Recent articles show the importance of including dynamics of human decision making in climate risk analysis

Two recent publications by VU and IVM scientists Toon Haer, Jeroen Aerts, and Wouter Botzen, in collaboration with Trond Husby from PBL, show the importance of taking into account adaptive decision making by governments, insurers, and household in climate risk analysis.

12/13/2019 | 1:27 PM

Regions around the world are faced with an increase in extreme weather as a result of climate change. In combination with socio-economic development, natural hazards often lead to extensive loss of life and damages such as illustrated by the damage caused by Hurricane Dorian in the Bahamas. To counter the adverse effects of natural hazards, global initiatives such as the Sendai Framework for Disaster Risk Reduction emphazise the importance of adaptation accross scales. Nonetheless, humans continue to settle in hazard-prone areas due to the promise of economic gains. 

While climate change receives a lot of attention, it is in fact mainly human decision making that drives the development of risk. Current risk assessment models are often ill-equiped to capture this process of human decision making, as they often assume static scenarios as if governments, insurers, and households do not respond to changing risk or to each other. In two recent publications in Environmental Research Letters and Global Environmental Change, Haer and co-authors show that taking into account these decision-making processes lead to an improvement understanding of the development of flood risk.

Flood risk figure

In Environmental Research Letters, Haer and co-authors present a multi-disciplinary approach that integrates different types of adaptive behaviour of governments (proactive and reactive) and households (rational and boundedly rational) in a continental-scale risk-assessment framework for river flooding in the European Union. They demonstrate how flood risk and adaptation might develop, indicate how DRR policies can steer decisions towards optimal behaviour, and show how much residual risk remains that has to be covered by risk-transfer mechanisms, such as insurance. The authors find that the increase in flood risk due to climate change may be largely offset by adaptation decisions, with a decrease in risk of 46-59% compared to the baseline. Interestingly, they find that households may be more influential for risk reduction than government protection in the short term. Policy to reduce risk should therefore focus not only on proactive adaptation by governments, but also on stimulating households to actively reduce their risk. The results highlight the importance of integrating behavioural methods from social sciences withquantitative models from the natural sciences, as advocated by both fields.

In Global Environmental Change, the team applies the model to investigate and quantify the effects of the safe development paradox for Europe. This phenomenom describes the paradoxal increase of socio-economic growth in flood-prone areas after the government provides additional protection. The feeling of safety leads to a decreased inclination to protect on a building level, which means that if disaster strikes, it will be more severe than it otherwise would have been. By using an agent-based modelling approach, the team quantifies the increased of expected damage of an extreme event when government provide protection, mounting up to 53 billion euro additional damage throughout Europe for the 500-year return periods. However, they also show how this effect can be counteracted by implementing building codes, or by providing financial stimuli to households to implement building-level flood protection. This is highly relevant for policy makers, as it shows the importance of implementing building-level regulations to counteract the adverse affect of well-intented large-scale adaptation.