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CBA Cost-benefit analysis
Basin Authority of the Romagna Rivers
Aveiro seminar 26-27 October 2011
The procedure of CBA has been realised by the Basin Authority of the Romagna Rivers for the management of the hydro-geologic risk:
• landslide risk
• flood risk
Stage of CBA
• The Basin Authority is experiencing some cost benefits analysis methodologies for comparison of different policy scenarios about the hydrogeological risk management.
• In 2001 a first attempt to address flood risk issuesrelated to cost-benefit analysis was made on floodrisk.
• At present an experimental CBA on landslide risk isin progress.
We will show you two different examples of CBA:
- Landslide risk: slow flow earth in “Spinello” – Santa Sofia (FC)
- Looming flood risk over Ravenna city
Territorial localisation of CBA
Lanslide riskLanslide risk Flood riskFlood risk
Experimental CBA of landslide riskWe have studied a slow flow earth that could damage a village and a
sport centre.
We have to decide which kind of mitigation measures (rules, regulations, structural works) to adopt for risk management.
Expertise involved• Geology• Geostatistics• Engineering • Economy
Experimental CBA of landslide risk
Following the Uzielli’s methodology (2011) on risk analysis, we have collected data on the shift of earth surface by permanent scatters (about 20 years) and inclinometers (about five years)
SAR interferometry and permanent scattererstechniqueSynthetic Aperture Radar (SAR) combines signal-processing techniques with satellite orbit information to produce a high-resolution radar image. Both amplitude and phase information are stored from the returning echoes. Interferogram is a phase difference image of two SAR-images acquired at slightly different positions. When the two images are not taken simultaneously the technique is called repeat-pass interferometry. Interferogram can be converted to a digital elevation model (DEM) with meter accuracy.
By TRE
Inclinometer
Blu point = permanent scatters
Red point = inclinometers
Placement of detection points
Landslide evolution
The landslide monitoring indicates that it is going towards the sport centre and the village.
Data indicate a regressive movement of the slow flow earth.
Landslide evolution could affect houses, buildings and economic activity.
How should we behave?
Hazard
We can obtain the spatial probability of the hazard by geostatistic methods.
We have drawn hazardous map elaborating the data of the landslide shift using the geostatistical model “Universal kriging with linear drift”.
Vulnerability
Typology of structures
Typology of foundations Age
IntensityIntensityResilienceResilience
Recalling the risk formula
R=H*V*E
H = hazard
V = vulnerability
E = elements at risk
We can get the total spatial risk value
Value of elements at riskValue of elements at risk
HazardHazard
euro
VulnerabilityVulnerability
Expected damage
Because of the slow-motion landslide we could foresee heavy damages in 200 years.
So in that period of time, we could expect a cost of the potential damage to the elements at risk of about 12.700.000 Euros.
But to estimating cost-benefit,
we need another parameter.
Time
So, for example, we could apply a law of the forecast of temporal event
H(N)=1-(1-P)N = 1-(1-1/T)N
where
H(N) = hazardous in time
P = probability of the impact
T = return time of maximum deformation
N = number of esteemed years
Assuming N=100 years – e.g.: life prediction of structures of the village
and T=5 years, as observed by data
H(N) =H(N) =~~ 0.630.63
Cost of risk mitigation
A possible hypothesis to defend the elements at risk is to implement structural works.
Here is an example of a preliminary project plan.To build a bulkhead piling foundation we would need:
– About 130 piles – everyone on average deep 15 linear meters– About 130 tieback anchors - everyone on average long 30 linear
meters– About 130 sub-horizontal drainages - everyone on average long
30 linear meters– A concrete beam linking piles
COST ABOUT 1.400.000 euros +COST ABOUT 1.400.000 euros +Maintenance about 50.000 euros on average every ten yearsMaintenance about 50.000 euros on average every ten years
CBA:
fundamental economic formula
∑t(Bt-Ct±Et)*(1+r)-t>0
Where
Bt = Benefit as a function of time
Ct = Cost as a function of timeEt = Environmental cost or benefit as a function of time
t = Timer = Rate discount
Avoiding the environmental parameter because too much uncertain and in this case perhaps less significant, we can calculate the
convenience of the risk mitigation.
Cost-benefit analysis
discount rate = 0,05
cost and benefit plan Discounting
Years CostBenefitby H(N)
Cost Bt/(1+r)t
BenefitCt/(1+r)t net benefit
1 € 1.400.000,00 € 0,00 -€ 1.333.333,33 € 0,00 -€ 1.333.333,33
10 € 50.000,00 € 222.394,81 -€ 30.695,66 € 136.531,12 € 105.835,46
20 € 50.000,00 € 412.702,63 -€ 18.844,47 € 155.543,28 € 136.698,81
30 € 50.000,00 € 574.515,79 -€ 11.568,87 € 132.930,00 € 121.361,13
40 € 50.000,00 € 711.057,99 -€ 7.102,28 € 101.002,72 € 93.900,43
50 € 50.000,00 € 825.220,65 -€ 4.360,19 € 71.962,32 € 67.602,13
60 € 50.000,00 € 919.595,92 -€ 2.676,78 € 49.231,05 € 46.554,27
70 € 50.000,00 € 996.506,30 -€ 1.643,31 € 32.751,34 € 31.108,03
80 € 50.000,00 € 1.058.031,49 -€ 1.008,85 € 21.347,88 € 20.339,03
90 € 50.000,00 € 1.106.032,57 -€ 619,35 € 13.700,33 € 13.080,98
100 € 50.000,00 € 1.142.173,87 -€ 380,22 € 8.685,65 € 8.305,43
€ 7.968.232,01 total net benefit -€ 688.547,64
Results
This experimental report was used inside Basin Authority in order to take a decision about the management of Spinello risk zone.
The Spinello CBA suggested not to make structural works.
So we have only worked out rules and regulations for the territory management.
Spinello risk zone
Outcome: a mandatory rule for Provinces and Municipalities
Rule and regulation
Zone 1S Very high hazard
•No new buildings
It is only allowed•Routine and extraordinary maintenance of existing structures •Risk mitigation works
Zone 2S
Medium hazard
What is allowed:
•Routine and extraordinary maintenance of structures
•New buildings on piles. Maximum 20% more than existing volume of buildings, provided that risk mitigation works are implemented.
Zone 3SLow hazardWhat is allowed:•Routine and extraordinary maintenance of structures•New buildings on piles.
The plan for Spinello’s landslide risk mitigation set rules that are mandatory for the Province of Forlì-Cesena and for the Municipality of Santa Sofia.
This mitigation risk plan is about a non-structural action and in this way we can mitigate the risk of Spinello over the time.
A real case of CBA for flood risk
Now we will show you a case where CBA was used to address flood risk in Ravenna threatened by Montoneriver.
The main expertise involved was hydraulic engineering and economyFlood could hit this area with a return time of 300÷400 years (T300÷400)
Area potentially affected by the flood
Expected damage = benefit
deterministic analysis
Element at risk Damage
Hard – medium - light
built-up area area concerned Ha 300 medium
strategic buildings area concerned n. 4 medium
settlement of production
area concerned Ha 30 medium
employees n. 200 medium
significant risk sites area concerned Ha 0
Life lines (water pipes, electricity lines, etc.)
users served n. 80000 light
main ways of communication
People/day n. 20000 hard
Goods/day ton 2500 medium
cultural heritage presence yes
Estimated damage Euro 404.902.209,00
COST
Design of the risk mitigation
Plan of the structural works
- Stretch of the river involved by work: about 4 km
-Screen waterproof
-Shift existing enbankment:
- Demolition and rebuilding
- Acquisition space for the river channel
Total cost = about Total cost = about 12.000.000 euros12.000.000 eurosMaintenance is evaluated Maintenance is evaluated in 100.000 euros/10 yearsin 100.000 euros/10 years
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Stretch of river involved by the works of flood risk mitigation
CBA
discount rate = 0,005
cost and benefit plan Discounting
Years Cost Benefit Cost Benefit net benefit
1 € 12.000.000,00 € 0,00 -€ 11.940.298,51 € 0,00 -€ 11.940.298,51
10 € 100.000,00 € 0,00 -€ 95.134,79 € 0,00 -€ 95.134,79
20 € 100.000,00 € 0,00 -€ 90.506,29 € 0,00 -€ 90.506,29
........ ........ ........ ........ ........ ........
........ ........ ........ ........ ........ ........270 € 100.000,00 € 0,00 -€ 26.011,38 € 0,00 -€ 26.011,38
280 € 100.000,00 € 0,00 -€ 24.745,87 € 0,00 -€ 24.745,87
290 € 100.000,00 € 0,00 -€ 23.541,93 € 0,00 -€ 23.541,93
300 € 100.000,00 € 405.000.000,00 -€ 22.396,57 € 90.706.100,39 € 90.683.703,82
total net benefit € 77.248.335,48
What did the decision makers do with it?
The final report included the cost of the design and the analysis of the potential damage of the flood event.
It was sent to the Government in 2001 and it approved it for financing.Actually, the Government has been financing parts of the project giving the executive offices some money to make the work.
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Some issuesProbabilistic estimation of risk
The macro-factors of risk are pervaded by significant uncertainty
Hazard
�Uncertainty on calculation models (e.g. magnitude-frequency relation)
�Uncertainty on runout
�Spatio-temporal variability
Vulnerability
�Spatio-temporal variability
�Uncertain indicators
�Uncertainty on calucalation models
Elements at risk
Uncertainty on calucalation models
�Subjectivity
�Spatio-temporal variability
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All these uncertainties have a All these uncertainties have a significant influence on the CBAsignificant influence on the CBA
Some issuesChoosing the right discount rateTo evaluate the benefit of the discount rate we can use the following formula: s= p+u*cwheres = the social time preference ratep = pure preference rate (that is the discount rate which is determined because you prefer present to future)c= rate of growth of real per capita consumptionu = measurement of the rate at which extra well being deriving from consumption decreases when consumption grows
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What is the right choice of the What is the right choice of the parameters?parameters?
The question is much debated The question is much debated among experts.among experts.
ThankThank youyou forfor youryour attentionattention
