NATIONAL FIRE DANGER RATING SYSTEM - COST BENEFIT ANALYSIS Final Version 2.2 - AFAC
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COST BENEFIT ANALYSIS NATIONAL FIRE DANGER RATING SYSTEM Final Version 2.2 24 August 2018 Prepared for
COST BENEFIT ANALYSIS | NATIONAL FIRE DANGER RATING SYSTEM CONTENTS PURPOSE OF REPORT ................................................................................................................................................ 5 ABBREVIATIONS ......................................................................................................................................................... 6 1. EXECUTIVE SUMMARY ................................................................................................................................ 8 1.1 Background ....................................................................................................................................................................... 8 1.2 Cost-Benefit Analysis .................................................................................................................................................... 8 1.3 Results ................................................................................................................................................................................. 9 1.4 Key Assumptions ............................................................................................................................................................ 9 1.5 Discussion ....................................................................................................................................................................... 10 1.6 Sensitivity Analysis ..................................................................................................................................................... 10 1.7 Other Economic Evaluations ................................................................................................................................... 11 2. BACKGROUND AND CONTEXT ................................................................................................................ 13 2.1 Current Fire Danger Rating System .................................................................................................................... 13 2.2 NFDRS Program............................................................................................................................................................ 14 2.3 Key Components .......................................................................................................................................................... 17 2.4 Improved Decision-Making ..................................................................................................................................... 19 2.5 Beneficiaries .................................................................................................................................................................. 20 2.6 Indices .............................................................................................................................................................................. 20 2.7 Outcomes......................................................................................................................................................................... 21 2.8 Key Deliverables To Date ......................................................................................................................................... 21 2.8.1 Research Prototype..................................................................................................................................................... 21 2.8.2 Social Research ............................................................................................................................................................. 21 2.8.3 Other Work ..................................................................................................................................................................... 22 2.9 Next Steps ....................................................................................................................................................................... 22 3. CASE FOR CHANGE ...................................................................................................................................... 23 3.1 Limitations of Current System ............................................................................................................................... 23 3.2 Improved Decision-Making ..................................................................................................................................... 24 3.3 Costs of Inaccurate Ratings...................................................................................................................................... 25 3.4 Increases in Extreme Fire Weather ...................................................................................................................... 26 3.5 Consistency with Government Policy .................................................................................................................. 27 3.5.1 Disaster Resilience ...................................................................................................................................................... 27 3.5.2 Mitigation of Disaster Risk ....................................................................................................................................... 27 3.6 Continuous Improvement ........................................................................................................................................ 28 4. PERFORMANCE OF RESEARCH PROTOTYPE ..................................................................................... 29 4.1 Description of Research Prototype ...................................................................................................................... 29 4.2 Trial Results – All Data .............................................................................................................................................. 30 4.3 Trial Results – Case Studies ..................................................................................................................................... 31 4.4 Operational Calibration & Additional Research .............................................................................................. 32 5. FRAMEWORK FOR EVALUATION OF COSTS AND BENEFITS ........................................................ 33 5.1 The Economics of Bushfires .................................................................................................................................... 33 5.2 Cost-Benefit Analysis ................................................................................................................................................. 34 2
COST BENEFIT ANALYSIS | NATIONAL FIRE DANGER RATING SYSTEM 5.3 Methods ........................................................................................................................................................................... 34 5.4 Consideration of Options .......................................................................................................................................... 35 5.5 Complexity ...................................................................................................................................................................... 35 5.6 Other Economic Evaluations ................................................................................................................................... 35 5.7 Effects of NFDRS ........................................................................................................................................................... 37 5.8 Benefits of NFDRS ........................................................................................................................................................ 39 5.9 Costs of Bushfires (Bushfire Losses) ................................................................................................................... 41 5.9.1 Direct Tangible Costs ................................................................................................................................................. 42 5.9.2 Indirect Tangible Costs.............................................................................................................................................. 44 5.9.3 Intangible Costs ............................................................................................................................................................ 45 5.9.4 Estimated Costs of Bushfires (Bushfire Losses) ............................................................................................. 47 5.10 Costs of Bushfire Management............................................................................................................................... 49 5.10.1 Direct Tangible Costs ................................................................................................................................................. 51 5.10.2 Indirect Tangible Costs.............................................................................................................................................. 51 6. ESTIMATION OF BENEFITS ...................................................................................................................... 53 6.1 Reduced Bushfire Losses .......................................................................................................................................... 53 6.1.1 Rationale for Reduction in Bushfire Losses ...................................................................................................... 53 6.1.2 Consideration of Issues ............................................................................................................................................. 53 6.1.3 Summary of Assumptions for Quantification of Benefits ............................................................................ 54 6.2 Reduced Number of Bushfires Started ............................................................................................................... 55 6.2.1 Rationale for Reduction in Number of Bushfires Started ........................................................................... 55 6.2.2 Consideration of Issues ............................................................................................................................................. 55 6.2.3 Summary of Assumptions for Quantification of Benefits ............................................................................ 58 6.3 Reduced Disruption (Productivity Losses) ....................................................................................................... 60 6.3.1 Over-Warning (Over-Predicting) .......................................................................................................................... 60 6.3.2 Trial Results & Assumptions ................................................................................................................................... 60 6.3.3 Local Risks ...................................................................................................................................................................... 61 6.3.4 Summary of Assumptions for Quantification of Benefits ............................................................................ 61 6.4 Firefighting Efficiencies ............................................................................................................................................ 62 6.4.1 Cost of Bushfire Management ................................................................................................................................. 62 6.4.2 Efficiency Benefits of NFDRS................................................................................................................................... 62 6.4.3 Potential for Further Productivity Gains ........................................................................................................... 63 6.4.4 Summary of Assumptions for Quantification of Benefits ............................................................................ 63 7. BENEFITS NOT QUANTIFIED ................................................................................................................... 65 7.1 Enhanced Community Resilience.......................................................................................................................... 65 7.1.1 Rationale.......................................................................................................................................................................... 65 7.1.2 Quantification ................................................................................................................................................................ 66 7.2 Reduced Risk of Over-Prediction .......................................................................................................................... 67 8. QUANTIFICATION OF NET BENEFITS ................................................................................................... 68 8.1 Summary ......................................................................................................................................................................... 68 8.2 Definitions ...................................................................................................................................................................... 70 8.3 Key Assumptions ......................................................................................................................................................... 70 9. SENSITIVITY ANALYSIS ............................................................................................................................. 72 3
COST BENEFIT ANALYSIS | NATIONAL FIRE DANGER RATING SYSTEM 9.1 Approach ......................................................................................................................................................................... 72 9.2 Summary of Analysis .................................................................................................................................................. 73 APPENDICES ............................................................................................................................................................... 74 A.1 Indicative Costs of Providing Bushfire Management in Australia ........................................................... 74 A.2 Loss of Life From Bushfire ....................................................................................................................................... 77 A.3 Historical Bushfire Disasters (1967 to 2018) .................................................................................................. 79 A.4 Total Fire Bans .............................................................................................................................................................. 82 A.5 Bushfire Restrictions .................................................................................................................................................. 84 A.6 Historic Forecasts of FDR in NSW ......................................................................................................................... 87 A.7 Cost of 2009 Victorian Bushfires ........................................................................................................................... 88 A.8 Major Losses in Victoria ............................................................................................................................................ 90 CONTACT US ............................................................................................................................................................... 92 4
COST BENEFIT ANALYSIS | NATIONAL FIRE DANGER RATING SYSTEM Purpose of Report In July 2014, emergency management ministers of the Law, Crime and Community Safety Council (LCCSC) agreed that the development of a new National Fire Danger Rating System (NFDRS) was a national priority. In response, the NFDRS Program was established, governed by the National Fire Danger Rating System Working Group, under the auspices of the Australia-New Zealand Emergency Management Committee (ANZEMC). Phase 1 of the NFDRS Program was completed in 2015. In 2016, ANZEMC determined to take a phased approach and Phase 2 was initiated. Phase 2 will be completed during 2018/19. The NFDRS Program is now seeking funding of $11.7 million for Phase 3 (which is scheduled to take three years commencing July 2019) and is currently preparing the Phase 3 Program Management Plan for submission to ANZEMC in September 2018. This cost benefit analysis has been prepared as part of that submission and builds on work undertaken during Phase 1, by the Bushfire and Natural Hazards Cooperative Research Centre (BNHCRC) and Cube Group (the 2015 Cube Report)1, on potential cost and benefit impacts of the NFDRS. This cost benefit analysis incorporates results achieved during Phase 2 from the trial of the Research Prototype that has been developed to improve the calculation of a fire behaviour index and ratings, and also reflects latest estimates of costs of bushfire losses and bushfire management. _______________________________ 1 National Fire Danger Rating System (NFDRS): Illustrative Impact of Benefits and Costs, September 2015 5
COST BENEFIT ANALYSIS | NATIONAL FIRE DANGER RATING SYSTEM Abbreviations Term Definition ACT Australian Capital Territory AFAC Australasian Fire and Emergency Service Authorities Council ANZEMC Australia-New Zealand Emergency Management Committee BCR Benefit-Cost Ratio BoM Bureau of Meteorology BNHCRC Bushfire & Natural Hazards CRC CFFDRS Canadian Forest Fire Danger Rating System CBA Cost Benefit Analysis CFA Country Fire Authority Victoria CSIRO Commonwealth Scientific and Industrial Research Organisation CWN Call When Needed DFES Department of Fire and Emergency Services Western Australia DSE Department of Sustainability and Environment Victoria ESO Emergency Service Organisation FDI Fire Danger Index FDR Fire Danger Rating FDRS Fire Danger Rating System FFDI Forest Fire Danger Index FY Financial Year GFDI Grassland Fire Danger Index ICA Insurance Council of Australia LCCSC Law, Crime and Community Safety Council NAFC National Aerial Firefighting Centre NDRRA Natural Disaster Relief and Recovery Arrangements NEMP National Emergency Management Project NFDRS National Fire Danger Rating System NPV Net Present Value NSDR National Strategy for Disaster Resilience NSW New South Wales NSW RFS New South Wales Rural Fire Service NT Northern Territory QFES Queensland Fire and Emergency Services 6
COST BENEFIT ANALYSIS | NATIONAL FIRE DANGER RATING SYSTEM Term Definition QLD Queensland SA South Australia SA CFS South Australia Country Fire Service SES State Emergency Service TAS Tasmania TFB Total Fire Ban TFS Tasmanian Fire Service VIC Victoria VSL Value of Statistical Life WA Western Australia 7
COST BENEFIT ANALYSIS | NATIONAL FIRE DANGER RATING SYSTEM 1. Executive Summary 1.1 Background In July 2014, emergency management ministers of the Law, Crime and Community Safety Council (LCCSC) agreed that the development of a new National Fire Danger Rating System (NFDRS) was a national priority. In response, the NFDRS Program was established. Phase 1 has been completed and Phase 2, which included the development and trial of a Research Prototype to improve the calculation of a fire behaviour index and ratings, will be completed during 2018/19. The NFDRS Program is now seeking funding of $11.7 million for Phase 3 (which is scheduled to take three years commencing July 2019). This cost benefit analysis (CBA) has been prepared as part of that funding submission and builds on work undertaken during Phase 1, by the Bushfire & Natural Hazards CRC (BNHCRC) and Cube Group (the 2015 Cube Report)2, on potential cost and benefit impacts of the NFDRS. In particular, this CBA incorporates results achieved during Phase 2 from the trial of the Research Prototype, and also reflects latest estimates of costs of bushfire losses and bushfire management. 1.2 Cost-Benefit Analysis CBA is an appraisal and evaluation technique that estimates the economic, social, and environmental costs and benefits of a project or program (in this case Phase 3 of the NFDRS Program) on all members of the community, relative to a situation without the proposed decision or action (i.e. the base case or ‘business as usual’ scenario). The base case is considered to be continuing with the existing McArthur-based fire danger rating system and not progressing the NFDRS Program. In undertaking our cost-benefit analysis, we have considered how the NFDRS might impact the direct/indirect tangible and intangible costs of (i) mitigation (prevention and preparation) and suppression activities, and (ii) bushfire losses It is important to note that costs in any cost-benefit analysis refer to economic, social, and environmental costs, not simply financial costs. Reliable estimates of mitigation/suppression costs and bushfire-attributed losses are not readily available. We have however estimated annual costs of bushfire losses in Australia at approximately $800 million and annual costs of providing bushfire management in Australia (for the authorities/agencies in each jurisdiction with lead responsibility for bushfire management) at approximately $1.5 billion/year. We note that the latter does not include costs associated with more than 200,000 volunteers which may be in the order of $3.6 billion annually. _______________________________ 2 National Fire Danger Rating System (NFDRS): Illustrative Impact of Benefits and Costs, September 2015 8
COST BENEFIT ANALYSIS | NATIONAL FIRE DANGER RATING SYSTEM 1.3 Results Our analysis indicates high potential returns from the NFDRS with our ‘most likely’ estimate presented in Table 1 below. Analysis has been done over a 20-year time frame (Year 1 is 2019/20) with all costs and benefits discounted to 2018/19 values using a 7% discount rate3. Table 1: Results of cost benefit analysis - Central Estimate Undiscounted Discounted at 7% ($m) per annum ($m) Benefits Reduction in quantum of bushfire losses 399.9 185.1 Reduction in number of bushfire losses 80.0 37.0 Reduction in variable suppression costs 66.8 31.5 Total 546.7 253.6 Costs Capital costs – Phase 3 of NFDRS 11.7 10.2 Additional operating costs of NFDRS (20 years) 5.4 2.7 Total 17.1 12.9 Net Present Value (NPV) 240.7 Benefit Cost Ratio (BCR) 19.7 1.4 Key Assumptions Key assumptions made in reaching the estimate above, and which are discussed in more detail in section 6 below, include: • Costs of bushfire losses in Australia are approximately $800 million/year and are expected to grow 3% per year, broadly in line with RBA forecasts for GDP growth.4 • Costs of providing bushfire management in Australia (for the authorities/agencies in each jurisdiction with lead responsibility for bushfire management) is approximately $1.5 billion/year and are expected to grow 2% per year based on annual population growth of more than 1.5% over the past decade, and growth in dwelling stock over the past four years in the range 1.5% to 2.0%.5 • By time of operational launch of the new NFDRS based on the Research Prototype (summer 2021/22), the NFDRS will at least match the Current System on over-prediction but will retain the superior under-prediction performance. _______________________________ 3 Office of Best Practice Regulation requires the calculation of net present values at an annual real discount rate of 7 per cent – CBA Guidance Note, Feb 2016 4 Central scenario remains for growth in the Australian economy to average a bit above 3 per cent in 2018 and 2019 – Speech by Philip Lowe, Governor, Sydney – 8 August 2018 5 Speech by Philip Lowe, Governor of Reserve Bank of Australia, Sydney – 8 August 2018 9
COST BENEFIT ANALYSIS | NATIONAL FIRE DANGER RATING SYSTEM • Given the performance of the Research Prototype in reducing under-prediction from 56% to just 7% (based on case studies of large destructive fires at the higher end of the rating system), and evidence of potential impacts on reducing bushfire losses with appropriate levels of readiness, we have assumed a 2% reduction in quantum of larger bushfire losses. • Given the performance of the Research Prototype in reducing under-prediction, and based on analysis of number/cause of fire by GFDI, we have assumed a reduction of 0.5% in the number of fires on the ‘most dangerous’ days and assume that 80% of bushfire losses occur on these days i.e. reducing the number of fires on the ‘most dangerous days’ will result in a reduction in annual bushfire losses of 0.4%. • Increased firefighting efficiency will translate into better firefighting outcomes (i.e. reduced bushfire losses) rather than significant cost reductions in firefighting services, although some reduction in variable fire suppression costs might be achieved (see below). • Variable fire suppression costs represent 20% of bushfire management costs and annual reductions of 1% in variable fire suppression costs are achieved following implementation of the NFDRS. • As we are assuming that over-prediction in the initial implementation of the NFDRS will match over-prediction in the Current System, we have assumed no benefits for potential reductions in community disruption nor ‘productivity gains’ associated with volunteers, although it is anticipated that there will be improvements in over-prediction over time as new science and improved indices are developed. • Implementation of a new fire danger rating scale based on the social research being undertaken, and more localised fire danger ratings, will require changes to the FDR decision- making framework. As we are uncertain what changes will be made and when/if changes will be made, we have not quantified nor included potential benefits associated with more localised fire danger ratings. 1.5 Discussion Whilst we have adopted a pragmatic approach in estimating costs and benefits, it is important to note that the evaluation of bushfire risk management is complex, and issues here include: • Quantifying and valuing all of the tangible and intangible costs of bushfire losses, and therefore the benefits of avoiding them, is very difficult. • There are inherent uncertainties in the relationship between bushfire management and avoided bushfire losses. • Estimating counterfactual scenarios is virtually impossible as consequences change due to impact of mitigation activities (e.g. Total Fire Ban declared) and suppression activities (e.g. initial attack success). • Significant data limitations in many areas. There is therefore inherent uncertainty in any estimates of costs or benefits. Given this uncertainty, we have undertaken sensitivity analysis as summarised in section 1.6 below. 1.6 Sensitivity Analysis As our analysis indicates high potential returns from the NFDRS (refer Table 1 above), we have focused our sensitivity analysis on ‘downside’ scenarios. Our ‘downside’ analysis is shown in Table 2 below and shows impact on NPV and BCR for a 50% reduction in outcomes and a 90% reduction in outcomes. 10
COST BENEFIT ANALYSIS | NATIONAL FIRE DANGER RATING SYSTEM Table 2: Sensitivity analysis Most Likely 50% 90% Scenario Reduction in Reduction in Outcome’ Outcomes Benefits Reduction in quantum of bushfire losses 399.9 200 40 Reduction in number of bushfire losses 80 40 8 Reduction in variable suppression costs 66.8 33.4 6.7 Sub-Total 546.7 273.4 54.7 Present Value of Benefits 253.6 126.8 25.4 Costs of NFDRS Capital costs – Phase 3 of NFDRS 11.7 11.7 11.7 Additional operating costs of NFDRS (20 years) 5 5 5 Sub-Total 16.7 16.7 16.7 Present Value of Costs 12.9 12.9 12.9 Net Present Value (NPV) 240.7 113.9 12.5 Benefit Cost Ratio (BCR) 19.7 9.8 2.0 Even with a 90% reduction in expected outcomes, the analysis still indicates a positive BCR of 2.0. 1.7 Other Economic Evaluations An economic evaluation of research to improve the Canadian Forest Fire Danger Rating System (CFFDRS) was published in 2013 by authors from Department of Natural Resources Canada and Australia’s CSIRO.6 Similar to the McArthur-based system described in section 3.1 above, the Canadian FFDR System at that time was based on a system conceptualised more than 40 years prior and had changed little in the intervening years. The next-generation CFFDRS envisaged making similar improvements to those contemplated in Phase 3 of the NFDRS Program. The 2013 evaluation indicated high levels of net economic benefit if the CFFDRS were to be enhanced by additional research investment, with ‘most likely’ estimate of net present value (NPV) of C$1.4 billion and benefit-cost ratio (BCR) of 220. In making this ‘most likely’ estimate, the researchers relied on ‘expert elicitation’ for ‘low’, ‘most likely’ and ‘high’ estimates for likely increases/reductions in a range of different parameters with _______________________________ 6 James S. Gould, Mike N. Patriquin, Sen Wang, Bonita L. McFarlane and B. Mike Wotton | Economic evaluation of research to improve the Canadian forest fire danger rating system, Forestry 2013;86,317-329 11
COST BENEFIT ANALYSIS | NATIONAL FIRE DANGER RATING SYSTEM and without the investment in a next-generation CFFDRS. This estimate also assumed a ‘medium’ research adoption period (as compared to a ‘shorter’ or ‘longer’ period of adoption). Whilst the researchers considered a wide number of parameters, most of the benefit was derived from expected savings in variable fire suppression costs and fixed fire suppression costs, with benefits calculated over 30 years and discounted at 3%. The returns presented by the Canadian evaluation are extraordinary compared to those seen in most CBAs. We have adopted much more conservative assumptions in this CBA, although our ‘most likely’ estimate still shows high potential returns from the NFDRS. 12
COST BENEFIT ANALYSIS | NATIONAL FIRE DANGER RATING SYSTEM 2. Background and Context 2.1 Current Fire Danger Rating System Fire danger indices are used in many parts of the world to integrate meteorological and fuel information into measures that can be used to issue warnings and/or estimate the difficulty of putting out fires which may occur. In Australia, the McArthur Mk V Forest Fire Danger Index (FFDI) and the CSIRO Grassland Fire Index (GFDI) are used to forecast the influence of weather on fire behaviour, with GFDI being used for most fuel types except forest. Forecasts of both indices are issued by the Australian Bureau of Meteorology (BoM). Fire agencies use these forecasts, together with other factors, to determine Fire Danger Ratings (FDRs) by area/region which are disseminated to the community. Since 2009, and in response to the recommendations of the 2009 Victorian Bushfires Royal Commission, State and Territory governments have adopted revised Fire Danger Rating categories with fire danger ratings as shown in Figure 1 below. Figure 1: Fire Danger Rating based on fire danger indices Prior to the adoption of the fire danger rating scale above, the scale was subdivided into five fire danger categories (Low, Moderate, High, Very High, and Extreme). Whilst the revisions to fire danger ratings in 2009 have improved communications (particularly public warnings as they relate to the top, more dangerous end of the scale), scientific variables that underpin the fire danger ratings were not reviewed nor used to inform revisions to the fire danger ratings. It was recognized, as part of the review, that an evaluation of the science driving the fire danger index was also needed.7 _______________________________ 7 AEMC - National Bushfire Warnings Taskforce, 2009 13
COST BENEFIT ANALYSIS | NATIONAL FIRE DANGER RATING SYSTEM In operational use since the 1960s, the current McArthur-based fire danger rating system (Current System) was designed for general fire danger forecasting and relies on simple weather data inputs. The current McArthur-based FDR system does not cover fire behaviour and fire danger for all major vegetation types in Australia (just grassland and dry sclerophyll eucalypt forest) and does not adequately reflect our current knowledge of fire behaviour and modern science, nor advances in communication, technology, and systems.8 Specific limitations of the current McArthur-based fire danger rating system in Australia are outlined in more detail in section 3.1 below. 2.2 NFDRS Program In July 2014, emergency management ministers of the LCCSC agreed that the development of a new NFDRS was a national priority. In response, the NFDRS Program was established, governed by the National Fire Danger Rating System Working Group, under the auspices of the ANZEMC. The NFDRS Program seeks to achieve the following:9 • Greater scientific accuracy behind decisions to enable more accurate advice and warnings. • Greater ability to understand and predict local fire danger risk. • Improved community awareness of risk exposure and increased confidence in the information being provided. • Increased safety, health, and wellbeing for the community. • More efficient use of national, jurisdictional, and local resources. During Phase 1, a Program Management Plan and supporting documents were developed. The NFDRS Program proposed at the end of Phase 1 was estimated to cost in the order of $42 million. In addition, jurisdictions were required to identify and enact the appropriate legislative and policy changes that support the implementation of a new NFDRS.9 In April 2016, ANZEMC agreed to a phased approach to deliver the system, with the following deliverables approved for Phase 2: • Establishment of Program Board and Program Management Office (AFAC – implemented). • Development of a research prototype Fire Behaviour Index to test the various elements of the requirements and providing greater control over costs and scheduling (NSW RFS – completed). • Social research into community understanding of fire danger (SA CFS – underway). • Preparation of a revised Program Management Plan for subsequent development (under development). _______________________________ 8 Claire S Yeo et al, Bushfire & Natural Hazards CRC | Fire Danger Indices: Current Limitations and a Pathway to Better Indices, 2014 9 National Fire Danger Rating System (NFDRS), Five Year Program Management Plan (PMP), December 2015, Final Version v1.2 14
COST BENEFIT ANALYSIS | NATIONAL FIRE DANGER RATING SYSTEM Since the establishment of the NFDRS Program in 2014, the first two phases have proceeded to plan with progress to date summarised in Table 3 below. A detailed report presenting the findings of the project that developed the Research Prototype is currently in draft10 and is due to be presented to ANZEMC in September 2018. Funding for these first two phases has comprised grant funding of $1.7 million from the National Emergency Management Project (NEMP) and additional support from fire and emergency services, land management agencies, BoM, BNHCRC, AFAC, and Emergency Management Australia. _______________________________ 10 Matthews S, Fox-Hughes P, Grootemaat S, Hollis JJ, Kenny BJ, Sauvage S (2018) National Fire Danger Rating System: Research Prototype, NSW Rural Fire Service, Lidcombe, NSW, 383 pp. 15
COST BENEFIT ANALYSIS | NATIONAL FIRE DANGER RATING SYSTEM Table 3: NFDRS Program – key deliverables to date Element 2014-15 2015-16 2016-17 2017-18 2018-19 Phase 1 Phase 2 Project • Requirements Summary (May 2015) • Establish Program Board and Program Management Office Management • Phase 1: Preferred Implementation Approach (Aug 2015) • Revised High Level Costings • Phase 3 Program • Illustrative Impact of Benefits & Costs (Sep 2015) (June 2018) Management Plan (Sept • Five-Year Program Roadmap (Nov 2015) 2018) • Five-Year Program Management Plan (Dec 2015) Fire • Research Prototype system • Calibrate/refine Research Behaviour built. Prototype. Index • System operated • Include northern dry demonstrating ratings can be season in live trial. applied in live trial. • Evaluate NFDRS for • Evaluation Report prepared: prescribed burning – Found Research • Publish evaluation. Prototype more accurate than Current System. – Identified knowledge gaps – Recommended next steps for development Other Indices • Scope other indices Social • Plan/conduct social Research research into community understanding of fire danger 16
COST BENEFIT ANALYSIS | NATIONAL FIRE DANGER RATING SYSTEM 2.3 Key Components The key components of the NFDRS as conceived are illustrated in Figure 2 below with comparison to the Current System shown in Figure 3 below. Figure 2: Key components of proposed NFDRS11 _______________________________ 11 National Fire Danger Rating System (NFDRS), Five Year Program Management Plan (PMP), December 2015, Final Version v1.2 17
COST BENEFIT ANALYSIS | NATIONAL FIRE DANGER RATING SYSTEM Figure 3: System view comparison of Current System as compared with proposed NFDRS12 Grey areas of diagram represent future development for the NFDRS Program and white areas indicate current (sometimes limited) functionality _______________________________ 12 National Fire Danger Rating System (NFDRS), Five Year Program Management Plan (PMP), December 2015, Final Version v1.2 18
COST BENEFIT ANALYSIS | NATIONAL FIRE DANGER RATING SYSTEM In essence, the NFDRS will incorporate more of the inputs necessary to assess fire danger, and use the latest science and systems, to better predict six factors (fire weather, fuel conditions, fire behaviour, ignition likelihood, fire suppression and impact on life, assets, and the environment) important to determining fire danger ratings and to supporting decision-making. Incorporating more data elements will increase the accuracy of forecasts and reduce the uncertainty around estimates. The six factors, which will inform decision-making and enable a Fire Danger Rating to be set, are explained in more detail in Table 4 below. Table 4: NFDRS Factors Factor Description Fire Weather Fire weather is a combination of climate (drought, severe weather, recurrence) and weather (temperature, humidity, wind speed, wind direction, instability). It also takes into consideration landscape dryness, chance of extreme events and atmospheric instability. Fuel Condition Fuel conditions includes hazard, dryness, flammability, availability, and continuity derived from data about the landscape/topography (slope, aspect, elevation) and fuel (structure, quantity, exposure, growth). Fire Behaviour Fire behaviour includes elements like spread/growth, ember density and distance, flame height and depth, radiation, convection, power, and energy Ignition Likelihood Ignition likelihood includes natural and human ignitions with a focus on ease of ignition and probability of ignition. Fire Suppression Fire suppression includes resource capacity and chance of success or failure Fire Impact Fire impact is also commonly known as fire damage and includes chance of loss of life, loss of property, impact on the built environment, impact on the natural environment, economic impact, and social impact. The fire danger ratings will reflect both fire behaviour and impact, and deliver more locally specific outputs, so that warnings, mitigation, and suppression can be more targeted. 2.4 Improved Decision-Making The enhancements described above will result in the NFDRS supporting improved decision- making, before and during bushfires, in the following areas: • Community warnings (declared rating). • Additional community or localised messaging for vulnerable communities and other at-risk groups. • Total fire bans and other restrictions. • Prescribed burning. • Determining readiness levels of emergency service organisations (ESOs). • Informing suppression strategy, resourcing, and planning. 19
COST BENEFIT ANALYSIS | NATIONAL FIRE DANGER RATING SYSTEM 2.5 Beneficiaries Reliable predictions of fire danger are critical to a wide variety of decision-making. The 2015 Cube Report noted that the proposed NFDRS would benefit many organisations and groups as set out in Figure 4 below. Insurers would be another group that could be expected to benefit from the NFDRS. Figure 4: Organisations and groups that will benefit from the NFDRS13 2.6 Indices Fire is a multi-faceted hazard and it may be necessary to use several indices to represent the risk.14 The NFDRS splits the fire danger rating into a Fire Behaviour Index, and three further indices that consider ignition likelihood, suppression, and fire impact. To date, the NFDRS Program has built a Research Prototype incorporating a new Fire Behaviour Index and new ratings scale. Scoping of three other indices (Ignition Likelihood Index, Suppression Index, and Fire Impact Index) will occur in 2018/19 with development of a research prototype of the three indices proposed for Phase 3 of the NFDRS Program. _______________________________ 13 National Fire Danger Rating System (NFDRS): Illustrative Impact of Benefits and Costs, September 2015 14 Claire S Yeo, Jeffrey D Kepert, Robin Hicks, Fire Danger Indices: Current Limitations and a Pathway Towards Better Indices. 20
COST BENEFIT ANALYSIS | NATIONAL FIRE DANGER RATING SYSTEM By accounting for the likelihood (e.g. probability of ignition) and consequences (e.g. possible asset damage), warnings and mitigation can be better targeted, and emergency resources more effectively deployed. 2.7 Outcomes The outcomes expected from the NFDRS Program include: • More accurate prediction and communication of bushfire risk. • More locally specific outputs that can be used to engage the community and manage resources. • Enhanced agency preparedness, readiness, and strategic planning – enabling more efficient and effective use of resources. • Reduced risk of loss of life and assets from bushfires. • Reduced economic loss due to unnecessary disruption to business and communities. • Contribution to risk management and prevention through enhanced efficacy in land management, critical infrastructure investment, planning schemes and building standards. 2.8 Key Deliverables To Date 2.8.1 Research Prototype A key deliverable achieved in Phase 2 was the development of a Research Prototype to improve the calculation of a fire behaviour index and ratings. The purpose of the Research Prototype was to demonstrate that it is feasible to develop a fire danger rating system based on fire behaviour models and which is national, modular, and open to continuous improvement. The Research Prototype was used to conduct a nationwide interactive trial over the 2017/18 southern fire season, with all jurisdictions participating and providing input. The trial compared the calculated prototype fire danger ratings to the existing fire danger ratings. Detailed results of the trial are presented in section 4 to this report. 2.8.2 Social Research As part of Phase 2, social research has been commissioned to: • Understand levels of comprehension, use, uptake, and effectiveness that exist for the current FDR. • Investigate what form and characteristics would a new NFDRS require in order to improve community safety outcomes. The social research commenced on 1 July 2018 and is scheduled to be finalised by February 2019. This social research will potentially impact on the messaging and signage that is used to convey Fire Danger Ratings to the general community. 21
COST BENEFIT ANALYSIS | NATIONAL FIRE DANGER RATING SYSTEM 2.8.3 Other Work Other work that will be undertaken in 2018/19 includes: • Further evaluation and calibration of the Research Prototype over the 2018-19 northern and southern fire season. • Investigation of the application of the NFDRS to prescribed burns using the Research Prototype. • Publication of Research Prototype methodologies and findings in scientific journals. • Scoping a project plan for the three other indices (Ignition Likelihood Index, Suppression Index and Fire Impact Index). • Completing the Phase 3 Program Management Plan including a series of high level consultation workshops and a cost benefit analysis. 2.9 Next Steps Following development of the Research Prototype, and consistent with the phased approach adopted to date, the NFDRS Program is now seeking Phase 3 capital funding of $11.7 million to: • Plan, build and implement the new system for fire behaviour (Fire Behaviour Index) i.e. take prototype to operational implementation. • Develop prototype indices to provide assessment of social, economic, and environmental impacts of fire: – Ignition Likelihood Index – Suppression Index – Fire Impact Index • Implement an improved FDR decision making framework, including information to community informed by social research. • Maintain Program Management Office. Phase 3 is scheduled to take three (3) years commencing July 2019 with the new NFDRS using the operational version of the Research Prototype expected to be implemented in time for the 2021/22 summer fire season. In addition, there is ongoing operational costs for the NFDRS of approximately $0.2 million per year. The NFDRS Program is currently preparing the Phase 3 Program Management Plan for submission to the Australia-New Zealand Emergency Management Committee in September 2018. This cost benefit analysis has been prepared as part of that submission. At the end of Phase 3, there will be a gateway review process to determine whether or not to proceed to Phase 4 of the NFDRS Program i.e. the transition of the three research prototype indices (fire impact, ignition likelihood and suppression capability) into operational use. It should be noted that the Phase 3 funding request above does not include policy and legislative activities, national collaboration activities nor change management activities. These activities are expected to be managed at the jurisdictional level. 22
COST BENEFIT ANALYSIS | NATIONAL FIRE DANGER RATING SYSTEM 3. Case for Change 3.1 Limitations of Current System In operational use since the 1960s, the current McArthur-based fire danger rating system was designed for general fire danger forecasting and relies solely on meteorological data inputs. The McArthur-based system does not cover all major vegetation types in Australia (just grassland and dry sclerophyll eucalypt forest) and does not adequately reflect our current knowledge of fire behaviour and modern science, nor advances in communication, technology, and systems.15 The system is also unable to consider risk to life and property should a fire occur and cannot be modified to incorporate these considerations. Specific limitations of the current McArthur-based fire danger rating system in Australia include:16 • Limited to just two fuel types which only account for 23% (grassland) and 6% (dry sclerophyll eucalypt forest) of vegetation types across Australia (refer Figure 5 below). • Current fire danger ratings do not reflect potential for community losses (i.e. impacts). • Fire danger ratings do not incorporate advances in our understanding of fire behaviour. • Fire danger ratings do not adequately take into account advances in our understanding of atmospheric stability, nor consider other important factors such as overnight air temperature and relative humidity. • Does not account for fuel variability (e.g. availability, load, type, and structure) and other risk factors. • High degree of error, particularly at the upper end of the fire danger scale, where risk is highest and where accuracy is needed most. • Fire danger is forecast over large areas when more specific localised models are required. • System does not include some of the worst-case conditions that have been experienced since the system was developed. • Fire danger ratings are sometimes poorly understood by both practitioners and the general public. • Fire danger ratings are not targeted towards specific applications (e.g. development assessment, suppression difficulty, impact/consequence determination) nor specific audiences (e.g. scientists, practitioners, burn planners and general public). • Subjective application of system around Australia limits ability to assess accuracy and application. The most severe conditions represented by both FFDI and GFDI were based on then known ‘worst-case’ fires (the 1939 Black Friday for forests, and the 1952 Mangoplah for grasslands). _______________________________ 15 Claire S Yeo et al, Bushfire & Natural Hazards CRC | Fire Danger Indices: Current Limitations and a Pathway to Better Indices, 2014 16 Matthews S, Fox-Hughes P, Grootemaat S, Hollis JJ, Kenny BJ, Sauvage S (2018) National Fire Danger Rating System: Research Prototype, NSW Rural Fire Service, Lidcombe, NSW, 383 pp 23
COST BENEFIT ANALYSIS | NATIONAL FIRE DANGER RATING SYSTEM Weather conditions for these ‘worst case’ fires have since been exceeded a number of times (e.g. Ash Wednesday 1983, Black Saturday 2009) which limits the applicability of the McArthur-based FDRS in situations where the conditions may be out of the range of those meters.17 In addition, the current System was never designed to inform community warnings and is ill- suited to do so, yet it is the only measure available to inform warnings. The National Framework for Warnings relies on the FDI to determine the level of community warning to be issued during a fire emergency. This directly impacts upon the accuracy and effectiveness of community warnings and is a key vulnerability for emergency services. Figure 5: Fuel types to be covered by NFDRS 3.2 Improved Decision-Making The limitations outlined above mean that the current fire danger rating system does not adequately model and communicate the impact of fire danger, meaning decision-making is sub- optimal. The NFDRS seeks to improve decision-making as follows: • Fire danger ratings based on local fuel type and condition, and local weather, leading to: – Better decisions based on level, nature, and scale of risk. – Increased ability to determine appropriate ratings and information to be disseminated. • Nationally consistent, defensible decision-making. • More accurate application of regulations and restrictions (e.g. total fire ban, cease harvest etc). _______________________________ 17 S. Harris, W. Anderson, M. Kilinc and L. Fogarty | Establishing a link between the power of fire and community loss: The first step towards developing a bushfire severity scale Fire and adaptive management report no. 89 24
COST BENEFIT ANALYSIS | NATIONAL FIRE DANGER RATING SYSTEM • Agency readiness better aligned to forecast risk. • Support long-term strategic risk-mitigation decisions – Prescribed burning – Land-use planning – Critical infrastructure protection 3.3 Costs of Inaccurate Ratings The Fire Danger Rating (FDR) is an early indicator of the potential danger should a bushfire start and is a trigger for communication, mitigation, and suppression readiness activities. Analysis of historical losses show that most losses (life and houses) have occurred when the Forest Fire Danger Rating (FFDR) has been Severe (FDI 50-74), Extreme (FDI 75-99) and Catastrophic/Code Red (FDI 100+), as shown in Figure 6 below. Cumulative loss of life (%) is shown in pink, and cumulative house losses (%) are shown in blue. Figure 6: Historical losses by reference to FDI calculations18 Further analysis of historic losses (life and property) is included in Appendix A.2 and Appendix A.3. Evaluation of the Current System and the Research Prototype, for a sample of case studies comprising large destructive fires at the higher end of the rating system (refer section 4 below), found that the Current System had a significant under-prediction bias. _______________________________ 18 AMEC – National Bushfire Warnings Taskforce, Australia’s revised arrangements for bushfire advice and alerts, Version 1.1 October 2009 25
COST BENEFIT ANALYSIS | NATIONAL FIRE DANGER RATING SYSTEM Under-predicting the fire danger rating is dangerous, especially at the higher end of the scale, because this is where there is most risk, and where most of the loss of life and loss of houses occurs. If under-predictions can be reduced, then the risk of loss of life and property also reduces, because damage from fires may be reduced (because agency readiness is at an appropriate level) or because the fires never start due to appropriate mitigation activities (e.g. regulatory actions such as total fire bans, and industry risk mitigation procedures modifying or ceasing an activity that might start a fire, etc). Conversely, over-predicting (i.e. false alarms) results in productivity losses (unnecessary total fire bans, school closures, restrictions on agriculture etc), over-preparedness of fire agencies (costs of aircraft on stand-by, productivity losses associated with volunteer firefighters etc), unwanted anxiety, and loss of trust/credibility in the forecasts. 3.4 Increases in Extreme Fire Weather Since the 1970’s, there has been an increase in extreme fire weather, and a longer fire season, across large parts of Australia. Figure 7 below shows national trends from 1974 to 2015 in annual 90th percentile of daily FFDI at 38 climate reference locations. Trends are in FFDI points per decade and filled circles represent statistically significant trends with larger circles representing larger trends. Trends are upward (in red), except for Brisbane airport (in blue).19 Figure 7: Trends in extreme fire weather days19 _______________________________ 19 Bureau of Meteorology, CSIRO – State of the Climate 2016 26
COST BENEFIT ANALYSIS | NATIONAL FIRE DANGER RATING SYSTEM The Bureau of Meteorology note that the ‘annual 90th percentile of daily FFDI points has increased since 1974 across Australia, especially in southern and eastern Australia, and the fire season has lengthened. Increasing temperatures and drying contributed to the observed upward trend in FFDI’.20 With weather conditions conducive to fire becoming increasingly frequent, the need for accurate and reliable fire danger warnings becomes even more important. 3.5 Consistency with Government Policy 3.5.1 Disaster Resilience Australia's National Strategy for Disaster Resilience (NSDR)21 acknowledges the increasing severity and regularity of disasters in Australia and the need for a coordinated and cooperative national effort to enhance Australia's capacity to withstand and recover from emergencies and disasters. Whilst disaster resilience is described in the NSDR as a collective responsibility, the NFDRS Program is consistent with the role of government outlined in the NSDR including: • Having effective arrangements in place to inform people about how to assess risks and reduce their exposure and vulnerability to hazards. • Developing and implementing effective, risk-based land management and planning arrangements and other mitigation activities. • Having clear and effective education systems so people understand what options are available and what the best course of action is in responding to a hazard as it approaches. • Supporting individuals and communities to prepare for extreme events. • Ensuring the most effective, well-coordinated response from our emergency services and volunteers when disaster hits. 3.5.2 Mitigation of Disaster Risk In 2014, the Productivity Commission conducted an inquiry into the efficacy of natural disaster funding arrangements in Australia in response to concerns that the consequences of some natural disasters could be mitigated but that funding arrangements were weighted towards disaster recovery, so reducing incentives for mitigation of disaster risk. 22 The NFDRS Program, being a program to improve disaster risk mitigation, is again consistent with the findings and recommendations of that report including: • Mitigation expenditure across all levels of government is likely to be below the optimal level. • Information is critical to understanding and managing natural disaster risk. Hazard and risk exposure information has improved significantly in recent years, but there are opportunities to improve information consistency, sharing and communication. • Governments at all levels should make new and currently held natural hazard data publicly available in accordance with open public sector information principles. _______________________________ 20 Bureau of Meteorology, CSIRO – State of the Climate 2016 21 National Strategy for Disaster Resilience, Council of Australian Governments, February 2011. 22 Productivity Commission 2014, Natural Disaster Funding Arrangements, Inquiry Report no. 74, Canberra. JEL code: H77, H84. 27
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