Economics of Disaster Risk and Resilience in Small Island Developing States
Authors:   , Taupo Tauisi 
Published: November 2021

<p>The four essays investigate the impacts and implications of climate change and disasters in Small Island Developing States (SIDS) in the Pacific by examining disaster risk, resilience, response, and recovery in Tuvalu.  The first chapter starts with a survey on the conceptual framework of disaster risk which relies on its associated components of hazard, vulnerability and exposure. It is an introductory literature review that sets the scene for the other chapters. It is not intended to make an original contribution nor a critical review of the literature justified to be publishable. How we measure these risks depends on how we define disaster risk and its components. Though there are diverse views on these definitions in different disciplines, we can capitalise on their commonalities to frame disaster risk models.  The second chapter investigates the vulnerability of households to climatic disasters in Tuvalu. Small Island Developing States, particularly the atoll islands, are considered to be the most vulnerable to climatic change, and in particular to sea-level rise and its associated risks. From the Tuvalu Statistics Department household survey, we construct poverty and hardship profiles for households on the different islands of Tuvalu, and combine these with geographic and topographic information to assess the exposure differentials among different groups using spatial econometric models. Besides the observation that households in hardship are more vulnerable to negative shocks because they lack the resources to respond, we also find that they are also more likely to reside in highly exposed areas to disasters (closer to the coasts and at lower elevation) and have less ability to migrate (between and within the islands).  The third chapter examines cyclones. The intensity of cyclones in the Pacific is predicted to increase and sea levels are predicted to rise, so an atoll nation like Tuvalu can serve as the `canary in the coal mine' pointing to the new risks that are emerging because of climatic change. Based on a household survey we conducted in Tuvalu, we quantify the impacts of Tropical Cyclone Pam (March 2015) on households, and the determinants of these impacts in terms of hazard, exposure, vulnerability and responsiveness. Households experienced significant damage due to the storm surge caused by the cyclone, even though the cyclone itself passed very far away (about a 1,000 km). This risk of distant cyclones has been overlooked in the literature, and ignoring it leads to significant under-estimation of the disaster risk facing low-lying atoll islands. Lastly, we constructed hypothetical policy scenarios, and calculated the estimated loss and damage they would have been associated with { a first step in building careful assessments of the feasibility of various disaster risk reduction policies.  The fourth chapter examines the financing of disaster risk management. Future climate and disaster risks are likely to impose increasing financial pressure on the governments of low-lying atoll nations. The aftermath of a disaster such as a cyclone requires financial means for quick response and recovery. Hence, we quantify appropriate levels of financial support for expected disasters in Tuvalu and Kiribati by building on the Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI) calculated likely costs for disasters. To these, we add estimates of the potential effects of distant cyclones, droughts, sea level rise and climate change as they are predicted to affect low-lying atoll islands. There are several potential financial instruments available for disaster risk management in the Pacific Islands. We focus on the potential contribution of the sovereign wealth funds (SWF) of Tuvalu and Kiribati in reducing reliance on foreign aid for both ex-ante and ex-post disaster risk management. We forecast the future size of the SWF using Monte Carlo simulations and an Auto-Regressive Integrated Moving Average model. We examine the long-term sustainability of the SWF, and the feasibility of extending their mandate to cover and pay for at least some climate change adaptation and disaster risk reduction.</p>