Is the future of Hampton Roads underwater?

Robert M. McNab

Dragas Center for Economic Analysis and Policy

Strome College of Business

Old Dominion University

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November 29, 2022

Bottom Line Up Front

• How will sea level rise and recurrent flooding impact Virginia this century?

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• We estimate the average annualized losses due to sea level rise, recurrent flooding, and major storms using projections from HAZUS.

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• We focus on eight planning districts that comprise “Coastal Virginia” and that are most at risk from sea level rise and we discount the financial and economic losses into 2021 dollars to provide insight into the impact of future flooding.

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• Unmitigated flooding from 2020 to 2099 will result in $56.1 billion in financial damages in 2021 dollars, resulting in a $79.1 billion decline in economic output in 2021 dollars.

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• The discounted future losses of unmitigated flooding are at least equal to 13.5% of Virginia’s 2021 Gross Domestic Product.

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• We project that Hampton Roads will account for approximately 85% of future losses from sea level rise in the Commonwealth if no action is taken.

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Study Areas

• Coastal Virginia is divided into eight Planning District Commissions (PDCs) by the Virginia General Assembly.

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• The eight PDCs are:
• Accomack-Northampton
• Crater
• George Washington
• Hampton Roads
• Middle Peninsula
• Northern Neck
• Northern Virginia
• Richmond

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Economic Characteristics

• The eight PDCs comprised approximately 60% of Virginia’s 2019 population.

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• The eight PDCs accounted for approximately 70% of Virginia’s Gross Domestic Product (GDP) in 2019.

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• Within the eight PDCs, economic activity and population are primarily concentrated in:
• Hampton Roads
• Northern Virginia
• Richmond

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• The spatial concentration of population and economic activity drives financial losses and economic impacts.

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ODU: �A Case Study in Flooding

Study Timeframe and Periods

• We estimate the economic impact of sea level rise and recurrent flooding from 2020 to 2099 using four distinct study periods.

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• The study periods correspond to NOAA’s 2022 projections of average sea level rise in Virginia.
• 2052 – 1.74 feet
• 2073 – 3.05 feet
• 2094 – 4.76 feet

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• The study periods are:
• 2020 – 2039 (Baseline)
• 2040 – 2059 (2052 NOAA SLR projection)
• 2060 – 2079 (2073 NOAA SLR projection)
• 2080 – 2099 (2094 NOAA SLR projection)

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Sea Level Rise – The Impact on ODU

• We can use NOAA’s Sea Level Rise Viewer to examine how sea level rise changes the landscape.

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• As sea level rises progresses from 2 to 4 to 6 feet, low lying areas are increasingly vulnerable to recurrent flooding.

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• Remember, NOAA’s projection is an average rise of 4.74 feet near the end of the century.

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• While most of the campus may be “dry,” sea level rise will increasingly impact transportation networks.

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• An increase in the “base” sea level of 4.74 feet increases the likelihood of damage from a storm event.

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• With unmitigated sea level rise, is there a long-term future for ODU’s main campus?

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ODU – Current Sea Level

ODU – Year 2080

SLR with tidal and storm flooding

Approach

Storm Events

• For each study period, we estimate the financial damages associated with storm events.

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• The odds of each storm event are:
• 1 in 10 
• 1 in 25
• 1 in 50 
• 1 in 100 
• 1 in 500 

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• As the odds of a storm event decline, the damages from the storm event increase.

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• The losses from a lower probability storm (1 in 100-year) will be higher than the losses from a higher probability storm (1 in 10-year).

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Storm Event Damages

• As sea level rise occurs, the damages for a given storm increase.

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• In other words, a 1 in 10-year storm produces higher damages in 2040 than in 2020 and higher damages in 2060 than 2040.

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• Another perspective is to focus on damages and ask what happens to the probability of a storm event.

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• As sea level rise occurs, the probability of experiencing the same damages as a 1 in 10-year storm in 2020 increase.

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• Virginia Beach requires storm design events to be 20% longer and intense than what is recommended by NOAA.

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Average Annualized Loss

• Average Annualized Losses (AALs) represent the expected coast flood losses for any given year in a study period.

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• The AAL for a given study period uses the discrete probabilities and damages to approximate the continuous damage function of that study period.

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• We assume that a storm that has a probability > 0.1 creates no additional damage.

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• We assume that a storm that has a probability < 0.02 has the same damages as a storm with a probability of 0.02.

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• AAL = [f(10)*L(10)] +

+ 0.5*[(f(10)-f(25))*(L(10)+L(25))]

+ 0.5*[(f(25)-f(50))*(L(25)+L(50))]

+ 0.5*[(f(50)-f(100))*(L(50)+L(100))]

+ 0.5*[(f(100)-f(500))*(L(100)+L(500))]

+[f(500)*L(500)]

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Source: Dragas Center for Economic Analysis and Policy Estimates

Present Value of Damages

• We now have annual estimates of direct economic losses by industry and PDC.

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• However, we also know that losses in the future have less value than losses in the present.

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• We linearly interpolate losses between the study periods to arrive at annual losses by PDC by industry.

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• We then apply a discount rate of 2.5% to estimate the present value of damages in 2021 dollars.

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• We also use an alternative discount rate of 5% to test the sensitivity of our results.

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Economic Impacts

• We obtain economic impact multipliers from the Bureau of Economic Analysis.

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• We apply the multipliers to the discounted annual damages by industry and PDC to obtain estimates of the total economic impact.

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• The total economic impact by PDC measures the loss in economic output across the study period due to sea level rise and recurrent flooding.

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• What would be an equivalent impact on today’s economic activity?

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• These estimates allow us to think about the costs associated with unmitigated sea level rise in Virginia.

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Economic Impacts

• We estimate the economic impacts for unmitigated sea level rise and recurrent flooding from 2020 to 2099.

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• We find that the direct damages are equal to $56.1 billion in 2021 dollars.

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• We find that the total economic impacts are equal to at least $79.1 billion in 2021 dollars.

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• We project that the cost of unmitigated flooding this century is at least equal to 13.5% of all economic activity in Virginia in 2021.

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• Hampton Roads accounts for 85.1% of estimated future losses due to sea level rise and recurrent flooding.

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Network Effects

• Our analysis does not capture potential network effects associated with sea level rise and recurrent flooding.

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• As the financial and economic damages from flooding rise, disincentives rise.

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• An increased likelihood of flooding will increase insurance premiums, lower covered insurance ratios, and, in the limit, result in ‘no insurance’ zones in Coastal Virginia.

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• Insurance deserts will increase the living and business costs, leading to outmigration and declining economic activity.

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• Our estimates should be viewed as a lower-bound on the potential economic losses associated with sea level rise and recurrent flooding.

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One Last Thing

• A natural disaster will likely lead to a significant injection of private insurance funds, public flood program funds, and federal and state disaster aid.

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• Sea level rise and recurrent flooding may result in the “death by a thousand small cuts” instead of a large natural disaster shock like Hurricane Katrina.

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• However, incentives are not aligned.
• Mitigation costs must be paid now.
• Mitigation benefits are in the future.
• The costs of future damages need to be internalized to change behavior.

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• Remember, our estimates are a lower bound
• Storm probabilities will increase as climate change accelerates.
• Storm damages may increase more rapidly than we expect.
• Network effects may lead to higher economic impacts than projected.

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Questions?

ODU – 2 Feet SLR Scenario

ODU – 4 Feet SLR Scenario

ODU – 6 Feet SLR Scenario

ODU – 8 Feet SLR Scenario

ODU – 10 Feet SLR Scenario

Storm Event Probability

• A “1 in 100-year” storm event is often thought of as occurring only once in 100 years.

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• However, the probability of a “1 in 100-year” storm event is 0.01 in any given year.

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• What is the probability of at least one “1 in 100-year” storm occurring over a 50-year period?

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• The probability is equal to 1 – P(no storm)^(periods)

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• Over a 50-year period, there is a 39.5% likelihood of being impacted by at least one “1 in 100-year” storm.

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HAZUS

• We applied HAZUS Flood Model to compute unrefined baseline losses for the study regions.

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• Sea level rise values were added to the current stillwater elevation to simulate the raised water surface “platform” upon which future storms will ingress. 

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• For example, if the current stillwater elevation is 3.75 feet and predicted sea level rise in 2080 is 4.72 feet, then the raised water surface platform is approximately 8.48 feet.

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• Using predicted values of sea level rise (NOAA intermediate-high scenario, 2017), flood models were executed for each study region to compute flood boundary and depth for storm recurrence periods. 

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• Model outcomes from HAZUS including building, contents, and inventory losses were categorized according to seven general occupancies.

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Workflow in HAZUS

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Storm Event Damages

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Estimation Overview

• We estimate damages for four study periods using projections of sea level rise.
• 2020
• 2040
• 2060
• 2080

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• Within each study period, four study events are run
• 1 in 10-year storm
• 1 in 50-year storm
• 1 in 100-year storm
• 1 in 500-year storm

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• We interpolate the damages for a 1 in 25-year storm in each study period.

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• These losses are estimated by type of occupancy (industry)
• Agriculture
• Commercial
• Educational
• Government
• Industrial
• Religion
• Residential

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• This process yields 1,120 estimates of damage across the eight PDCs, four study periods, seven industries, and five study events.

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Damage Estimates Example� �Hampton Roads

• Study period: 2020
• SLR projection: Current
• Study event: 1 in 100-year storm
• Industry: Commercial
• Total damage estimate: $870,043,000

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• Study period: 2040
• SLR projection: 1.61 feet
• Study event: 1 in 100-year storm
• Industry: Commercial
• Total damage estimate: $1,718,698,000

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• Study period: 2060
• SLR projection: 2.95 feet
• Study event: 1 in 100-year storm
• Industry: Commercial
• Total damage estimate: $2,604,908,000

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• Study period: 2080
• SLR projection: 4.66 feet
• Study event: 1 in 100-year storm
• Industry: Commercial
• Total damage estimate: $4,331,748,000

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Economic Impacts

• Direct effects are the set of expenditures (or losses) in an industry.

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• We need to consider the indirect and induced effects.

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• Indirect economic effects are business-to-business purchases in the supply chain resulting from the initial direct spending (or loss).

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• Induced economic effects are the spending of employees within the affected supply chain.

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• Economic impact is the result of direct, indirect, and induced effects.

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