The economics of hydro-meteorological disasters: approaching the estimation of the total costs

The paper argues that traditional disaster assessments rely too heavily on direct tangible costs, neglecting indirect and intangible impacts. It proposes a 'total cost' framework comprising four quadrants: direct tangible, indirect tangible, direct intangible, and indirect intangible costs. The authors review market-based, non-market-based, and economic system modelling techniques, concluding that while no single method covers all cost categories across all scales, benefit transfer is a critical tool for making comprehensive total cost estimations accessible at meso and macro scales.

• The authors define 'total cost' as the overall burden on a socio-ecosystem, encompassing direct costs (damages occurring during the physical event), indirect costs (induced by the hazard but occurring apart from the event in space or time), tangible costs (economic impacts), and intangible costs (non-market values that are difficult to monetize).
• Direct tangible costs are categorized by 'first order consequences' located in the flood area, including physical asset damage and emergency service costs, which the authors note often outweigh other direct economic costs.
• Indirect tangible costs are divided into second-order effects (disruptions to production and traffic diversion that can extend far beyond the flood zone) and third-order effects (long-term recovery phase impacts such as declines in investment or national income).
• Intangible costs, which are frequently neglected in disaster economics, include impacts on people (mortality, injuries, psychological trauma, and loss of cultural heritage) and the environment (loss of ecosystem services and soil quality).
• The paper identifies a significant mismatch between the need for accurate damage assessments and the quality of available datasets and models, specifically regarding stage-damage functions used for physical assets.
• Traditional economic indicators like GDP are described as misleading measures of welfare in the context of disasters because they may count risk reduction expenditures as positive contributions to GDP while ignoring social costs.
• The authors categorize valuation methodologies into three clusters: market-based (MB), non-market-based (NMB), and traditional and integrated economic system modelling (T&IESM).
• Non-market-based methods, such as contingent valuation and choice experiments, are effective for micro-scale intangible cost estimation but are often too resource-intensive for meso-scale applications.
• Benefit transfer is highlighted as a uniquely versatile tool that allows for the estimation of total costs across meso and macro scales by transferring values from existing primary studies to new contexts.

APA

Balbi, S., Giupponi, C., Olschewski, R., & Mojtahed, V. (2013). The economics of hydro-meteorological disasters: approaching the estimation of the total costs. Basque Centre for Climate Change. https://www.bc3research.org/h6T8Uy8Nm4gFs0O/20130828112704434143521.pdf

Chicago

Balbi, Stefano, Carlo Giupponi, Roland Olschewski, and Vahid Mojtahed. The economics of hydro-meteorological disasters: approaching the estimation of the total costs. Basque Centre for Climate Change, 2013. https://www.bc3research.org/h6T8Uy8Nm4gFs0O/20130828112704434143521.pdf.

Wikipedia

{{cite report |last1=Balbi |first1=Stefano |last2=Giupponi |first2=Carlo |last3=Olschewski |first3=Roland |last4=Mojtahed |first4=Vahid |title=The economics of hydro-meteorological disasters: approaching the estimation of the total costs |publisher=Basque Centre for Climate Change |date=August 2013 |url=https://www.bc3research.org/h6T8Uy8Nm4gFs0O/20130828112704434143521.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{balbi2013economics, author = {Balbi, Stefano and Giupponi, Carlo and Olschewski, Roland and Mojtahed, Vahid}, title = {{The economics of hydro-meteorological disasters: approaching the estimation of the total costs}}, institution = {Basque Centre for Climate Change}, year = {2013}, month = aug, url = {https://www.bc3research.org/h6T8Uy8Nm4gFs0O/20130828112704434143521.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }