NATIONAL FIRE DANGER RATING SYSTEM - COST BENEFIT ANALYSIS Final Version 2.2 - AFAC

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NATIONAL FIRE DANGER RATING SYSTEM - COST BENEFIT ANALYSIS Final Version 2.2 - AFAC
COST BENEFIT ANALYSIS
NATIONAL FIRE DANGER
RATING SYSTEM
Final Version 2.2

                        24 August 2018

                        Prepared for
NATIONAL FIRE DANGER RATING SYSTEM - COST BENEFIT ANALYSIS Final Version 2.2 - AFAC
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

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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

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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

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         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

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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

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 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

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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

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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

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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.

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           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

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     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.

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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

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           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

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          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.

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     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

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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

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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

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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.

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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.

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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.

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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.

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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

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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

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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

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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

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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.

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