1. Socio-economic Benefits of Weather Information Jeffrey K. Lazo Societal Impacts Program National Center for Atmospheric Research Boulder CO 43rd plenary session of CGMS May 22, 2015

2. Welcome to Boulder … Source: https://www.google.com/search?q=picture+of+boulder+colorado&biw=1669&bih=964&tbm=isch&tbo=u&source=univ&sa=X&ei=LhtdVa- UAYKqyATN3YG4BA&ved=0CDIQ7Ak#imgrc=FMvYgJz12IuJNM%253A%3B85vnDBWx7QftIM%3Bhttp%253A%252F%252Fkkofirm.com%252Fimages%252Fhome_backgrounds%252Fred_sky_flatirons_boulder.jpg%3Bhttp%253A%252F%252Fkkofirm.c om%252F%3B1500%3B995

3. Because economists need jobs too! Program evaluation / program justification Study of human behavior / decision making Why economics?

4. Depends on purpose of the study … –Back-of-the envelope –Academic exercise –OMB Reviewed for program justification What kind of economics?

5. US GDP = 16.77 trillion USD (2013) % average annual reduction in GDP caused by weather $16.77 trillion x __________ % = __________ USD % unmitigated without weather information _______ USD x __________ % = __________ USD % of wx info benefit attributable to satellites _______ USD x __________ % = __________ USD Benchmarking Exercise Annual Weather Damages Value of Weather Information Value of Weather Satellites

6. US GDP = 16.77 trillion USD (2013) % average annual reduction in GDP caused by weather $16.77 trillion x ____0.5____ % = __83.85 B_ USD % unmitigated without weather information __83.85 B_ USD x __5.0____ % = ___4.19 B_ USD % of wx info benefit attributable to satellites ___4.19 B_ USD x ___10.0__ % = __419.25 M_ USD Benchmarking Exercise

7. “Weather Information Value Chain” Tell the story of the process of information creation, dissemination, communication, use, and value Example from USAID/WMO/World Bank SEB book My weather information value chain DOE Solar Weather Information Value Chain Conceptual Framework

8. Components of the Service Production and Delivery System of NMHSs Weather Information Value Chain

9. Simplified schematic of the met/hydro services “value chain” Weather Information Value Chain

10. Economic values are the result of a complex process Value can be added or lost at each step Not a linear process Ultimately value of weather information is a function of the ability of decision makers to receive, understand, and act on information on uncertain future events. Weather Information Value Chain

11. Weather Information Use / Decision Making Economic Values Modeling Forecasting Dissemination Communication Monitoring Observation Perception Interpretation National Hydro-Meteorological Services (e.g., NWS) Media / Broadcasters Emergency Managers / Public Officials Vendors / Private Sector Meteorology Economic Sectors / Stakeholders Weather Information Value Chain

13. Value of information Decision making under uncertainty Public goods Key Economic Concepts

14. Economics has the methods and theories Do not need to develop new methods! We don’t have many applications Valuation of benefits

15. Overview of economic valuation methods Sector Specific / Benchmarking / Expert Elicitation Non-market valuation techniques Stated preference methods Revealed preference methods Economic decision modelling Decision analysis Equilibrium models Econometric models Avoided cost/damage assessments including avoided mortality and morbidity impacts Benefits transfer

16. “Primer on Economics for National Meteorological and Hydrological Services” –http://www.sip.ucar.edu/pdf/Primer_on_Economics_for_NMHS_2009_08_06.pdf USAID/WMO/World Bank SEB Book –European RA IV economics group WMO – SERA WG Some resources

17. Chapter 1: Introduction Chapter 2: The Production, Delivery and Use of Weather, Climate and Hydrological Services (Met/hydro services) Chapter 3: The Purposes of SEB Studies of Met/Hydro Services (Purposes of SEB) Chapter 4: Designing and Commissioning a SEB (Designing SEB) Chapter 5: Economic Essentials Chapter 6: Defining and Measuring Costs (Costs) Chapter 7: Defining and Measuring Benefits (Benefits) Chapter 8: Benefit Cost Analysis (BCA) Chapter 9: Communicating the Results of SEB Studies (Communications) Chapter 10: Looking Forward Appendix A: Glossary of Technical Terms Appendix B: Meteorological, Hydrological and Related Services Appendix C: A Short History of Studies of Socio-economic benefits of meteorological and hydrological services Appendix D: Complementary roles for other social science applications in SEB Valuing Weather and Climate: Economic Assessment of Meteorological and Hydrological Services

18. Findings from lit review – good stuff! Arctic Case Study Good demonstration of value chain Likely to find minimal values A recommendation Case study on values to public –Primary mission of most NMHS – save lives –Important to policy makers –Likely large economic value (largest) Some thoughts on the SETT

19. Value of improved hurricane forecasts and warnings to households

20. 11 total choice questions for each individual x 804 = 8,844 n for models = 8,733 Value of Improved Hurricane Warnings

21. VariableEstMean Marg. Benefits Landfall location-0.5791.000-0.579 Landfall location * Education (years)0.03314.5340.483 Landfall location * House Type (dummy)0.2110.5730.121 Landfall location * Evacuation likelihood with order0.0994.1280.410 Landfall location * House Vulnerable (Alpha Factor Score) 0.1410.000 Landfall location * Cultural Theory - Individualist-0.1660.000 Landfall location * Barriers (Alpha Factor Score)-0.0990.000 Total Utility0.434 Cost-0.0611.000-0.061 Cost * Income (Thousands)0.000157.7990.006 Marginal Utility Income-0.055 WTP for improved landfall accuracy$7.92 Calculating Benefit of Improved Landfall Location

22. Back-of-the-envelope … Per household$286/yr Attribute 5% to satellites$14.30 US Households115,610,216 Annual benefit$1,653,226,088.80

23. Weather Information Value Chain –Making the connection from observations to decision making is the hard part –The economic tools and methods are there –The economic evaluation of improved decisions relatively straightforward Recommend –Literature review of all value of weather information studies –Case study of value to households If you think this is important … weather community will have to fund the work Summary

24. Thank You! Jeff Lazo lazo@ucar.edu PO Box 3000, Boulder, CO 80307 Office: 303-497-2857 http://www.weather.com/news/weather-hurricanes/20-amazing-hurricane-images-20130528