Disaster Risk Management and Fiscal Policy
This paper addresses the question whether and how co-benefits, through disaster resilience building, can be further promoted. Co-benefits are defined as positive externalities that arise deliberately as a result of a joint strategy that pursues several objectives synergistically at the same time, such as disaster risk management and development goals, or disaster risk management and climate change adaptation. Of particular interest is the question of how the economic and broader benefits of disaster risk management can be recognized and realized by those in charge of fiscal policy decisions. The paper considers the interplay between public disaster risk management investment and fiscal policy, and provides an overview of the current debate as well as assessment methods, tools, and policy options. In fiscal budgeting, it has been standard practice to focus on direct liabilities and recurrent spending. Costs of disasters are often dealt with after the fact only, rather than being considered as contingent liabilities. As a consequence, the full costs of disasters have often not been budgeted for, and, with a price signal missing, there is lack of clear incentives for investing in disaster risk management. Overall, the paper identifies four steps and three dividends to be harnessed: (i) understanding fiscal risk; (ii) protecting public finance through risk financing instruments, the first dividend; (iii) managing disaster risk comprehensively, the second dividend; and (iv) pursuing a synergistic, co-benefits strategy of concurrently managing disaster risks and promoting development, the third dividend.
| Summary: | This paper addresses the question
whether and how co-benefits, through disaster resilience
building, can be further promoted. Co-benefits are defined
as positive externalities that arise deliberately as a
result of a joint strategy that pursues several objectives
synergistically at the same time, such as disaster risk
management and development goals, or disaster risk
management and climate change adaptation. Of particular
interest is the question of how the economic and broader
benefits of disaster risk management can be recognized and
realized by those in charge of fiscal policy decisions. The
paper considers the interplay between public disaster risk
management investment and fiscal policy, and provides an
overview of the current debate as well as assessment
methods, tools, and policy options. In fiscal budgeting, it
has been standard practice to focus on direct liabilities
and recurrent spending. Costs of disasters are often dealt
with after the fact only, rather than being considered as
contingent liabilities. As a consequence, the full costs of
disasters have often not been budgeted for, and, with a
price signal missing, there is lack of clear incentives for
investing in disaster risk management. Overall, the paper
identifies four steps and three dividends to be harnessed:
(i) understanding fiscal risk; (ii) protecting public
finance through risk financing instruments, the first
dividend; (iii) managing disaster risk comprehensively, the
second dividend; and (iv) pursuing a synergistic,
co-benefits strategy of concurrently managing disaster risks
and promoting development, the third dividend. |
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