Weather-Water-Climate Value Chain(s): Giving VOICE to the Characterization of the Economic Benefits of Hydro-Met Services and Products

Weather-Water-Climate Value Chain(s): Giving VOICE to the Characterization of the Economic Benefits of Hydro-Met Services and Products

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Executive Summary

Every year, weather-related hazards such as hurricanes, floods, heat waves, droughts, and tornadoes cause billions of dollars of damage and affect millions worldwide in both developed and developing countries. “Day-to-day” routine events (not considered “disasters”) likely have an even larger aggregate impact on society and affect everyone everywhere.

In this paper we present and develop the concept of the “weather information value chain” as a means for understanding, discussing, and analyzing the socioeconomic value of Earth Observations, Science, and Services (ESOSS) (also referred to here as “hydro-met” as shorthand for hydrological, meteorological, and climatological). The value chain concept provides a useful approach to understanding and discussing the entire process of information creation, communication, and use.
From an economist’s perspective, a primary reason for adopting the concept in hydro-meteorological studies is to explicitly connect the information service or product (e.g., observation, data, forecasts, warnings) being evaluated with relevant societal decisions and outcomes to ensure the validity and reliability of economic analyses.

An important distinction lies between the economic impact of weather (not our focus here) and the value of current or improved weather information (this paper’s primary concern). There are weather-related impacts that are unavoidable and weather-related impacts that potentially could be avoided with better information or behavior changes. The value of weather information is related to avoiding impacts, facilitating more efficient response, or realizing new opportunities.

There are many different uses and approaches to characterizing a value chain or an information process. Any given information process is dynamic and complex. Over time, the characterization of the information process changes as knowledge, technology, institutions, and policies evolve. Relationships among components of the enterprise also shift. Notably, the private sector now plays a more significant and growing role not only in the provision of hydro-met information but also in observation systems, modeling, forecasting, and dissemination.

To begin to formalize a process for building and evaluating value chains we propose the “Value of Information Characterization and Evaluation,” or VOICE approach. The value of information (VOI) depends on changes in outcomes that result from decisions made (or potentially made) using the information. Ultimately, VOI is a function of the ability of decision-makers to receive, understand, and act on information about uncertain future events. The VOICE approach provides a framework to gather and organize the relevant data to rigorously tell the end-to-end story of any given weather information chain or explain explicitly how the information relates to decisions, outcomes, and values. This can facilitate both retrospective and prospective evaluations of existing and planned services, respectively.

The value chain framework encourages consideration of the relative merits of investing in different areas of the information process, not just those associated with improvements in prediction quality attributes. For example, investments in communication may yield higher payoffs than improving on the accuracy and precision of hydrological, meteorological, and climate information. Likewise, developing systems and enhancing resources so that vulnerable individuals or communities have the ability to respond to weather, water, or climate threats will not only improve socioeconomic outcomes but increase the value of the hydro-met information used to respond to those threats.

The value chain concept can be used for multiple purposes, as illustrated by the case studies included in this study. These purposes include, for example, facilitating decision-making; enhancing collaboration among experts from different disciplines; framing and synthesizing information and understanding; and communicating with external users and audiences. The seven case studies provided by contributing authors include U.S. and international studies as well as applied and theoretical work.

Based on our development of this white paper, discussions with researchers, practitioners, and decision-makers across the weather enterprise, and our professional experience, we offer the following recommendations related to the value chain concept, the VOICE framework, and economic analysis in general concerning weather, water, and climate information:
• All major investments or changes in hydro-met services should be subject to economic analysis. We believe that the value chain approach and VOICE template provide a useful framework to organize such an undertaking.
• A critical review should be undertaken of the use of economics in national hydro-met service policy making to identify where and why it has been helpful or unhelpful in policy making, and under what conditions it could have been more beneficial.
• More and better primary studies on the value of hydro-met information across a broad range of hydro-met phenomena, information products and services, stakeholders, and end users should be implemented to build the body of knowledge to support and improve the weather enterprise.
• Those funding new studies should require them to meet higher design, implementation, and documentation standards. We advocate adopting requirements based on established criteria, such as those recommended for the evaluation of studies for use in benefits transfer to ensure quality and transparency of the study and enhance the value of studies as resources in future benefits transfer applications. In this vein, studies of the value of hydro-met information should fully characterize the weather information value chain or study relevant components thereof as a fundamental part of such benefits studies.
• Researchers should begin to evaluate the potential contributions of behavioral economics (and closely related fields in anthropology, psychology, geography, and sociology) more thoroughly to understanding and improving weather information processes and decision-making across the value chain.
• A white paper should be developed to discuss and examine the value of incorporating approaches and concepts from philosophy and their relationship to the weather information value chain and the provision of hydro-met information in general to better address ethical and other issues outside the realm of the physical and social sciences.
• Efforts should be made to further develop and implement the concept of the weather information value chain and the VOICE template to fully map out the relationships between the creation and value of hydro-met information to enhance the validity and reliability of their economic analysis.