Cost benefit analysis of TOGA and the ENSO observing system

Abstract

R&D programs intended to develop climate prediction capabilities are costly. But if they are successful, they yield continuing economic benefits. However, because such benefits are difficult for private companies to capture, it falls to the public sector to pursue them. Public sector decision makers, before funding climate research programs, must be convinced that such programs serve the public interest, i.e., that their economic benefits exceed their economic costs. The purpose of this paper is to shed some light on that issue. Specifically, we construct a cost benefit analysis of the recently completed TOGA (Tropical Ocean Global Atmosphere) program. TOGA, a successful 10 year international scientific effort to understand and model the ENSO (El Nino/Southern Oscillation) phenomenon, has led to models which are capable of predicting ENSO events a year or so in advance. In our cost benefit analysis, we used estimates of the benefits of climate forecasts to the U.S. agricultural sector, the actual historical and the estimated future costs (to the U.S.) of the research, development and operationalization that climate forecast system, and a 36 case sensitivity analysis. Our results indicate that TOGA will provide a real economic return on investment to the U.S. of at least 13% to 26%, depending on the assumptions made in the analysis. This is substantially in excess of the hurdle rate of 7% usually used by the federal government. We conclude that the TOGA program was a sound use of public resources, and that additional funding of climate forecasting R&D efforts (at both the national and international levels) merits serious consideration.