources
• “Primer on Economics for National Meteorological
and Hydrological Services”
–
http://www.sip.ucar.edu/pdf/Primer_on_Economics_for_NMHS_2009_08_06.pdf
• USAID/WMO/World Bank SEB Book
– European RA IV economics group
• WMO – SERA WG
Valuing Weather and Climate:
Economic Assessment of
Meteorological and Hydrological
Services
Chapter 1: Introduction
Chapter 2: The Production, Delivery and Use of Weather, Climate and
Hydrological Services (Met/hydro services)
Chapter 3: The Purposes of SEB Studies of Met/Hydro Services (Purposes of SEB)
Chapter 4: Designing and Commissioning a SEB (Designing SEB)
Chapter 5: Economic Essentials
Chapter 6: Defining and Measuring Costs (Costs)
Chapter 7: Defining and Measuring Benefits (Benefits)
Chapter 8: Benefit Cost Analysis (BCA)
Chapter 9: Communicating the Results of SEB Studies (Communications)
Chapter 10: Looking Forward
Appendix A: Glossary of Technical Terms
Appendix B: Meteorological, Hydrological and Related Services
Appendix C: A Short History of Studies of Socio-economic benefits of
meteorological and hydrological services
Appendix D: Complementary roles for other social science applications in SEB
Some thoughts on the SETT
Findings from lit review – good stuff!
Arctic Case Study
• Good demonstration of value chain
• Likely to find minimal values
A recommendation
• Case study on values to public
– Primary mission of most NMHS – save lives
– Important to policy makers
– Likely large economic value (largest)
Value of improved
hurricane forecasts and
warnings to households
Value of Improved Hurricane
Warnings
•
•
11 total choice questions for each individual x 804 = 8,844
n for models = 8,733
Calculating Benefit of
Improved Landfall Location
Variable
Landfall location
Est
-0.579
Mean
1.000
Marg.
Benefits
-0.579
Landfall location * Education (years)
0.033
14.534
0.483
Landfall location * House Type (dummy)
0.211
0.573
0.121
Landfall location * Evacuation likelihood with order
0.099
4.128
0.410
Landfall location * House Vulnerable (Alpha Factor
Score)
Landfall location * Cultural Theory - Individualist
0.141
0.000
0.000
-0.166
0.000
0.000
Landfall location * Barriers (Alpha Factor Score)
-0.099
0.000
0.000
Total Utility
0.434
Cost
-0.061
1.000
-0.061
Cost * Income (Thousands)
0.0001
57.799
0.006
Marginal Utility Income -0.055
WTP for improved landfall accuracy
$7.92
Back-of-the-envelope …
Per household
Attribute 5% to satellites
US Households
Annual benefit
$286/yr
$14.30
115,610,216
$1,653,226,088.80
Summary
Weather Information Value Chain
– Making the connection from observations to decision
making is the hard part
– The economic tools and methods are there
– The economic evaluation of improved decisions relatively
straightforward
Recommend
– Literature review of all value of weather information studies
– Case study of value to households
If you think this is important … weather community
will have to fund the work
Thank You!
Jeff Lazo
[email protected]
PO Box 3000, Boulder, CO 80307
Office: 303-497-2857
http://www.weather.com/news/weather-hurricanes/20-amazing-hurricane-images-20130528