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Suggested Citation:"Chapter 6 - Conducting a Cost-Benefit Analysis." National Academies of Sciences, Engineering, and Medicine. 2020. Incorporating the Costs and Benefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change—Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/25744.
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Suggested Citation:"Chapter 6 - Conducting a Cost-Benefit Analysis." National Academies of Sciences, Engineering, and Medicine. 2020. Incorporating the Costs and Benefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change—Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/25744.
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Suggested Citation:"Chapter 6 - Conducting a Cost-Benefit Analysis." National Academies of Sciences, Engineering, and Medicine. 2020. Incorporating the Costs and Benefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change—Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/25744.
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Suggested Citation:"Chapter 6 - Conducting a Cost-Benefit Analysis." National Academies of Sciences, Engineering, and Medicine. 2020. Incorporating the Costs and Benefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change—Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/25744.
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Suggested Citation:"Chapter 6 - Conducting a Cost-Benefit Analysis." National Academies of Sciences, Engineering, and Medicine. 2020. Incorporating the Costs and Benefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change—Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/25744.
×
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Suggested Citation:"Chapter 6 - Conducting a Cost-Benefit Analysis." National Academies of Sciences, Engineering, and Medicine. 2020. Incorporating the Costs and Benefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change—Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/25744.
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Suggested Citation:"Chapter 6 - Conducting a Cost-Benefit Analysis." National Academies of Sciences, Engineering, and Medicine. 2020. Incorporating the Costs and Benefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change—Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/25744.
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Suggested Citation:"Chapter 6 - Conducting a Cost-Benefit Analysis." National Academies of Sciences, Engineering, and Medicine. 2020. Incorporating the Costs and Benefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change—Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/25744.
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Suggested Citation:"Chapter 6 - Conducting a Cost-Benefit Analysis." National Academies of Sciences, Engineering, and Medicine. 2020. Incorporating the Costs and Benefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change—Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/25744.
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Suggested Citation:"Chapter 6 - Conducting a Cost-Benefit Analysis." National Academies of Sciences, Engineering, and Medicine. 2020. Incorporating the Costs and Benefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change—Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/25744.
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Suggested Citation:"Chapter 6 - Conducting a Cost-Benefit Analysis." National Academies of Sciences, Engineering, and Medicine. 2020. Incorporating the Costs and Benefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change—Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/25744.
×
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Suggested Citation:"Chapter 6 - Conducting a Cost-Benefit Analysis." National Academies of Sciences, Engineering, and Medicine. 2020. Incorporating the Costs and Benefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change—Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/25744.
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Suggested Citation:"Chapter 6 - Conducting a Cost-Benefit Analysis." National Academies of Sciences, Engineering, and Medicine. 2020. Incorporating the Costs and Benefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change—Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/25744.
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55 Appropriate Level of Analysis Research suggests expecting or experiencing adverse weather events resulting in damage may be a key driver in resilience investment decisions. Yet, the majority of DOTs in the United States do not have formal criteria for determining if or when to do a CBA. Real and perceived barriers to implementing policies for completing CBAs include • Lack of valuation information; • Lack of baseline asset data, particularly related to actions and costs associated with extreme weather; • Access to and confidence in using climate projections for planning; • Difficulty computing long-term benefits; • Concerns about the time or expense involved in performing CBAs on an asset-specific basis; • Limited access to information on adaptation alternatives, or a decision not to consider alternatives; • Lack of support from leadership; • The need to integrate adaptation into the project scope and budget in the planning process (while having not done so); and • Lack of funding mechanisms through which to implement adaptation options. Some organizations are considering when and to what extent to conduct a CBA and are incorporating these decisions into guidance for practitioners. It may not always make sense to conduct a CBA; adaptation measures that are inexpensive to implement are unlikely to warrant a CBA, while complex, expensive projects are likely to benefit from a detailed CBA. Likewise, long-range planning and exploration of the implications of different paths will benefit from a CBA, whether it is quick and informal or more elaborate. DOTs can ascertain the financial implications of changes to the transportation system caused by continued, increasingly serious flooding and the sustainability of certain areas. Conceptual Planning The results of this team’s research indicate that DOTs believe performing a CBA is most useful during planning activities. CBAs performed at this stage allow transportation practitioners to evaluate projects and even programs at a high level to gauge which ones are likely to be the most beneficial to pursue in greater detail. CBAs at this stage allow agencies to determine how they might allocate their capital budgets and resources to develop priorities and achieve objectives. Detailed Study CBAs can also be completed during the design phase of a project to determine which design alternatives or elements of a design will yield a positive ROI. C H A P T E R 6 Conducting a Cost-Benefit Analysis

56 Incorporating the Costs and Benefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change—Guidebook Selection of Alternatives and Analysis Time Frame Adaptation options are needed to address identified vulnerabilities in priority investments. Adaptations may be proposed to account for factors such as risk tolerance, performance, and technical feasibility. Expert knowledge may be needed to identify appropriate adaptations and alternatives, particularly for flood impacts, though transportation-specific guidance is becom- ing increasingly available. Several publications and engineering design resources are shown in Table 11. Table 11 deals predominantly with engineering adaptations applicable to the longer–life cycle assets most commonly subjected to CBAs during the capital planning process. Comparatively lower-cost, operations-focused tools may also be used as adaptations to extreme weather and changing climate. Some common techniques to handle lower-intensity “nuisance” events that nonetheless have an effect on demand and performance are summarized in Table 12. The time horizon is the number of years that the CBA analyzes. A longer time horizon auto- matically gives more weight to the impacts that happen in the future. For example, if an impact happens in year 20, but the time horizon is 15 years, then it will not be included in the CBA. The overall impact on the CBA depends on whether the future impacts from a given project are mainly positive or negative. For example, a project that yields large positive values in later years will be favored by CBAs with a long time horizon. Selection of alternatives and time frame will be interwoven with the transportation-planning process. MAP-21, the Moving Ahead for Progress in the 21st Century Act, requires state DOTs to develop transportation asset management plans (TAMPs), which include investment strategies that lead to a program of projects that would help the state achieve its targets for asset condition and performance (FHWA, 2017). As part of the planning provision of 23 CFR §450.206(c)(4), state DOTs are required to integrate the goals, objectives, performance measures, and targets of the TAMP into the statewide transportation-planning process. As transportation agencies develop their TAMPs they should consider the impact that extreme weather and climate change could have on their assets, and then develop strategies to improve the resilience of assets determined to be most critical or most at risk, programming them as appropriate into their capital financial plans. NCHRP Project 25-25(94), “Integrating Extreme Weather into Transportation Asset Management Plans” (http://onlinepubs.trb.org/onlinepubs/nchrp/ docs/NCHRP25-25(94)_FR.pdf), provides a framework for integrating extreme weather and climate change impact considerations into transportation asset management planning. The TAMP sets the long-term infrastructure condition goals and performance targets. The state long-range transportation master plan sets the long-term transportation plan and improvements for the state. The state transportation improvement plan (STIP) is the shorter- term project planning and budget document that reflects the DOT’s long-term strategic plan and TAMP. The TAMP should be consistent with the statewide plan and the STIP. TAMPs should be integrated into the planning processes that lead to the STIP (FHWA, 2017). STIP budgets are constrained, meaning that the total cost of projects cannot exceed the funds available. The state coordinates with metropolitan planning organizations and councils of governments to incorporate some of their transportation improvement plan projects into the STIP based on the consistency of the transportation improvement plan projects to meet the state’s performance targets and other TAMP goals. Many states are taking steps to incorporate climate change and adaptation performance measures into their updated STIPs. Because TAMPs are high-level, long-term documents, it is unlikely that CBAs will be performed as part of the TAMP development process. Rather, CBAs can help inform the selection of projects for funding in the STIP within the framework of the TAMP, particularly as project alternatives

Resource Title Author/ Organization Modes Links Synthesis of Approaches for Addressing Resilience in Project Development (2017) FHWA Multimodal /Multi-Asset https://www.fhwa.dot.gov/environment/ climate_change/adaptation/ongoing_and _current_research/teacr/index.cfm “Planning for Systems Management and Operations as Part of Climate Change Adaptation” (2013) FHWA Operations http://ops.fhwa.dot.gov/publications/fhwahop 13030/ HEC-17: “Highways in the River Environment: Floodplains, Extreme Events, Risk, and Resilience” (2016) FHWA Roadway Bridge Railway Structure Tunnel https://www.fhwa.dot.gov/engineering/ hydraulics/pubs/hif16018.pdf HEC-25: “Highways in the Coastal Environment: Assessing Extreme Events” (2014) FHWA Roadway Bridge Railway Structure Tunnel http://www.fhwa.dot.gov/engineering/ hydraulics/pubs/nhi14006/nhi14006.pdf “Integrating Extreme Weather Risk into Transportation Asset Management” (2012) AASHTO Multi-Asset http://climatechange.transportation.org/pdf/ extrweathertamwhitepaper_final.pdf NCHRP Report 750: Strategic Issues Facing Transportation, Volume 2: Climate Change, Extreme Weather Events, and the Highway System: Practitioner’s Guide and Research Report (2014) NCHRP Multi-Asset http://onlinepubs.trb.org/onlinepubs/nchrp/ nchrp_rpt_750v2.pdf Table 11. Engineering design publications and resources. (continued on next page)

58 Incorporating the Costs and Benefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change—Guidebook Resource Title Author/ Organization Modes Links NCHRP Project 15-61, “Applying Climate Change Information to Hydrologic and Hydraulic Design of Transportation Infrastructure” NCHRP Multi-Asset https://apps.trb.org/cmsfeed/TRBNetProject Display.asp?ProjectID=4046 Table 11. (Continued). Operational Impact Area Example Tools or Activities Adaptation Examples Debris Management Personnel scheduling Perform more frequent inspections Clear culverts and drains before forecasted events (Drenan and Treloar, 2014) Procurement and Preparedness Training Operations plans Interagency coordination Cross-train staff to handle multiple aspects of event response Reserve equipment (e.g., buses) for evacuation or other response and preparedness responsibilities Reserve sufficient materials for “bad seasons” with multiple extreme events Establish contingency contracting to maintain surge capacity for events occurring outside typical seasons (FHWA, 2016) Monitoring Road weather information system stations BridgeWatch water- level monitors Invest in denser networks of real-time road weather monitoring Receive, respond to, and communicate changes in conditions Anticipate response activities such as closures and detours (Highway Capacity Manual, 6th ed., 2016) Communication and Intelligent Transportation Systems Variable message boards Dedicated radio Social media Independent agency communication system Apprise travelers of real-time and expected extreme weather conditions and changes in traffic conditions Reduce disruptions to agency communications during events (G. Donaldson, personal communication, March 22, 2016) U.S. Geological Survey and National Weather Service stream gauges Table 12. Examples of adaptation using lower-cost, operations-focused tools and activities.

Conducting a Cost-Benefit Analysis 59 are evaluated to meet the TAMP’s extreme weather– and climate change–related goals. Figure 18 suggests how CBA can be incorporated into the planning process to help meet the TAMP’s and STIP’s goals. Some states are going so far as to institute policies that mandate incorporating climate change into long-term planning processes and implementing cost-effective adaptation approaches. For example, in accordance with Executive Order 41, the State of Delaware is incorporating climate change adaptation into its planning processes. The executive order requires all state agencies to incorporate cost-effective measures for adapting to increased flood levels and sea level rise to minimize risk. Planning for sea level rise is to be done in accordance with the levels established by the state’s Department of Natural Resources and Environmental Conservation. The department is revising its LCCA procedures to account for climate change and working with the Delaware DOT as it evaluates the costs and benefits of certain adaptation measures and develop guidance for incorporating CBAs into transportation-planning processes. Figure 18. CBA can be incorporated throughout the transportation-planning process to evaluate cost-effectiveness of climate and extreme weather adaptation.

60 Incorporating the Costs and Benefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change—Guidebook Recurrence Intervals The recurrence intervals (RIs) of natural hazard events such as floods have to be determined and associated with levels of corresponding damages and losses to enable evaluation of the impacts of climate adaptations using CBA. The RI of an event is defined as the expected return period (T) of an event expressed in years. Flood-event RIs are inversely related to annual probabilities of flood events. For example, a flood event with 1 percent annual chance or a 0.01 annual probability of being equaled or exceeded in any given year has an RI equal to (1/0.01) = 100 years; while a 10 percent annual chance or 0.10 annual probability flood event has an RI equal to (1/0.10) = 10 years. RIs for historic events can be determined based on other past events or through hydrologic analysis: • Flood elevations or discharges tied to flood RIs. Flood elevations or discharges from historic events can be estimated by comparing them with flood elevations or discharges of events with known RIs. Historic event elevations or discharges can be found by reviewing stream or tide gauge data from the U.S. Geological Survey (USGS) website (https://waterdata.usgs.gov/nwis/sw) and selecting the gauge data closest to the project site. Additionally, the USGS PeakFQ Program, which can be downloaded from the USGS website (https://water.usgs.gov/software/ PeakFQ/), can provide identified flood RI data. Section 2.1.2 of FEMA’s Supplement to the Benefit-Cost Analysis Reference Guide (https://www.fema.gov/media-library-data/ 1396549910018-c9a089b8a8dfdcf760edcea2ff55ca56/bca_guide_supplement__508_final. pdf) provides step-by-step instructions and a detailed example of estimating RIs using the USGS PeakFQ approach. FEMA Flood Insurance Study (FIS) Profiles and Discharge Tables or Transects provide flood elevations and discharges for the 10-, 50-, 100-, and 500-year RI flood events. FIS data are available for all communities participating in the National Flood Insurance Program from the FEMA Map Service Center website (https://msc.fema.gov/): – From the menu on the left select “Search All Products.” – From the drop-down menus select the state, county, and community of interest and then press “Search.” – Select “Effective Products” and then “FIS Reports.” – Download the file containing the desired flood insurance study. Following large events like Hurricane Katrina (2005) or Hurricane Sandy (2012), FEMA may prepare Advisory Base Flood Elevations and preliminary Flood Insurance Rate Maps (FIRMs) before issuing new FIRMs. In other cases, hydraulic and hydrology studies may be used when FIS data may be incomplete or out of date, but complete copies of studies need to be provided as supporting documentation. • Hydrologic analysis. RI determinations made by a hydrologist or other qualified expert may be considered for use in a specific geographic location, especially for large events such as Hurricane Katrina (2005) or Hurricane Sandy (2012). Documentation sources include – Post-event studies prepared by the U.S. Army Corps of Engineers or the USGS; grant applications must include complete copies of studies. – Estimates prepared by a hydrologist; grant applications should include background data, calculations used to estimate RIs, or both. The RIs of major storm events can vary significantly depending on the location. This varia- tion is illustrated in Figure 19, which shows the results of a January 2013 analysis report prepared for FEMA to estimate storm-surge flood recurrence intervals of Hurricane Sandy in New York and New Jersey.

Conducting a Cost-Benefit Analysis 61 145 185 136 330 686 260 115 146 105 206 220 125 185 145 25 40 15 26 1546 35 15 40 70 6 6 5 10 10 10 100 85 80 65 66 15 16 Figure 19. Estimated coastal flood recurrence intervals for Hurricane Sandy in New Jersey and New York (FEMA, 2013b).

62 Incorporating the Costs and Benefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change—Guidebook • Climatological or rain gauge data. Since a 100-year rainfall event does not usually equate to a 100-year flood, climatological or rain gauge data for historic damage events need to be tied to flood RIs by a hydrologist or other qualified professional. Sources include – The National Climactic Data Center Storm Events Database (https://www.ncdc.noaa.gov/ stormevents/), which records daily rainfall and other climactic data recorded by thousands of weather stations nationwide. Grant applicants need to remember to include all applicable data. – The National Climactic Data Center also has records available online (https://data.nodc. noaa.gov/cgi-bin/iso?id=gov.noaa.ncdc:C00313). – Analysis of rain gauge data prepared by a hydrologist. Grant application documentation should include background data, calculations used to estimate flood RIs, or both. If the RIs for historic flood events are unknown and cannot be established using the approaches described previously, some tools such as the FEMA BCA Tool (https://www.fema.gov/benefit- cost-analysis) and FTA HMCE Tool (https://www.transit.dot.gov/funding/grant-programs/ emergency-relief-program/hazard-mitigation-cost-effectiveness-tool) feature an unknown recurrence interval calculator that can be used to estimate unknown RIs. Use of the unknown recurrence interval calculator requires • A minimum of three hazard events occurring in different years in which either – The RIs of all events are unknown, or – The RIs of up to two events are known and have total damage values that exceed the total damage values of all the other unknown RI events. • An analysis duration based on the age of the structure (year built) or a minimum of 10 years, whichever is greater. Additional information regarding the use of these calculators and their required inputs is included in Appendix F. For some projects, particularly those projects that will construct a new facility or a facility in a new location, historic data regarding damages sustained from an event might not be avail- able. In these cases, damages that might be expected from an event having a certain magnitude and recurrence interval can be estimated from studies by engineers or other qualified experts. Recurrence intervals need to be calculated for expected flood events. Approaches for estimating recurrence intervals are as follows: • Estimated event RIs from engineering studies. Engineering studies or reports from qualified experts may be used to estimate RIs of various hazard events. Information sources include – Engineering Reports, a good source to indicate various estimated event RIs to various transportation facilities based on similar historic events or detailed engineering analysis. – Transportation Agency Studies, which can indicate estimated event RIs affecting transpor- tation facilities; these would likely include hydrologic and hydraulic studies completed by agency engineers. • Estimated event RIs based on the FEMA BCA Tool. The FEMA BCA Tool can be used to estimate flood-event RIs as a function of flood depth based on the FIS or equivalent hydraulics and hydrology data. These estimates can account for sea level rise but do not account for other changes in climate: – FIS profiles and discharge tables or transect data are available from the FEMA Flood Map Service Center website (https://msc.fema.gov/portal/home). � From the menu on the left select “Search All Products.” � From the drop-down menus select the state, county, and community of interest and then press “Search.” � Select “Effective Products” and then “FIS Reports.” – When available, preliminary FIS or hydraulics and hydrology studies may be used where effective FIS data may be incomplete or out of date.

Conducting a Cost-Benefit Analysis 63 Base and Alternative Cases Often in BCA, a “base case” is analyzed first for comparison of alternatives. The base case is not a “do-nothing” alternative. “Do-nothing” assumes that the asset will be left as is and will not be regularly maintained or periodically upgraded over its useful life. Because DOTs develop and implement maintenance and repair schedules for transportation assets, a business-as-usual case is assumed to be the “base case.” The base case assumes that the agency maintains its regular O&M practices over the time frame of the alternatives that will be analyzed. This business-as- usual analysis assumes that the agency’s usual processes will be followed with respect to the asset, project, or program being analyzed. Complex Projects with Sub-Projects or Incremental Projects Changing climate conditions will require transportation engineers to adapt to a new normal and account for extremes that did not previously need to be managed, or to put it another way, they will need to treat as average events that were once extremes. These changes could necessitate that designers and engineers plan for transportation infrastructure in a more incremental fashion, that is, using an adaptive management approach. For example, one option for a bridge design is to construct it to one elevation and then elevate it 30 years later to accommodate additional flows that arise from climate change. In so doing, designers are able to bide their time, allowing more science to emerge on climate change predictions in the longer term, while also constructing something of value for society in the near term. How does this incremental approach affect the CBA? First, the designer needs to establish the base case, as discussed previously. For the bridge example, the base case could be a bridge with a designed life span of 50 years that is not designed to be elevated in the future; that is, this project is not designed with the impacts of climate change in mind. • Alternative 1. Once the base has been established, a comparison can be made. For the bridge example, the initial comparison option could be to assess the incrementally funded bridge, that is, one that is designed with plans to elevate it in the future. • Alternative 2. Another design alternative to compare could be for a bridge designed to be large enough from the beginning to withstand the future impacts of climate change; essentially, it would be a pre-elevated bridge. Once the base case and alternatives are established, the design team would need to estimate how much each design would cost to construct. The base case bridge in the example is probably the cheapest to construct, with Alternative 1—the incremental option—being costlier because it embeds more complicated design elements from the beginning. Alternative 2 is likely the most expensive of the three designs, as it is the largest. The Alternative 1 design element—the bridge being elevated at year 30 to cope with the predicted impacts of climate change—is then factored in. To assess this in the BCA, the expected cost, including costs to commuters from delays and detours, needs to be input. These values will be discounted to generate the elevation’s present value. Operations, maintenance, and disposal costs or salvage value can also be estimated. In the bridge example, it is difficult to say that the three hypothetical designs would have significantly different O&M costs in terms of road repair and typical structural maintenance. Similarly, the annual benefits generated by travel time savings, and so on, may also be assumed to be similar. Depending on how the bridge is financed, there may be some differential debt financing costs. For example, if the bridge will be partly or wholly financed through a loan or bond, the more expensive project will have correspondingly higher interest repayments. In this analysis, the BCA needs to account for alternatives analyzed over a term equal to at least the longest-lived asset across the alternatives (and base case), which is how replacement costs for

64 Incorporating the Costs and Benefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change—Guidebook shorter-lived alternatives are taken into account. Alternatively, salvage value, value beyond the term of the analysis, or both can be included as an annuity. Overall, it is assumed that, excluding the elevation construction of the incremental bridge, the three bridges may perform similarly through their operational phases, without factoring in climate change. However, once the annualized expected impacts from climate change are included in the BCA, the options may start to diverge in terms of their BCR. • Base Case – The design team needs to estimate the annualized expected damages resulting from climate change. This process is described in Chapter 5, but it essentially entails establishing the return period of a flood for which there would be varying levels of damage, ranging from no damage through to bridge failure, calculating the damages from each of those return periods, and estimating the likelihood of those, given climate predictions. – Because the bridge is not designed to be elevated, the annualized expected damages and costs will be higher for this design. This is because increased flows or sea level rise resulting from climate change will cause damage sooner, more often, and at greater intensity. – The design team needs to include not only the direct costs from repairs and reconstruction but also the indirect costs from road closures. Indirect costs include increased travel time for commuters, which may be more significant versus direct repair costs for smaller climatic impacts. • Alternative 1 – Before the elevation is undertaken, the annualized expected costs between Alternative 1 and the base case are likely to be similar, as their height or capacity is not significantly different. – However, once the elevation is complete, the “new” bridge is far more resilient to climate change than before, and the risk of damage decreases greatly. With this reduced risk of damage and failure, the annualized expected damages correspondingly decrease. • Alternative 2 – For Alternative 2 (the bridge designed to be large enough from the beginning), the expected annualized costs will be less than both the base case and Alternative 1 (before elevation). This is because it is able to withstand greater flows without being damaged in the process, meaning that it takes an event with a larger return period to generate damages. – However, the annualized expected damages may be assumed to be similar to Alternative 1 post-elevation, as they both now have similar capacities. Whereas the base case bridge may have a higher risk of damage, closure, or even failure, Alternative 1 and Alternative 2 do not face this risk to the same degree. It is important not to double-count at this point. The initial bridge faces definite monetary costs in CBA, but avoid- ing those costs is not necessarily included as a benefit in the alternative designs’ CBAs. This is because the benefits of the alternative bridges are already shown by the base case bridge having a cost. For example, the base case bridge may incur an annual cost of $10,000 in damages. This will already affect the comparison of the CBAs in favor of the two alternatives. If annual benefits of $10,000 in “avoided costs” are then added to the elevated bridges’ CBAs, the difference will be reflected as $20,000 per year, rather than $10,000, and would double-count the annual cost and the benefit. Often in CBA, the $10,000 in avoided damages would be included as a losses- avoided benefit rather than a cost. Sea Level Rise or Change A potential long-term consequence of climate change is sea level rise or change. Changes in sea levels occur slowly over time from a combination of melting glaciers and thermal expan- sion of sea water as it warms (NOAA, 2017). NOAA (2017) estimates that the global sea level

Conducting a Cost-Benefit Analysis 65 is rising at a rate of 3.4 millimeters, or just over 1/8 inch, per year. Sea level change is not uniform everywhere; some locations experience sea level increases in excess of the global average, while other locations are experiencing decreases in sea levels. Before incorporating SLR into an adaptation project, planners need to evaluate a location for SLR to determine if adapta- tion will be incorporated into a project. The U.S. Army Corps of Engineers circular 1165-2-212 (https://web.archive.org/web/20160519022621/http://www.corpsclimate.us/docs/EC_1165-2- 212%20-Final_10_Nov_2011.pdf) and regulation ER-1100-2-8162 (http://www.publications. usace.army.mil/Portals/76/Publications/EngineerRegulations/ER_1100-2-8162.pdf) outline a procedure for evaluating locations for incorporating SLR adaptation into projects. If planners determine that adaptation for SLR is to be included, the effects of a gradual change over time will be evaluated to determine if they effect changes to O&M over the life of the project (MaineDOT, 2014). With a project that addresses gradual changes, accounting for annual maintenance and repairs from damages and traffic impacts over the period consid- ered will provide an accurate assessment of preventable losses. Accounting for dynamic costs incurred over the useful life of a project subjected to SLR needs to be considered when calculating life-cycle costs. Extreme Heat Throughout most of the United States, temperatures in the future are expected to be higher and the number of hot days per year is expected to increase. Heat events are measured differently from flood events in that recurrence intervals generally have not been associated with extreme heat. Extreme heat is generally defined as temperatures that hover 10 degrees or more above the average high temperature for the region and last for several weeks. It is evident from this definition that the temperature associated with extreme heat will vary based on geography, and therefore extreme heat is locally defined. For example, the average high temperature in July in Bozeman, Montana, is 83°F, while in Tucson, Arizona, the average high temperature in July is 101°F. Extreme heat will likely have an impact on both transportation assets and construction and maintenance personnel. The potential impacts of extreme heat on paved roads, bridges, and buildings are summarized in Table 5 in Chapter 3. As with the variability in the definition of extreme heat based on local conditions, the impacts of extreme heat on some transportation assets will also vary based on materials. For example, the asphalt binder used in paving might perform differently depending on the pavement design. Generally, though, pavement binder may exhibit sensitivity beginning around 108°F (West et al., 2010). High ambient temperatures reduce the stiffness of asphalt, making it more prone to rutting (deformation) under traffic loads (Manolis, 2014). As the number of extremely hot days and the number of consecutively hot days increase, paved surfaces are likely to experience increases in rutting caused by asphalt deformation, which in turn is likely to increase O&M costs. In addition to asphalt deforma- tion, bridges might also be affected by extreme heat at bridge joints, although Hagedorn (2016) concluded that large variations in daily temperature are more critical to bridge performance than extreme heat. As extreme temperatures and temperature variations become of greater concern for designers, different materials or design approaches may be considered. In the meantime, existing structures may require more frequent maintenance and repairs as compo- nents such as joints wear more quickly. Similarly, extreme heat is likely to affect some of the systems in DOT buildings. Extreme heat could increase the loads placed on building cooling systems, requiring them to work longer over the course of a year. Depending on the type of cooling system, increased operating costs from electricity and water use may result. Because the systems are working longer, they may require more frequent maintenance. Further, the systems’ useful life may be shorter than in the original

66 Incorporating the Costs and Benefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change—Guidebook design if it did not incorporate increased loads placed by increases in extreme heat. Increased system operating times might also increase GHGs released to the atmosphere; potential environ- mental impacts need to be considered when data are compiled for a CBA. While transportation physical assets are likely to be affected by extreme heat, literature indi- cates that the greatest impact will be on human assets. Worker health and safety will be an increasingly important consideration when planning construction and O&M activities during hot months. Workers who work during the day will require more frequent breaks to protect them from the impacts of heat (e.g., heat stroke, heat exhaustion). Depending on local condi- tions, some activities normally performed during the day may need to be performed at night during periods of extreme heat. These changes in how work is performed are likely to affect project life-cycle costs and need to be factored into analyses. In urban areas and some small cities and suburban locations, the impacts of extreme heat may have even greater impacts on transportation project costs and implementation than in more rural areas because of the urban heat island effect. These highly developed areas tend to have less vegetation and more asphalt and roofs, which absorb more of the sun’s energy, leading to higher temperatures. Heat islands have higher daytime temperatures and less nighttime cooling than rural areas; temperatures in urban areas can be 1.8°F to 5.4°F higher than their surrounding areas during the day, and as much as 22°F higher at night because the built environment retains the heat absorbed during the day (U.S. EPA, 2016b). The urban heat island effect and its potential impacts on transportation projects should be taken into consideration during planning. Data for CBAs need to consider the impacts on O&M and life cycle, as well as potential environmental and social impacts. As stated previously, traditional approaches to conducting CBAs based on recurrence inter- vals are not applicable to extreme heat events because they are measured differently, and the measurement is localized. Because extreme heat is a new consideration, little in the literature addresses conducting CBAs for extreme heat events. Quantifiable information is becoming available regarding the potential impacts on human health and safety, but little information is publicly available that allows extreme heat impacts on transportation assets to be quantified. Transportation agencies first need to determine which question to ask: • Are agencies most concerned with operational impacts and costs, such as increases in energy use and the associated costs from increased demand for cooling, decreases in asset useful life, and so on? • Are agencies most concerned about continuity of operations and the potential length and frequency of interruption if the power grid has stability issues during excessive demand? Once a DOT determines which question it is most concerned with, it will need to evaluate the level of acceptable risk—can the function go off-line for a while, and if so, for how long? If not, how can long-term functionality be ensured? Absent recurrence intervals, the “what-if” scenario approach might be one effective way of evaluating adaptation strategies; DOTs might ask, “What will happen if our region experi- ences 10 consecutive extremely hot days? What if the number increases to 25 days? 40 days?” The strategies developed can be evaluated in these contexts for costs and benefits. Because CBA methodologies for extreme heat are still in development, some cities are not seeking to quantify the impacts of adaptation strategies in terms of NPV or BCR, but rather in more qualitative terms of high, medium, and low levels of likely cost-effectiveness. If DOTs are most concerned with operational impacts, the question of heat differences can possibly be addressed, but the potential accompanying change in humidity (e.g., future climate conditions that are both hotter and wetter) is not as easily addressed. Heating degree days and

Conducting a Cost-Benefit Analysis 67 cooling degree days traditionally used in engineering design can be estimated in the future to reflect possible extreme heat events, while accounting for humidity is more difficult because wet and dry bulb temperatures are not readily available in a format architects and engineers can use. In an attempt to address this concern, the Transportation Engineering Approaches to Climate Resilience project conducted a case study in Texas to evaluate the impacts of changes in temperature and moisture on transportation asset performance. The study used the Thornthwaite Moisture Index, a dimensionless measure that indicates the humidity or aridity in a geographic region as a predictor of changes in humidity. The project study correlates the Thornthwaite Moisture Index with the various RCP scenarios in CMIP5 through 2100. These data could allow transportation practitioners to anticipate asset performance under changing temperature and precipitation and hence humidity conditions so they can determine if they will consider different design approaches, such as using a different asphalt binder in roads to decrease asphalt pavement rutting. Life-cycle costs can be computed based on scenarios to evaluate the impacts of extreme heat on transportation assets and potential adaptation options and the results compared to evaluate cost-effectiveness. However, traditional benefits are more difficult to quantify. If the question of concern relates more to continuity of operations, an EIA of an asset or system outage could be useful to DOTs in making decisions regarding adaptation for extreme heat.

Next: Chapter 7 - Study Level 1 Climate Resilience Cost-Benefit Analysis »
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Extreme weather events and a changing climate increasingly boost costs to transportation agencies and to the traveling public. While Departments of Transportation (DOTs) are taking into account changing climate and extreme weather when making infrastructure decisions, they typically are not using a formal set of tools or cost-benefit analyses (CBAs) to address climate resilience because they may be too time-consuming and expensive to conduct routinely.

The TRB National Cooperative Highway Research Program's NCHRP Research Report 938: Incorporating the Costs and Benefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change—Guidebook was developed to try to fill the gaps identified by DOTs. It is intended to provide a consolidated resource for transportation practitioners to be able to more readily consider CBAs as a tool in their investment-decision making processes when considering different climate and extreme weather adaptation alternatives.

This report has additional resources, including a web-only document NCHRP Web-Only Document 271: Guidelines to Incorporate the Costs andBenefits of Adaptation Measures in Preparation for Extreme Weather Events and Climate Change, a Power Point presentation that describes the research and the results, a spreadsheet tool that provides an approximate test to see if it would be cost-effective to upgrade assets to the future conditions posed by climate change, and a spreadsheet tool that uses existing conditions without climate change only to calculate the new return period for future conditions with climate change.

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