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Disaster Risk Management and Fiscal Policy: Entry Points for Finance Ministries

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Realising the 'Triple Dividend of Resilience'

Abstract

This chapter reflects on the benefits of disaster risk management (DRM) in the context of fiscal policy and public investment. Of particular interest is the question of how those in charge of fiscal policy decisions can recognise and realise the economic and broader benefits of DRM. We consider the interplay between public DRM investment and fiscal policy and provide an overview of current debate as well as assessment methods, tools and policy options. Standard practice has been to focus on direct liabilities and recurrent spending, dealing the costs of disasters often only after the fact. Their full costs have thus often not been budgeted for; with a price signal missing, there is lack of clear incentives for investing in DRM.The discussion traces progress by focusing strongly on analytics and current practice. Overall, we identify four steps, being pursued deliberately: (1) assessing the relevance of disaster risk for public finance ; (2) protecting public finance through risk-financing —examining insurance-related instruments that support protection of the fiscal position (first dividend of resilience); (3) comprehensively managing disaster risk, including reduction and preparedness as they affect development (second dividend of resilience); and (4) pursuing a synergistic co-benefits strategy of concurrently managing disaster risks and promoting development (third dividend of resilience).

The authors are very grateful for substantial guidance and very helpful comments received from Swenja Surminski, Thomas Tanner, Stephane Hallegatte and Mook Bangalore.

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Notes

  1. 1.

    In contrast, ancillary benefits are additional benefits that arise without deliberate planning. Similarly, there may also be co-costs from projects and policies. This is not the topic of this chapter, but will need attention further on.

  2. 2.

    MCA has been applied to DRM in the UN Environment Programme’s project Multi-Criteria Analysis for Climate Change, commissioned to provide practical assistance to governments in preparing climate change mitigation and adaptation strategies. The objective was to assist government decision-makers, particularly in developing countries, to identify and examine policy options and measures for climate change that are low cost, environmentally effective and in line with national development priorities (http://www.mca4climate.info).

  3. 3.

    Projects including dedicated DRM projects as well as other projects that incorporate and support building resilience.

  4. 4.

    For example, “Promote the mainstreaming of disaster risk assessments into land-use policy development and implementation, including urban planning, land degradation assessments and informal and non-permanent housing, and the use of guidelines and follow-up tools informed by anticipated demographic and environmental changes” (15).

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Correspondence to Reinhard Mechler .

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Mechler, R., Mochizuki, J., Hochrainer-Stigler, S. (2016). Disaster Risk Management and Fiscal Policy: Entry Points for Finance Ministries. In: Surminski, S., Tanner, T. (eds) Realising the 'Triple Dividend of Resilience' . Climate Risk Management, Policy and Governance. Springer, Cham. https://doi.org/10.1007/978-3-319-40694-7_4

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