Monday, May 27, 2013

An assessment of the economic and social impacts of climate change on the coastal and marine sector in the Caribbean

Executive summary:
Climate change poses special challenges for Caribbean decision makers related to the uncertainties inherent in future climate projections and the complex linkages between climate change, physical and biological systems, and socioeconomic sectors. At present, however, the Caribbean subregion lacks the adaptive capacity needed to address these challenges.

The present report assesses the economic and social impacts of climate change on the coastal and marine sector in the Caribbean until 2050. It aims both to provide Caribbean decision makers with cutting-edge information on the vulnerability to climate change of the subregion, and to facilitate the development of adaptation strategies informed by both local experience and expert knowledge.

Climate and extreme weather hazards related to the coastal and marine sector encompass the distinct but related factors of sea level rise, increasing coastal water temperatures, and tropical storms and hurricanes. Potential vulnerabilities for coastal zones include increased shoreline erosion leading to alteration of the coastline, loss of coastal wetlands, and changes in the profiles of fish and other marine life populations. The present report uses a modified version of the regional integrated model of climate and the economy (RICE model) (Nordhaus, 2010) to estimate the economic and social impacts of climate change. The RICE model views climate change in the framework of economic growth theory. The maximized economic and social welfare under the impacts of the three different climate change trajectories, shown below, are examined in the RICE model:
a) assuming there is no climate change (baseline)
b) under the A2 scenario/Business as Usual (BAU) [high impact scenario]
c) under the B2 scenario [low impact scenario]

The report considers the potential economic and social costs arising from damage to the coastal and marine sector as a consequence of tropical storms and hurricanes. The model employed assesses the impacts of tropical storm or hurricane strikes based, among other variables, on the power dissipation index (Emanuel, 2005), which computes the frequency, duration and intensity of hurricanes (Elliott, Lorde and Moore, 2012). Potential adaptation and mitigation strategies for the sector are discussed and cost-benefit analyses of  selected options undertaken.

Results indicate that sea level rise would lead to the definitive loss of land each year in the Caribbean.  By 2050, the area totally inundated would be just over 3,900 square kilometres under the A2/BAU climate change scenario and close to 3,500 square kilometres under B2. The value of the land lost by 2050 has been ECLAC – Project Documents collection An assessment of the economic and social impacts of climate change estimated at US$ 624 billion and US$ 406 billion, under A2/BAU and B2, respectively, accounting  for between 0.6 per cent and 0.7 per cent of total land mass. Loss of land is loss of capital, with negative consequences on output. Such a loss would affect the tourism sectors in the Caribbean severely. In addition to market economic impacts (tourism and real estate), climate change in the Caribbean is predicted to have a devastating impact on marine ecosystems and natural habitats. By 2050, there would be an almost virtual collapse in coral-reef-associated ecosystems (reefs, seagrasses, reef fisheries). Those ecosystems have provided important services, from the purely recreational and biodiversity protection to breeding zones for fish, tourism attractions and natural protection from storm surges. Under A2/BAU, the value of those ecosystems would fall, to an estimated value of US$ 2.7 billion in 2050 from a high of US$ 64.7 billion in 2030; under B2, the decline would be smaller, but still very severe, falling to US$ 36.3 billion in 2050.
Grand Anse beach, St. George's, Grenada
Total cumulative climate damage to the coastal and marine sector increases exponentially under both A2/BAU and B2 scenarios. The cumulative value of the damage is expected to be US$ 798.7 billion by  2050 if A2 occurs, and US$ 471.7 billion if B2 occurs. Total cumulative damage to the coastal and marine sector by 2050 induced by climate change is valued at 159 per cent and 98 per cent of gross domestic product under A2/BAU and B2, respectively.

The overall decline in welfare by 2050 compared to the baseline scenario ranges from 1.2 per cent to 1.5 per cent under B2, and 2.4 per cent to 2.8 per cent under A2/BAU, depending on the discount rate. While the differences in welfare among the three scenarios appear to be relatively small, the same monetary loss would have very different consequences within countries and across the Caribbean.

The model showed that the impact of hurricanes and storms on the coastal and marine sector of the Caribbean would be high. Cumulative losses to fisheries in the subregion to 2050 would range from US$ 13.3 million to US$ 18.2 million for the worst-case scenario, and US$ 7.5 million to US$ 13.3 million for the best-case scenario. The cumulative losses to the coral reef ecosystem would be very high under a worst-case scenario, over US$ 900 million per decade in 2010, 2020 and 2030. In 2050, the cost of the potential hurricane damage would drop significantly to US$ 39.3 million, reflecting the almost complete collapse of the coral reef ecosystem by 2050. Built coastal assets would be severely damaged under both the best-case and worst-case scenarios. Predicted damage would be around US$ $ 0.5 billion in a best-case scenario and over US$ 1 billion under a worst-case scenario. These results are reinforced by existing trends, with coastal areas becoming more densely populated in response to trends in economic structure and lifestyles. Confronted with growing populations, land scarcity and infrastructural gaps, more marginal and higher-risk land is urbanized in the Caribbean every year. Moreover, land loss due to sea level rise would amplify these trends.
Net Present Value of Consumption per capita in the Caribbean under Baseline,
A2/BAU and B2 SRES Climate Change Scenarios at 1%, 2% AND 4% Discount Rates US$
In general, the Caribbean has limited capacity to rebuild after extreme weather events; if the subregion were to be affected regularly, it would not have enough time to rebuild between events, and could end up in a state of permanent reconstruction, with all resources devoted to repairs instead of to new infrastructure and equipment. This obstacle to capital accumulation and infrastructure development could lead to permanent underdevelopment.

Implementation of adaptation strategies on a regional level should be increasing the flexibility of institutions and decision processes so that the public and private sectors can adjust more readily to climate impacts as these occur. More flexibility may be needed to accommodate uncertainties associated both with climate change with non-climatic stresses, such as changes in population growth, economic trends, resource demands, the legal landscape, and economic trends.

Adaptation to sea level rise should take a hybrid approach. Under the threat of rising sea levels, strategies for the Caribbean should consider the balance between protecting, on the one hand, individual safety and socioeconomic activity and, on the other, the habitats and ecological functioning of the coastal zone.

Coastal infrastructure—such as sea walls—may threaten the tourism industry vital to the Caribbean, by depreciating landscapes, ecosystem health and beach leisure attractions. Hard protection has been shown to contribute to the depletion of fish stocks by damaging coastal ecosystems further (Clark, 1996). As a consequence, hard protection should no longer be considered an option for the Caribbean ECLAC – Project Documents collection An assessment of the economic and social impacts of climate change.  Lessening the impacts of higher temperatures in Caribbean waters due to global warming would require strategies that increase the overall resiliency of ecosystems. Placing greater emphasis on habitat protection and ecosystem-based management approaches to managing fisheries, coral reefs, and other coastal resources would establish an important foundation on which to cope with the multitude of stressors affecting those resources. Furthermore, it would be important for researchers to continue monitoring coastal water temperatures closely, and to develop swift, strategic management responses to deal with extreme events such as mass coral bleaching and disease outbreaks.

There are several measures that could be taken to reduce the risk of extreme weather events.

Examples include the adoption of early warning systems and better forecasting of extreme weather events, risk communication between decision makers and local populations, improved land-use planning, improved ecosystem management and restoration, better health response initiatives, and improved sanitation, drainage, and building codes. Local populations have an important part to play through integrating local knowledge in hazard-reduction and risk-management strategies.

Benefit-cost analyses have indicated that justifiable adaptive strategies for extreme weather events for the Caribbean subregion include reforestation of mangrove swamps in coastal areas, monitoring of all coastal waters to provide early-warning alerts of bleaching and other marine events, the development and implementation of programmes aimed at the protection and rehabilitation of degraded fisheries habitats and ecosystems—and the environment generally—and the development of national evacuation and rescue plans. 

Many adaptive actions could create cost savings through damage avoidance. Many of the changes required will take time to implement. Waiting for climate change to “arrive” will be too late, in some cases, and significantly more costly, in others.

The full report is available free of charge at 
by Troy Lorde, Charmaine Gomes, Dillon Alleyne and Willard Phillips
United Nations Economic Commission for Latin America and the Caribbean (ECLAC) Institute for Economic and Social Planning (ILPES)
February, 2013

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