Investing in Disaster Risk Management in an Uncertain Climate

Abstract

Climate change will exacerbate the challenges associated with weather variability and extremes in developing countries. As such, it reinforces the development case for investment in disaster risk management (DRM). Uncertainty about how climate change will affect particular locations makes optimal investment planning more difficult. In particular, our inability to derive meaningful probabilities from climate models limits the usefulness of standard project evaluation techniques such as cost-benefit analysis, that attempt to optimise risk-return trade-offs. This chapter offers a simple decision framework that enables policy-makers to identify the particular circumstances under which uncertainty about future climate change becomes critical for DRM investment decisions. Accounting for climate uncertainty is likely to shift the optimal balance of DRM strategies towards more flexible, low-regret-type interventions, especially those that promote 'development-first' or 'risk-coping' objectives. Such investments are likely to confer additional development dividends, regardless of the climate future in a given location. The analysis also demonstrates that climate uncertainty does not necessarily motivate a "wait and see" approach. Instead, where opportunities exist to avail of adaptation co-benefits-for example where DRM initiatives could help avoid locking in future exposure to climate risk-climate uncertainty provides additional motivation for early investment in DRM.