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A Risk-Based Approach to Wildland Fire Budgetary Planning

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The financial impact of wildfire management within the USDA Forest Service challenges the ability of the agency to meet societal demands and maintain forest health. The extent of this financial crisis has been attributed to historical and continuing fire management practices, changing climatic conditions, and increasing human development in fire-prone areas, as well as the lack of financial accountability of fire managers and misaligned incentive structures. In this article, we focus on incentives related to cost containment. We review the literature on the incentive structure facing wildfire managers and describe how the incentive structure does not sufficiently reward cost containment. We then cover a range of possible approaches to promote cost containment, culminating in a novel solution premised on the application of actuarial principles to wildfire budgetary planning that we believe most closely aligns with the Forest Service's transition to risk-based management paradigms and that most comprehensively incentivizes containment across the spectrum of wildfire management activities. We illustrate through a proof of concept case study how risk-based performance measures would be calculated and compare our results with historic suppression expenditures. Preliminary results suggest that our simulation model performs well in a relative sense to identify high- and low-cost forests, and we detail modeling improvements to refine estimates. We then illustrate potential extension to an actuarial system, which would further incentivize appropriate risk management and cost containment across the fire management continuum. We address the strengths and weaknesses of the proposed approaches, including potential roadblocks to implementation, and conclude by summarizing our major findings and offer recommendations for future agency direction.
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Keywords: incentives; risk assessment; wildfire economics; wildfire suppression

Document Type: Research Article

Publication date: 09 February 2013

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