Benefit-Cost Analysis of FEMA Hazard Mitigation Grants

Adam Rose, Keith Porter, Nicole Dash, Jawhar Bouabid, Charles Huyck, John Whitehead, Douglass Shaw, Ronald T. Eguchi, Craig Taylor, Thomas R. McLane, L. Thomas Tobin, Philip Ganderton, David Godschalk, Anne S. Kiremidjian, Kathleen Tierney and Carol Taylor West

No 06-02, Working Papers from Department of Economics, Appalachian State University

Abstract: Mitigation ameliorates the impact of natural hazards on communities by reducing loss of life and injury, property and environmental damage, and social and economic disruption. The potential to reduce these losses brings many benefits, but every mitigation activity has a cost that must be considered in our world of limited resources. In principle benefit-cost analysis (BCA) can be used to assess a mitigation activity’s expected net benefits (discounted future benefits less discounted costs), but in practice this often proves difficult. This paper reports on a study that refined BCA methodologies and applied them to a national statistical sample of FEMA mitigation activities over a ten-year period for earthquake, flood, and wind hazards. The results indicate that the overall benefit-cost ratio for FEMA mitigation grants is about 4 to 1, though the ratio varies according to hazard and mitigation type.

Date: 2006
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