Avoided Costs of Climate Services : Lake Ice Extent (LIE) Service as an Example

Lake ice is vital for functioning of the lake ecosystems and provides multiple key ecosystem services to the Arctic societies. Climate change changes lake ice conditions which affects these ecosystems and ecosystem services provided by the lake ice. To assess changes of the lake ice in the Northern hemisphere, a climate service providing information on the lake ice extent (LIE) has been set up. The LIE service generates also other types of benefits to for example sector of hydroelectricity and recreation.

Potential of climate services has not been fully realised by stakeholders and decision-makers. Economic evaluation may support communicating their value especially in times when objectives of public economy are preferred. Moreover, impacts of small climate services can be difficult to perceive, and certain types of benefits can be challenging to observe. These benefits include avoided costs using climate services.

In this thesis avoided costs of the LIE service are estimated both quantitatively and qualitatively using avoided-cost assessment. Used data includes interview results, statistical data, and previous literature. Avoided costs the service generates comprise mainly of avoided in-situ lake ice monitoring trips and travel expenses, avoided flood and infrastructure damages, and potentially avoided injuries and mortality through improved safety. Although quantitatively assessed avoided costs are quite low, level of avoided costs using the LIE service are considerable when quantitatively and qualitatively assessed avoided costs are combined. Moreover, the benefit-cost ratio (BCR) of the avoided costs is reasonable.

Findings underline the importance of understanding benefits of climate services that are difficult to quantify. Understanding these benefits also supports justifying financing of climate services. Nonetheless, results are highly uncertain and prospective assessments are required.