Economic impacts on New Zealand of climate change-related extreme events

• 1. Introduction: this project
• 2. Freshwater Flood Cost Assessment Frameworks
• 3. Costs of New Zealand Floods
• 4. Climate Change in New Zealand
• 5. Future research
• 6. References
• Appendix A: The FASTER System
• Appendix B: Cost Data Available for New Zealand Freshwater Floods

Economic impacts on NZ of climate change-related extreme events:
Focus on freshwater floods

Executive Summary

The aim of this project is to provide recommendations on how to better understand the economic impacts in New Zealand of climate change-related extreme events. The project focuses on New Zealand flood events, and presents a framework in which such events may be assessed in terms of economic costs. By comparing the cost of past events with the costs of possible future events occurring under hypothesised climate change scenarios, this work aims to provide the basis for estimating future costs of climate change.

The most comprehensive analysis of New Zealand flood losses was undertaken in 1986 [Ericksen (1986)]. Although nearly two decades old, many of its observations regarding New Zealand flood loss estimation hold true today. The study notes that despite the vulnerability of a large number of New Zealand communities to flooding, flood losses are "poorly documented, with no one agency seeming to have responsibility for them". Little has changed since those words were written.

The present study outlines a framework for estimating New Zealand flood losses, drawing from the 1986 work and similar, more recent, overseas work. Several practical issues with respect to flood loss estimation are identified:

1. The use of depth-damage functions is a desirable long-term framework for national average estimates. However, because of the significant quantity of data (and hence potentially high costs) required in the construction of depth-damage curves, surveying of flood losses will play an important part in gathering cost information, at least in the short term.
2. Flood hazard maps are an important partner to depth-damage curves, allowing identification of specific buildings with a given flood risk. The combination of depth-damage curves and flood hazard maps would be particularly useful for projecting future flood losses under a changing climate.
3. Survey information provides validation of depth-damage relationships, and has the potential to be a key direct source of flood loss information. The consistency of survey methodology, in terms of questionnaire layout, question wording, etc, is a desirable characteristic for ensuring comparability of results between events.
4. Depth-damage curves tend to focus on a single flood action (that is, slow-rising inundation), and thus are likely to be weak in estimating losses from floods characterised by other actions (e.g. high velocity flood waters, waves and surging). Investigation of the typical actions of New Zealand floods would provide the basis for functions that more realistically reflect the damage-causing properties of those floods. It also will not generally be possible to apply overseas depth-damage curves to New Zealand conditions.
5. The most appropriate mix of survey information, depth-damage estimation and economic modelling for a specific event will depend on the size and nature of the event under examination (as well as available resources). The greater the homogeneity of flood-affected buildings, for instance, the more likely it is that modelling techniques can provide realistic flood loss estimates. Indirect losses of small events may be too small to warrant separate estimation. Insurance claim information can be an important data source for flood losses provided adjustment for underinsurance can be made.

Both climatic and non-climatic factors have the potential to affect future flood losses. Thus, modelling of future flood losses should account for both of these factors. Non-climatic factors can be modelled as described above - that is, via use of detailed flood hazard maps (in which urbanisation and land-use changes can be depicted) and depth-damage curves.

Abbreviations used in this report

EQC

(New Zealand) Earthquake Commission

FHRC

Flood Hazard Research Centre, Middlesex University, U.K. http://www.fhrc.mdx.ac.uk

ICNZ

Insurance Council of New Zealand

IPCC

Intergovernmental Panel on Climate Change

GDP

Gross Domestic Product

NZD

New Zealand Dollar

UNFCCC

United Nations Framework Convention on Climate Change

USACE

United States Army Corps of Engineers http://www.usace.army.mil

USD

United States Dollar, On 12 April 2004 1 USD ≈ 1.52 NZD

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