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Assessment of the Body of Knowledge on Incorporating Climate Change Adaptation Measures into Transportation Projects

5 Assessing Costs and Benefits of Adaptive Strategies

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Estimates of the costs and benefits of adapting transportation systems to climate change can provide useful input into transportation planning and decision making. At all levels of government, cost estimates can inform understanding of long-term investment needs and support strategic planning. At state and local levels, information on costs and benefits can also facilitate evaluating and choosing among individual adaptive actions/options, or comparing sets of options. Understanding the costs of "no action" can help show when investment in adaptation measures makes financial sense.

In practice, estimating the costs and benefits of adaptive measures can be tricky. Costs of adaptation can be very project- or site-specific. Benefits of adaptation are sometimes associated with a large amount of uncertainty. Although economists have well-developed methodologies for estimating costs and benefits of a variety of actions, cost-benefit analyses are still not always used in developing climate adaptation plans due in part to the challenges of quantifying costs and benefits. However, new methods have recently been tested by some agencies to begin quantifying costs and benefits.

The remainder of this section focuses on these issues from several perspectives, and is organized as follows: (1) an overview of how costs and benefits are defined; (2) a discussion of traditional methods for estimating costs and benefits; (3) example "real-life" efforts to estimate costs and benefits of climate change adaptation in the transportation sector; and (4) best practices moving forward.

5.1 Defining Costs and Benefits of Adaptation

Actions taken to adapt transportation systems to climate change have both costs and benefits. Costs can include increased construction cost associated with designing a bridge to be able to withstand more frequent and intense storms, training costs associated with process or equipment changes, or the increased cost of labor and materials if operation and maintenance activities change or occur more frequently. Costs can also include broader effects (whether positive or negative) on the economy and jobs.

The benefits of adaptation are the adverse impacts that are avoided; the more effective adaptation is, the greater the benefits. Benefits could include savings from avoiding the need to repair/replace assets. Benefits could also include impacts on quality of life from reduced traffic delays, avoided risks to human safety, avoided disruption of the flow of goods, etc.

5.2 Traditional methods for estimating costs and benefits

Methods to estimate costs and benefits have been widely applied in non-climate contexts, including analyses of regulations promulgated by DOTs and the analysis of specific project investments. In some cases these methods have also been tested or applied to climate adaptation planning, particularly for developing countries (see, for example, World Bank 2010). Thus, some resources exist to assist transportation officials in starting to understand the analytical techniques (see text box below). However, applying these methods to estimate the costs of adapting transportation planning to climate change poses challenges. Estimating costs and benefits using these methods can require extremely detailed information on the timing and level of climate impacts on vulnerable resources, the cost and efficacy of individual adaptation options, and an assessment of the extent to which different adaptation options would be applied. Often, this information is just not available to transportation officials. Thus, the appropriate approach to estimating adaptation costs and benefits, and the manner in which the information is used, will depend both on the resources available to the decision maker and the needs of the adaptation planning process.

Resources and Methods to Estimate Benefits and Costs

The following resources provide transportation officials with a starting point in estimating the costs and benefits of adaptation measures:

Transportation Research Board Report: Methodologies to Estimate the Economic Impacts of Disruptions to the Goods Movement System. The report evaluates methods to measure direct and indirect economic impacts of disruptions to the goods movement system, and develops conceptual methodologies to estimate such impacts. Case studies to illustrate the use of the methodologies at different scales and in different contexts.

FEMA Benefit-Cost Analysis Tool. The tool consists of guidelines, methods and software modules for estimating the benefits and costs of mitigation strategies to a range of major natural hazards, including wildfire, floods, hurricanes, and tornadoes.

Economics of Climate Adaptation (ECA). Shaping Climate-Resilient Development: A Framework for Decision Making. This report describes a framework for applying an asset-based Benefit Cost Analysis framework to climate adaptation decision making, and presents case studies applying the framework. The framework identifies steps and challenges in conducting benefit cost analysis for different sectors.

Guidelines for Preparing Economic Analyses.  This guidance from the U.S. Environmental Protection Agency discusses a range of practical issues that arise in estimating costs and benefits in a regulatory context, including determining baselines, choosing discount rates, and dealing with benefits that cannot be quantified.

Economic Analysis Primer. This FHWA document is a brief overview of principles, concepts, and methods for performing economic analyses of highway projects.

5.2.1 Estimating costs: Concepts and methods

Adaptation may involve a variety of activities: investment (replacement or new construction), maintenance and repair, relocation or raising structures, building up land, or other physical measures. As part of these activities, adaptation may require training or education and communication. Adaptation often also involves programmatic activities, such as planning, implementation, enforcement, and monitoring. Each of these activities may have associated costs (see "Categories of Costs" text box below).

Categories of Costs

Direct costs are incurred by the entities taking action, and are the most straightforward to identify and measure.  Costs that fall into this category include capital costs such as equipment or construction costs, training or education costs, changes in fuel, labor, or other materials. Direct costs may also include programmatic costs or the costs of making institutional or regulatory changes.

Adaptation may result in indirect and hidden costs, which can be much more difficult to measure.  Indirect costs include impacts of adaptation on other sectors, or long-term regional or local economic investment and growth (Roson and Tol 2003). Some costs of adaptation may be hidden—or not always apparent. For example, land use changes can have implications for habitats, or closing a road for repairs may impede access to important services, such as hospitals.

Researchers refer to a detailed analysis of adaptation costs as a "bottom-up" analysis. Bottom-up analyses are based on detailed, specific information on vulnerable transportation assets, such as inventories of roads and bridges and their susceptibility to climate events, the costs of specific adaptation measures, and an assessment of where, when, and to what extent such measures will be applied. Because this approach requires considerable data on assets and adaptation options, researchers generally conserve resources by developing categories of assets, and applying assumptions about the extent or cost of adaptation to all assets in a category. This type of approach is taken, for example, in a study of the cost of adapting Alaska infrastructure to climate change (Larsen et al. 2008).

An alternative, much less resource-intensive approach is a "top-down" cost analysis, which may be sufficient for many planning purposes. Top down estimates generally use aggregate level data (e.g., total current expenditures, or miles of road) and then make rough assumptions about how those expenditures will change. For example, a study might assume that a fixed incremental percentage over current expenditures/investment will be needed to climate-proof investments, or assume an incremental cost per unit, e.g., per mile of road. Historical data on past expenditures can be used as the basis for developing these assumptions. Top-down studies can then make aggregate statements about adaptation cost needs. This type of approach was adopted in the state level cost estimates prepared for New York State.

While some of the data needed to estimate adaptation costs already exists to support current transportation planning, it is not always readily available for all relevant climate change effects. A recent study gathered information on the maintenance costs that DOTs are experiencing due to recent extreme weather events (Venner and Zamurs 2012). A survey of state DOTs revealed that data information was often available for flooding and winter storm events, but not from forest fires and wind and dust storms.

5.2.2 Estimating benefits: Concepts and methods

Example Climate-SMART: a Suite of Tools

In partnership with other Canadian government agencies and organizations, the Halifax Regional Municipality is developing a series of tools to support communication impact and adaptation planning (Halifax 2013).  The tools include:

  • Risk management tool, to help assess vulnerability of physical and environmental assets
  • Community-based vulnerability assessment and risk management tool, to evaluate vulnerability for the broader community
  • Cost-Benefit assessment tool, to identify and quantify the economic costs and benefits of adaptation measures
  • Environmental impact assessment tool, to assess environmental impacts of a project
  • Communication and outreach tool, to inform and mobilize vulnerable residents and businesses

The benefits of adaptive actions are the avoided damages (impacts) of climate change. Impacts of climate change on the transportation sector can be wide ranging. Most immediate are the loss or disruption of transportation services and the impacts on health due to changes in safety and accident rates. In turn, interruptions in transportation services can affect access to critical goods and services such as hospitals, gasoline and food. Impacts can extend to the broader business community and economy, by affecting access of businesses and customers to markets and jobs, to name only a few pathways.

Benefits of adaptation are estimated in several stages. First, estimates of the physical changes in impacts (e.g., delays, fatalities) are developed for a specific climate scenario. Next, the reduction in impacts as a result of the adaptation measure must be estimated, often measured using physical metrics such as length of delay, or numbers of fatalities. Last, economists have methods for translating these metrics into monetary measures, such as the value of lost time (both residential and commercial), increases in vehicle operating costs, estimated medical and other costs of accidents, or the costs of fatalities.

Estimates of the benefits of adaptation measures are even rarer than estimates of the costs. In part, this reflects an initial focus by planning agencies on the very tangible damages to transportation assets and the engineering costs of improving the resilience of these assets, or the costs of repairs and rebuilding. Without quantitative estimates of the broader damages (including impacts to health and safety, quality of life, and similar impacts), it is difficult to determine how adaptation will reduce those damages.

At least some of the data to develop impacts estimates already exist at transportation agencies, but may not be generally available or in consistent and comparable forms across agencies. For example, many transportation agencies collect data on streams of services (tons carried or passenger miles traveled), as well as miles of road subject to different types of climate stressors, or the number of delays and cancellations that result from a weather disruption events. SEPTA, for example, has detailed records of the delay minutes and number of cancellations associated with weather events since 2005, which can be used to estimate the potential impacts from an increase in the frequency and/or severity of these events in the future (ICF ongoing).

5.2.3 Putting it together: Benefit- Cost Analysis and other evaluative frameworks

Information on costs and benefits can be integrated in decision making in different ways. The most obvious is to combine them in a benefit-cost analysis, but cost and benefit information can also be used to support decision making as part of a suite of tools (see text box). The types and level of detail of cost and benefit information that is needed will depend on how decisions are made and what framework is typically used. Some approaches to using cost and benefit information include the following.

Benefit cost analysis. Benefit-cost analysis is a process for organizing information on the benefits and costs over time of individual actions, or a set of actions. If benefits exceed costs, then this criterion recommends that an action be adopted (subject to how it fares on other criteria). If benefit-cost analysis is used to compare actions, the criterion says that the action with the highest net benefits is recommended, again, subject to other constraints on the decision and how the actions fare under other criteria. It can also be used to compare portfolios of actions, as well as individual actions.

In the context of climate change, benefit-cost analysis of adaptation options faces several challenges, including data limitations (particularly with regard to quantitative estimates of impacts), the long time frame of the analysis over which climate change, costs, and impacts are difficult to project, and the importance of discount rates in determining the outcome over that long time frame. In addition, while benefit-cost analyses can be conducted when benefits or costs of action are uncertain, the uncertainty of future climate scenarios can make it more difficult to quantify costs and benefits. As part of a suite of tools, however, it can be quite useful, and has been successfully been applied to help rank adaptation options in developing countries by the World Bank, and other organizations (World Bank 2010, Van Logchem and Queface 2012).

Cost-effectiveness analysis. Cost effectiveness analysis compares alternative approaches to meeting a pre-defined goal. For example, where a desired standard of risk can be defined (e.g., protection from a flood with a 1% chance of occurrence in a given year), then the criterion favors the policy alternative that meets the chosen standard at the least cost.

Cost-benefit and cost-effectiveness frameworks are most useful for organizing information in circumstances where there is good information on the probabilities associated with different outcomes, costs and goals or benefits are well-quantified, and making a good decision relies on understanding the tradeoffs involved in choosing in different options. These approaches are not always practical, however; at the least, good information on costs, benefits, or on the probabilities of different outcomes-which is necessary to apply the above approaches-may simply not be available.

Alternatives for weighing multiple criteria. There are a number of alternative frameworks that provide ways to rank or choose among alternatives based on multiple criteria. Many of these alternatives involve decision algorithms that have been developed into decision software. In addition to more formal decision analysis tools, simple weighted matrix approaches can be used to compare and assess alternate options.

In some cases, options to deal with climate change cannot be separated and analyzed as distinct within the decision-making process; for example, if a new road is sited so that it will not be vulnerable to expected increases in flooding, it is difficult to analyze the costs and benefits of the climate adaptation portions of the project separate from other aspects. In other cases, decision makers may face non-climate goals or institutional constraints on the decisions they can make, so that approaches that balance costs with other criteria (e.g., service, safety, environmental goals) are impractical.

Despite their limitations in some circumstances, these frameworks have value for organizing and presenting information to decisions makers. Ultimately, how climate change adaptation can be incorporated into decision-making processes, and the information that will be needed to do so, will depend on the nature of the decision, current decision making processes, viewpoints and technical capacity of decision makers, and institutional and legal constraints on the process.

5.3 Example Efforts to Estimate the Costs and Benefits of Adaptation

Regions, states, and municipalities are beginning to build on the results of vulnerability assessments and take steps to develop adaptation plans to reduce climate impacts. These plans sometimes include estimates of the cost of the plan or explicit estimates of effectiveness or benefits. This section presents an overview of recent efforts by government agencies to evaluate costs and benefits of adaptation.

5.3.1 State, Regional, and Local Estimates of Adaptation Costs and Benefits

When developing climate adaptation plans, some states have undertaken detailed vulnerability assessments and analyses of potential adaptation options. In some cases, adaptation cost information has contributed or been used in support of the development of these plans. In rare cases, measures of benefits have also been developed, and used to construct a measure of cost-effectiveness or to conduct a cost-benefit assessment. For the most part, however, information on costs and benefits has not played a large role in the supporting evidence presented publicly as part of state adaptation plans.

New York State, for example, incorporated information on estimated economic impacts and adaptation costs into the development of its statewide strategy to adapt and respond to climate change (NYSERDA 2011). This study uses available evidence to estimate costs, and then applies a benefit-to-cost ratio derived from empirical data from the past 20 years to estimate the likely benefits of adaptation measures.

Where specific investments or other project-level adaptation decisions are under consideration, and would need either to be financed from local budgets or by grants or other financing, cost-level data is more likely to be reported, as well as to be part of the planning process. For example, cost estimates are often available for a variety of state and local projects that represent climate change adaptation, such as projects to replace sea walls to protect downtown areas, to raise and replace transportation infrastructure, or other actions (Sussman et al. 2013).

5.3.2 The Use of Anecdotal or Historical Evidence

States and localities sometimes employ anecdotal or historical information to make a case for the importance of adaptation, or to suggest the potential magnitude of future adaptation costs. For example, cost estimates at the regional and local levels are available for individual events, such as hurricanes or floods; For example, the New York City Metropolitan Transportation Authority (MTA) reports that it will cost $4.7 billion for the repair and restoration of MTA assets damaged by Hurricane Sandy in October 2012. This is the level of investment necessary to bring facilities and equipment to pre-storm conditions (NYC MTA 2012b). The Vermont Agency of Transportation reports that it will cost $250-300 million to repair the damage to the state transportation system caused by catastrophic flash flooding from Tropical Storm Irene (VTrans 2012).

In some cases, historical estimates have been roughly extrapolated to suggest future costs of climate change. The Southeastern Pennsylvania Transportation Authority (SEPTA) used reimbursement information submitted to FEMA to estimate the cost of a tropical storm or winter snowstorm (Table 3) (ICF ongoing). SEPTA also used weekly labor costs coded as "weather-related" to estimate the agency's labor costs associated with major historical weather events. These costs were then combined with projected changes in the frequency of extreme events (excluding tropical storms)[1] to estimate labor costs in the future. The Chicago Transit Authority (CTA) used a similar approach of collecting information from FEMA claims to assess the costs of heavy precipitation events (Table 4). CTA is also using data from the traction power system (the electricity grid that supplies electrified rail networks) to estimate the increase in electricity use due to extreme heat and associated costs (Peet 2012).

Table 2: SEPTA reimbursement submittals to FEMA for key weather events (ICF ongoing)

Event

Date

Reimbursement total

Hurricane Floyd

Sept. 16-17, 1999

$1,523,196

Tropical Storm Allison

June 16-17, 2001

$5,755,364

Winter Snowstorm

Feb. 5-10, 2010

$1,274,940

Hurricane Irene

Aug. 26-39, 2011

$2,531,683

Tropical Storm Lee

Sept. 3, 2011

$4,235,009

Five Event Total

 

$15,320,191

Average Cost of Tropical Storm/Hurricane

 

$3,511,313

Table 3: CTA costs of selected extreme precipitation events (Peet 2012)

Event

Date

Cost

Flood

Sept. 5-15, 2008

$3,058,145

Blizzard

Jan. 31-Feb. 1, 2011

$670,610

Heavy Rainstorm

Aug. 23-24, 2007

$50,207

Anecdotal information can also provide insight into the potential benefits of adaptation, to the extent that damages from climate events are partially reduced by adaptation. For example, the Washington State DOT assessed economic losses from the closures of highways I-5 and I-90 due to winter storms in 2007-2008. The study surveyed trucking firms and freight-dependent businesses to estimate the direct business losses from the road closures (including losses in business sales, additional freight costs associated with delays or detours, and future disruption prevention costs). It then used an economic model to estimate the indirect and induced economic impacts (such as impacts on employment and state tax receipts). The combined costs amount to approximately $75 million, $37 million of which is direct business losses (TRB 2012). Such damage/loss estimates provide a baseline against which the benefits of adaptation can begin to be assessed.

5.3.3 National level estimates of adaptation costs

At the national scale, only two studies have attempted to quantify adaptation costs in the transportation sector: one study estimates the cost of strengthening bridges vulnerable to climate change, and the other study estimates the cost of maintenance and design changes to maintain the current level of road service. A summary of these estimates is provided in Table 4. These studies suggest that the total cost of adapting roads and bridges could range between about $3 billion and $5 billion annually for the United States as a whole. Neither study estimates benefits of adaptation; both assume that the adaptation measures employed would maintain the current level of infrastructure quality and service.[2]

Table 4: Summary of adaptation cost estimates in US$2010 (Sussman et al. 2013)

Study

Adaptation options

Coverage

Adaptation cost estimates

Wright et al. (2012)

Strengthening vulnerable bridges

Continental U.S.

From 2010 to 2090, cumulative

(undiscounted) costs of proactive

adaptation range from $141,200 million to $196,900 million

Chinowsky et al. (n.d.)

Maintenance and design changes for paved and unpaved roads

Continental U.S.

In 2050, annual adaptation

Cost (undiscounted) for paved and unpaved roads combined could range from $1.6 billion to $2.5 billion

While these two studies have made great strides in expanding our understanding of adaptation costs in the road transportation sector, they present only part of the puzzle. The two studies only examine a subset of possible climate effects, and are limited in terms of the impact categories, adaptation options, and cost categories that they cover. Consequently, adaptation costs could be substantially higher than those reported in these studies. For example, the study of bridges examines increased river flooding and omits other climate effects, such as extreme heat or heavy wind. The two studies also focus on the direct costs of adaptation (capital and operating and maintenance costs), while leaving out less tangible costs such as those associated with the implementation of adaptation measures (e.g., training). On the other hand, both studies focus on a subset of engineering solutions and do not consider adaptation measures such as process changes; to the extent that alternative adaptation options may have lower costs, the studies may overestimate adaptation costs.

5.4 Best Practices for Evaluating Costs and Benefits of Adaptation Actions

This section describes some of the best practices that are emerging across agency efforts to evaluate the costs and benefits of adaptation actions.

5.4.1 Develop an Information Base

Adaptation options range from system-wide to asset-specific, from infrastructure-based to operations, from construction to planning, and more. Given the potential usefulness of benefit and cost data, but the lack of underlying data, an important first step is to develop an information base while at the same time determining decision maker needs for information on cost and benefits of adaptation, and useful forms of decision support.

5.4.2 Improve Access to Existing Data

Historical data on costs and effectiveness of asset repair and replacement and responses to past weather events can provide an indication of future costs. In addition, routine data collected on traffic delays, fatalities, and other measures of transportation services can provide the basis for understanding impacts of extreme events and other trends in impacts. These data can be collected (in many cases state DOTs already do) and used more widely to develop cost and effectiveness estimates for certain types of adaptation options.

5.4.3 Monitor the Costs of Extreme Weather and Document Damages

Transportation agencies are increasingly tracking data on the costs of extreme weather events; in part because understanding these costs is a prerequisite to identifying where larger-scale, higher cost adaptation interventions may be needed, and in part because better data can support estimates of funding or reimbursement needs. Setting up monitoring systems and methods of tracking costs in advance will prepare agencies to make the business case for adaptation in the future. For example, MassDOT is working with maintenance staff to document information on the drainage impacts of heavy rain and storm events in their asset management system, Maximo. As a second example, Iowa DOT has developed a streamlined reimbursement process to help quickly process funding requests following extreme weather events (Choate et al. 2012).

5.4.4 Characterize Decision Making Processes and the Usefulness of Decision Tools

Adaptation options can be evaluated against many criteria, including: feasibility, efficacy, ability to withstand a range of climate stressors, costs, benefits, fit within existing processes, and alignment with other organizational goals. The integration of climate adaptation options into existing transportation plans should recognize whether-and how-these criteria are balanced and the processes by which planning already occurs.

5.4.5 Stakeholder Engagement

Input from those individuals responsible for implementation is a key component of the evaluation process. On-the-ground practitioners know the systems better than anyone, and often have valuable insights on what strategies may work well and which would be more difficult to adopt. Vulnerability assessment efforts in the past (e.g., MassDOT, SEPTA, Caltrans, Oregon DOT, and WSDOT) have successfully solicited input from staff through meetings, interviews, or surveys. Transportation agencies may choose to use a similar approach to evaluate the feasibility, cost, and efficacy of different adaptation strategies under consideration. For example, the Federal Land Management Agency climate change transportation toolbox developed for Southeast region of the United States includes activities for Parks and Refuges to use in a workshop setting to qualitatively evaluate the costs and benefits of adaptation options.

Updated: 03/27/2014
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