Economic Value of Weather and Climate Forecasts

Case Studies: Transportation

Transportation


Craft, E.D. (1998). The value of weather information services for nineteenth-century Great Lakes shipping. American Economic Review, 88, 1059-1076.
Leigh, R.J. (1995). Economic benefits of Terminal Aerodrome Forecasts (TAFs) for Sydney Airport, Australia. Meteorological Applications, 2, 239-247.
Regnier, E. and Harr, P.A. (2006). A dynamic decision model applied to hurricane landfall. Weather and Forecasting, 21, 764-780.
Smith, K. and Vick, S.D. (1994). Valuing weather radar benefits for winter road maintenance: a practical case example. Meteorological Applications, 1, 173-177.


Study Craft, E.D. (1998). The value of weather information services for nineteenth-century Great Lakes shipping. American Economic Review, 88, 1059-1076.
Structure of Decision Problem Forecast Characteristics Information Valuation
Decision: whether to delay shipping
Dynamics: no
Time Scale: several hours
Predictand: storm warning/wind speed
Format: categorical
Type: realistic
Quality Changes: no
Baselines: see comments
VOI, imperfect: social rate of return at least 60%
VOI, perfect: not reported
Risk Treatment: expected value
Comments Forecast value measured in terms of social rate of return for weather expenditures. Value derived by relating shipping losses to number of storm-warning stations. One of earliest estimates of forecast value.
Related Studies Craft, E.D. (1995). The provision and value of weather information services in the United States during the founding period of the Weather Bureau. Ph.D. dissertation, Univ. of Chicago.


Study Leigh, R.J. (1995). Economic benefits of Terminal Aerodrome Forecasts (TAFs) for Sydney Airport, Australia. Meteorological Applications, 2, 239-247.
Structure of Decision Problem Forecast Characteristics Information Valuation
Decision: whether to carry additional fuel aboard aircraft
Dynamics: no
Time Scale: daily
Predictand: storms, fog, low cloud height, low visibility
Format: categorical
Type: realistic, derived
Quality Changes: yes
Baselines: climatological
VOI, imperfect: $6.9 million/year (1994 Australian $)
VOI, perfect: $8.5 million/year
(1994 Australian $)
Risk Treatment: expected value
Comments Results are for Qantas Airways only (most airlines operate under mandatory alternate fuel policy which reduces forecast value). Economic benefit of 1% increase in forecast accuracy is $1.2 million/year. Qantas indirectly pays about A$6 million/year to Bureau of Meteorology for aviation weather services.
Related Studies Anaman, K.A., et al. (1997). Benefits of meteorological services: Evidence from recent research in Australia. Meteorological Applications, 5, 103-115.


Study Regnier, E. and Harr, P.A. (2006). A dynamic decision model applied to hurricane landfall. Weather and Forecasting, 21, 764-780.
Structure of Decision Problem Forecast Characteristics Information Valuation
Decision: prepare for hurricane (e.g., evacuation) or wait
Dynamics: yes
Time Scale: 6 hours
Predictand: hurricane track
Format: probabilistic
Type: derived
Quality Changes: no
Baselines: climatology
VOI, imperfect: up to 8% relative to static decision
VOI, perfect: used as additional reference
Risk Treatment: expected value
Comments "A key feature of the decision model is that the decision maker explicitly anticipates and plans for future forecasts whose accuracy improves as lead time declines." Markov chain model used to produce hurricane-strike probability forecasts. Value results from reduction in false alarms due to dynamic optimization, not any improvement in forecasts.
Related Studies Regnier, E. (2008). Public evacuation decisions and hurricane track uncertainty. Management Science, 54, 16-28.


Study Smith, K. and Vick, S.D. (1994). Valuing weather radar benefits for winter road maintenance: a practical case example. Meteorological Applications, 1, 173-177.
Structure of Decision Problem Forecast Characteristics Information Valuation
Decision: whether to apply de-icing materials (salt and grit).
Dynamics: no
Time Scale: daily forecasts
Predictand: precipitation occurrence
Format: categorical
Type: realistic
Quality Changes: no
Baselines: original forecast service
VOI, imperfect: £23,000 (1994 UK £) per 100 days winter maintenance per year
VOI, perfect: not given
Risk Treatment: expected value
Comments Forecast value is based on additional benefits when weather radar imagery complements existing forecast service. Value is for single Regional Council in Scotland.


Home | Agriculture | Energy | Fishery | Case Study Attributes