To Örebro University

Disaster risk management is an example of a public good where political decisions determine the content and extent of the services provided. For the policy maker the question is how much to spend on these services since resources are limited. The question addressed in this report is how economic analysis, including cost-benefit analysis, can be used in order to achieve an efficient level of these services.

The report is commissioned by the Swedish Civil Contingencies Agency. It is a contribution to their work with development of a methodology for National Risk Assessments and Disaster Risk Management. The former is prepared in response to an EU directive. According to the EU commission: Risk assessment and mapping are carried out within the broader context of disaster risk management. Risk assessment and mapping are the central components of a more general process which furthermore identifies the capacities and resources available to reduce the identified levels of risk, or the possible effects of a disaster (capacity analysis), and considers the planning of appropriate risk mitigation measures (capability planning), the monitoring and review of hazards, risks, and vulnerabilities, as well as consultation and communication of findings and results.”

This report starts with a description of the current work with disaster risk management in Sweden and changes in the organization that has taken place in recent years. It also describes the evolution and use of economic analysis, including cost-benefit analysis, in policy making in different contexts. Based on these overviews it is concluded that economic analysis is rarely used in practical policy making regarding public goods in Sweden, and it has not previously been used in decisions concerning disaster risk management. Therefore, based on a literature review, we present a basic economic model that can be used in this context to define what a policy measure is and the aspects that needs to be considered in an economic evaluation of such measures. Furthermore we provide an example of how a method developed for economic analysis proposed by OECD, Regulatory Impact Assessment, can be applied to this kind of decision making. In the example we use information collected in a risk assessment made regarding the impact of climate change for one of the largest rivers in Sweden, Göta Älv.

It is concluded that economic analysis can provide important information to this type of decision making, not the least through providing structure to the collection of information. However, further work is needed before this type of analysis can be used in practical policy making and the report ends with suggestions for further development work.