, a team of economists at the VU University Amsterdam has undertaken a research into the monetary valuation of immaterial damages connected to a flood event (Bockarjova et al. 2010). Expressing immaterial damages in monetary terms is required to make these comparable with other cost and benefit indicators used in CBA. In this study, we have considered three aspects of immaterial damages: avoided fatalities, avoided injuries and avoided preventive evacuations. The method. Valuation of immaterial damages was done by means of conducting a large-scale questionnaire where respondents were asked to make choices within a given situation. So, a group of respondents (about 500 persons) have completed so-called “stated choice” experiments, in which a number of choice cards with varying risk levels and monetary attributes were offered in order to elicit their willingness to pay for risk reductions connected to a flood event. The valued changes in fatality risk were performed around currently existing levels of risk (in the range of 10^-6 to 10^-5 per year). Such low levels of risk valued are relatively unusual in economic valuation exercises, and require particular caution as respondents are required to make ‘informed choices’. To ensure that, current flood risks were explained before choice cards were offered. Alongside with the valuation of fatality risks, the current study has also undertaken a separate simultaneous valuation of risk of injury and risk of evacuation. The study thus produces estimates for the value of statistical life (VOSL), value of injury (VOI), and value of evacuation (VOE). This type of research is new not only in the Netherlands, but also for flood risk and hazard research internationally.

Results. The obtained values of VOSL, VOI and VOE are summarised in Table 1, and are robust as they remained stable throughout estimations carried out with various statistical models. Numerically, the obtained values are plausible and reflect findings elsewhere in the literature. The reported VOSL is within the “acceptable” range of M€ 2 to 14, found by Kluve and Schaffner (2008) for European studies on risk valuation in various risk contexts.

Table 1. Summary estimated values of VOSL, VOI and VOE

	Estimated average values
	Lower bound	Upper bound
VOSL, value of statistical life (per fatality)	6.3 mln €	7.2 mln €
VOI, value of injury (medium to severe injury)	91,000 €	102,000 €
VOE, value of evacuation (per person)	2,300 €	2,500 €

Considering the composite valuation of fatalities, injury and evacuation, we have found that taking into account only VOSL as a proxy for all immaterial damages may under certain circumstances significantly underestimate the total value of immaterial damages. The composition of immaterial damages (consisting of values of fatality, injury and evacuation) would further depend on the nature of flood risk in a particular area, such as the coast vs. the riverside (see Table 2). The total value of avoided injuries per single fatality is about 10% of VOSL (provided, on average, 5 to 10 injured persons are avoided per fatal victim saved). The value of avoided evacuation, however, proved to vary with the type of area and to depend on the nature of flood danger. For example, as we have shown in Bockarjova et al. (2010), in the riverside areas in the Netherlands where extreme water levels can timely be predicted and the majority of residents can be evacuated, value of evacuation per one fatality would be relatively high, from about 1 and up to 10 times VOSL depending on the assumptions about such parameters as frequency of evacuations, fraction of evacuated persons per event and the extent of flood (our figures are based on the recent calculations of respective parameters by HKV, 2010). For the coastal areas where storm surges are less predictable and where only a small fraction of inhabitants can be timely evacuated, evacuations surcharge per one fatality would be substantially lower and vary, again depending on the circumstances, from about 15% to 80% of VOSL.

Table 2. Composite valuation of immaterial damage.*

	Coastal area	Riverside
Monetary value of injuries per one fatality (relative to VOSL) **	0.07-0.14	0.07-0.14
Monetary value of evacuation inconvenience per one fatality (relative to VOSL) ***	0.15 – 0.80	1.03 – 10.30

*     Source: Bockarjova et al. (2010)
**   Assumed VOI is 100,000 € and VOSL is 7 mln €.
*** Assumed VOE is 2,500 € and VOSL is 7 mln €.

Conclusions. Our inquiry not only yields new insights into the valuation of risks connected to flooding in the Netherlands, but also provides an important contribution to the hazard literature internationally. Our findings are threefold. First, valuation of fatality risk in flood (VOSL=7 mln €) in the Netherlands is higher than the respective indicator obtained in the context of transport safety (VOSL=2.5 mln €) and that is currently adopted in CBA of flood protection measures. This pleads for a higher monetary value of benefits in relation to avoided fatalities connected to better flood protection measures. Second, composite valuation of immaterial damage shows that it is important to include differentiated indicators of immaterial damage alongside with valued fatalities (VOSL) in cost-benefit analyses, such as value of injury (VOI) and value of evacuation (VOE) which can substantially contribute to the total value of avoided immaterial damages. Finally, the observed discrepancy in the relative weights of various components of immaterial damage (and we have considered only three of them in this study) between various areas with differing flood risks points at the necessity to consider area-specific immaterial damages when conducting CBA.

References.

M.Bockarjova, P.Rietveld, E.Verhoef (2010) Immaterial damage valuation in flooding: value of statistical life, value of evacuation and value of injury. Paper to be presented at the International conference “Delta’s in the Time of Climate Change”, 29 September – 1 October 2010, Rotterdam, the Netherlands.

HKV (2010) Kentallen evacuatie voor kostenbaten analyse, Memorandum PR1919-10.

Kluve, J., and Schaffner, S. (2008) The Value of Life in Europe – a Meta-Analysis; Sozialer Fortschritt 10-11: 279-287.

This research was financed by the BSIK project Climate Changes Spatial Planning (Klimaat voor Ruimte, see www.klimaatvoorruimte.nl) and project KBA WV21 from the Dutch Ministry of Transport and Water Management.

Dr. Marija Bockarjova is the corresponding author ( Dit e-mailadres is beschermd tegen spambots. U heeft Javascript nodig om het te kunnen zien. ). P.Rietveld and E.T.Verhoef are the co-authors. The authors work for VU Amsterdam, FEWEB, Department of Spatial Economics.