Triggering Early LP Costs for Drought using LEAP

1. Triggering Early LP Costs for Drought using LEAP Joanna Syroka, Addis Ababa, Ethiopia 21 January 2008

2. CALCULATIONS (in LEAP) INPUT OUTPUT Challenge • To create an objective index that can be used to trigger earlyLivelihood Protection costs to regions for PSNP and non-PSNP drought needs • Input Data: • LEAP water balance model calculations • Objective estimates of crop yield deviations due to water stress (and therefore rainfall) • Calculations: • A methodology that relates water balance calculations to beneficiary numbers per region • Fixed at the beginning of the season • Output Data: • LP Costs per region, varying only due to rainfall

3. Approach • It must be simple, transparent and robust • To establish the calculation methodology we must compare LEAP water balance output to historical beneficiary numbers • The final index should be able to target both PSNP and non-PSNP weredas, therefore wereda-level data needed: • LEAP water balance output specified for locally grown, dominant crops, WBIwereda • E.g. adjusted for local varieties, soil type etc. • Take into account Belg and Meher yields where appropriate • 1995-2007 • Historical DPPA data • 1994-2004: Total Emergency Beneficiary Numbers • 2005-2007: PSNP + Emergency Beneficiary Numbers • Output data is only as good as inputs used!!

4. Calculation Methodology • A simple linear regression to relate a historical Regional Drought Index (Y, independent variable) to a Regional Total Beneficiary Estimate (N, dependent variable), i.e. N = a * Y + b • The intercept and slope, b and a, are estimated by the intercept and slope of the least-squares regression line • Historical Y values against historical DPPA data per region (adjusted for population growth), for 1995-2006 rainfall seasons • N gives the estimated total number of beneficiaries (chronic + transient) in the region • Benefits: Confidence bands can be statistically calculated; least amount of assumptions about underlying data

5. N = a * Y + b N Y

6. Regional Drought Index, Y • LEAP water balance output for each wereda is weighted by relative wererda vulnerability and aggregates over the region • “Yield” variations in most vulnerable weredas contribute most to the regional drought index • Vulnerability defined in terms of the wereda’s relative vulnerable population of the region • Y = (Σwereda WBIwereda *ARPwereda )/ARPregion • WBIwereda : • Water balance output specified crop(s) in wereda • ARPwereda : • At-Risk Population in Wereda = Historical Maximum Ever Population in Need in Wereda (i.e. PSNP + Emergency for 2005-2007) • ARPregion : • At-Risk Population in Region = Σwereda (ARPwereda)

7. At-Risk Pop Region & Weredas 1. 10,000 2 2. 15,000 1 3. 10,000 3 4 4. 8,000 5 5. 10,000 6 7 6. 1,500 8 7. 1,000 8. 0 40% 70% 90% 60% WBIwer Ave = 63% Y = 29550 / 55500 = 53% for this season

8. Regional LP Cost Estimate • If the Regional Total Beneficiary Estimate, Nfor a givenYinput value is > Total Number of PSNP Beneficiaries, PSNP, in the region: • It is assumed that additional assistance is needed by the region to deal with the increased number of beneficiaries and needs • Reg LP Cost Estimate = max(0, N - PSNP)*C • C is the Cost per Additional Beneficiary (e.g. $34) to estimate the additional funding costs needed by the region in such as scenario • Confidence Bands can be calculated by using the Standard Error (SE) in N, i.e. • i.e. N –/+ *SE • Where  specifies the desired confidence level • If not, the PSNP is assumed to be able to take care of all drought-related needs within the region.

9. Limitations of Approach • As for all methods, only as good as the input data used: • “GIGO: Garbage in garbage out” • Assumes a linear response between drought stress on yields and early LP costs • Transparent, but the most “accurate”? • Uses data from 1995-2007 to establish the calculation parameters a and b • How will extreme drought events, like 2002, look like in a PSNP world? • Will the response (a and b) be the same? • Ongoing process, needs to be continuously refined and improved • Focuses on drought risk only • Not flood, price, pest, “green famine”, civil unrest etc.

10. Triggering Early LP Costs for Drought using LEAP:Preliminary Results for 1996-2007

11. Inputs Used • To establish a and b: • WBIwereda: LEAP water balance output specified for either maize, sorghum or rangeland • Taking into account Belg and Meher where appropriate • 1995-2006, using NOAA rainfall satellite data • Historical DPPA data, adjusted for population growth (2.9% per year) • 1996-2004: Total Emergency Beneficiary Numbers • 2005-2007: PSNP + Emergency Beneficiary Numbers • To calculate early LP costs: • PSNP population per region • C, Cost per Additional Beneficiary = $34

12. 2004 2002 PSNP < 55 Tigray Region Correlation: 57%

13. PSNP: 2.5 mil Amhara Region Correlation: 60% No Historical Triggered Payouts

14. 2002 2003 PSNP < 73 Oromia Region Correlation: 56%

15. 1999 PSNP SNNPR Region Correlation: 64%

16. 2002 PSNP < 35 Afar Region Correlation: 65%

17. PSNP Total Beneficiaries for All Regions (minus Gambella and B-Gumuz) Correlation: 85%

18. Historical Early LP Costs for PSNP Regionsi.e. N > PSNP per Region

19. $25 Million Contingent Grant Historical Early LP Costs for PSNP Regionsi.e. N > PSNP per Region

20. Historical Early LP Costs for All Regions(minus Gambella and B-Gumuz)

21. $25 Million Contingent Grant Historical Early LP Costs for All RegionsAssuming 20% PSNP Contingency

22. Historical Early LP Costs for All RegionsAssuming Increasing PSNP Levels from 1996 to Capture Increasing Vulnerability

23. Recommendations • LEAP can be used to index beneficiary numbers and therefore should be! • Works needed to improve the input data as much as possible: • Input LEAP water balance calculations • DPPA data • Model must be continually improved and refined as more data post 2005 becomes available and more verification work is done