Economic Value of Flood Forecasts and Early Warning Systems

Abstract

As population growth, economic development, and climate change increase the risks of inland flooding across the US and worldwide, a range of flood mitigation approaches must be considered and evaluated, including flood forecast and early warning systems (FFEWS). Cost-benefit analysis (CBA) has long been used to scrutinize flood mitigation investments, and although most applications have addressed physical infrastructure projects, a growing body of research has focused on assessing the benefits of information-based approaches such as FFEWS. This review summarizes research to date on the economic benefits of FFEWS, using value-of-information (VOI) analysis as a conceptual and organizing framework. This framework emphasizes the role of FFEWS in improving protective action decisions and flood-related outcomes. I also use the framework to categorize the methods used to assess FFEWS benefits, distinguishing between methods that focus specifically on prevented flood damage and those that take a more holistic VOI-based approach. Through a systematic search and screening of the literature, I identified 66 articles and reports published from 1970 to 2023 in more than 15 countries. Overall, I found that relatively few of the studies (15) applied a VOI-based approach, and most of them estimated VOI in relative rather than absolute (i.e., monetary) terms. In contrast, almost half of the studies used expert assessments or surveys of household or businesses to quantify the effectiveness of warnings for prompting protective actions and for reducing damages. Even so, evidence from these studies regarding the economic value of avoided flood damages is limited and is particularly lacking for the US. These findings highlight the continuing need for empirical research to inform VOI analyses of FFEWS and to isolate the effect of FFEWS on incurred flood damages and on protective action costs.