32. The Economics of Climate Change, Urbanisation, and Long-Term Flood Protection

Heavily urbanised areas located in the low-lying deltas of Asia have been identified as being especially vulnerable to climate-related impacts (IPCC 2007). It has been predicted that coastal cities in East and South Asia will face an increase in the exposure of population and assets to flooding (Nicholls et al. 2008). Climate change projections suggest the possibility of an increase in the frequency and intensity of floods in these areas. At the same time, urban growth will increase the value of potential flood damages and vulnerability in the region. Given these changing disaster risks, coastal cities will need to revisit their long-term disaster risk management strategies with special consideration to flood protection investments and urban development plans. A balance will need to be found between the potential increases in flood damages and the economic benefits from growth in areas vulnerable to floods over the next decades. This paper presents an economic analysis of investments in flood protection infrastructure to mitigate increased disaster risk due to climate change and urbanisation based on hydrologic, engineering, and socio-economic considerations. The analysis is applied in the Ho Chi Minh City province of Vietnam, an area that is growing rapidly and is also subject to flooding. Probabilistic cost-benefit analysis is used to study the economic viability of alternative infrastructure designs for flood protection. The analysis improves upon traditional disaster risk planning by taking into account future changes in flood frequencies due to climate change and changes urban development due to economic growth. The framework presented illustrates the potential to incorporate economic methods in the evaluation of investments for disaster risk reduction and climate change adaptation.