Valuing Weather and Climate: Economic Assessment of Meteorological and Hydrological Services (book)

CCRD led publication and authorship of the FREE book "Valuing Weather and Climate: Economic Assessment of Meteorological and Hydrological Services." Under the leadership of Dr. Glen Anderson, CCRD Chief of Party and 10 contributing authors, the book was written in partnership with the World Meteorological Organization and World Bank. The book is FREE to the public and was released at WMO's World Congress. 

The Executive Summary shines light on the importance of national meteorological and hydrological organizations conducting, analyzing, and communicating socio-economic benefits studies:

Executive Summary
For more than a century, countries have provided weather, climate and hydrological information, forecasts and, more recently, remotely-sensed data and early warnings to the public and private sector. These services have increased the safety and efficiency of land, sea and air transport, helped communities prepare for and respond to extreme weather events and facilitated improved decision-making in weather-sensitive economic sectors. Increasingly, it has become easier for people and businesses to access met/hydro information and products due to advances in the Internet and telecommunications. 

Yet, as National Meteorological and Hydrological Services (NMHSs) strive to maintain and improve the quality, diversity, and coverage of their services, they face challenges similar to other public institutions in securing adequate and sustained funding. To compete for and optimize the use of scarce public investment resources, NMHSs may be required to demonstrate that the benefits of their services are significantly larger than the costs to produce and deliver them. Although there is not a single definitive study on the global benefits of met/hydro services, economic studies have consistently generated benefit/cost ratios greater than one-to-one (see box at right).  This book is intended to help NMHSs and other providers of met/hydro services develop a basic understanding of economic valuation methods to enable them to design and commission studies. It further supports utilization of the results to improve service delivery through business optimization and communication with decision-makers, users and the public.  

Creating value: Linking production and delivery of services to valued outcomes
Met/hydro services do not generate economic and social value unless users benefit from decisions as a result of the information provided, even if the services are of the highest quality. In addition, met/hydro services of similar quality provided in two countries can vary significantly in terms of their benefits depending on the relative nature of weather- and climate-related risks, the number and types of users and their capacity to take actions to avoid harm or increase economic output. 

The generation of met/hydro services benefits can be depicted in a “value chain” linking the production and delivery of services to user decisions and the outcomes and values resulting from those decisions. The value chain presented below (and featured in Chapter 2) can be used to illustrate the production and delivery of the entire suite of met/hydro services provided by NMHSs or to describe a single new or existing service. How the value chain is specified depends on the met/hydro services to be valued and the reasons for conducting the valuation study. 
As is discussed in Chapter 3, the valuation study can be designed for the purpose of validating the current provision of individual or all met/hydro services, justifying new investments in met/hydro services or demonstrating the value of met/hydro services in key sectors such as agriculture, aviation or energy.

Planning the study
Chapter 4 provides a discussion of the process for planning, commissioning and conducting socio-economic benefits (SEB) studies. On the assumption by the book authors that few NMHSs would conduct in-house economic studies, it is envisioned that a concept note would be prepared to secure resources for the study in terms of financing, expertise and access to the necessary information and data. The concept note would provide information on reasons for conducting the study, the services and user communities to be assessed, costs and timeframe, valuation methods proposed and plans for disseminating the results of the study. Chapter 4 also describes the elements of a detailed scope of work required for procurement and to guide preparation of the study and dissemination of the study’s results to decision-makers and stakeholders. 

Conducting the SEB Study
SEB studies to support investment decisions will typically involve analysis of benefits and costs and a comparison of benefits and costs using the net benefits (benefits minus costs) or benefit/cost criteria. The diagram at right describes the ten steps that are undertaken in conducting a SEB study.

Chapter 5 through 8 provide the reader with the essential economics material covering Steps 3 through 9 in the diagram. For readers not conversant in economics, Chapter 5 provides an introduction to definitions and concepts needed to understand the discussions of benefits, costs and benefit-cost analysis presented in Chapter 6, 7 and 8

Chapter 6 provides an overview of the extensive variety of methods that have been used to assess the benefits of met/hydro services. The methods can be tailored to different users and benefits stream (avoided costs or damages, higher profits or increased social welfare). Some methods, particularly where more precise results are required, will involve extensive data collection, surveys of user preferences and willingness-to-pay for services, or economic modelling, while other methods such as benchmarking and benefits transfer are reasonably inexpensive to apply. NMHSs, in collaboration with their SEB study implementers, will need to select the benefits estimation method(s) most suitable to the services and types of users to be assessed, while accounting for resource and time constraints.

Given NMHSs’ experience in preparing budgets, the discussion of costs in Chapter 7 will be more familiar. However, some adjustments are required in converting budget information and expenditures, particularly for capital investments, into economic costs that can be compared to benefits. In addition, SEB studies may also require consideration of costs incurred by users to benefit from met/hydro services. Chapter 8 describes the criteria and methods that are used to compare benefits and costs and explains how these values are discounted and aggregated. The chapter also provides some guidance on how to present benefit-cost results to demonstrate sensitivity to underlying assumptions and uncertainty.

Chapter 9 covers the important topic of communicating the results of SEB studies, the range of audiences and the types of messages to be delivered via radio, television, the print media, Internet, SMS text messaging and public meetings. Communications efforts as well as assessment of benefits should be part of a continuous process of education, outreach and review of the quality and uptake of met/hydro services. Internal communication to inform prioritization and business planning is also highlighted.

The book also includes five appendices covering a glossary of met/hydro and economic terms, historical background on the global development of met/hydro services and progress in estimating benefits of these services, a survey of non-economic social sciences methods for assessing the quality of met/hydro services and summaries of nine SEB studies. 

As noted in the concluding chapter, there is still much work to be done to help NMHSs and other providers to make the financial case to sustain and increase the quality and coverage of met/hydro services. It also highlights the value that open data and open access approaches can add. There are significant gaps in the application of benefits estimation methods, regional coverage of studies (particularly in developing countries), and studies for key economic sectors. The authors hope the book increases the understanding of the potential value of SEB studies and serves as a catalyst for future studies.