Methods and example publications on the economics of adapting fisheries to climate

Some of the earliest economic studies on fisheries and aquaculture estimated near-term adaptation costs using investment and financial flow (IFF) analysis. These include studies on fisheries at the global and national scale. The IFF studies assess existing sector flows (i.e. current investment in the public and private sectors), and project them forward in time (generally out by 20 years or so). They then re-analyse these future flows with the additional uplift (the additional costs) needed to address climate change, for adaptation. In many cases, this does not use detailed fisheries analysis, but instead applies a general percentage “mark-up” on current investment/finance levels to reflect the extra adaptation investment needed. These studies have the advantage of grounding the analysis in current policy and plans, but they tend to have less analysis of future climate change. Importantly, they rarely quantify adaptation benefits.

At the global level, an analysis by the United Nations Framework Convention on Climate Change (UNFCCC, 2007) estimated the additional costs of adaptation for the fisheries sector at about USD 300 million/year by 2030 (McCarl, 2007) [USD 2005].[I] Following this global study, there was a programme of national IFF studies (UNDP, 2011), although only one country included fisheries (Peru). This study estimated the cumulative total cost of adapting the national fisheries sector at USD 0.5 billion from 2012 to 2030 [USD 2005]. This included adaptation for human consumption (focusing on anchovy) and aquaculture (shellfish and trout). The capture fisheries subsector was estimated to require an additional investment of USD 280 million (cumulative 2012-2030) to implement identified measures, while the aquaculture sector was estimated to require an additional USD 174 million (cumulative 2012-2030). For capture fisheries, the identified options consisted of: infrastructure, machinery and equipment for production and extraction; training, outreach and awareness; research; conservation and environmental management; and institutional capacity building in public administration. Importantly, it identified that many of these costs would fall on fishing companies, although there would also have to be a significant government budget increase (which could be funded by fishing rights). For aquaculture, the investments were near-shore, primarily by the private sector, but required the introduction of new standards or regulations, as well as research, training, awareness and supervision.

Subsequent studies have focused more on the economic analysis of adaptation costs and benefits (OECD, 2015a). These generally use scenario-based impact assessment (see Metroeconomica, 2004; UNFCCC, 2009). These studies first assess the change in future climate change (using climate model projections) and then assess the physical impacts and economic costs of climate change that are projected to occur. They further assess the potential benefits of adaptation in reducing these impacts, as well as the potential costs. This framework can be used to assess the costs and benefits of individual options or combinations of interventions, and even the optimal level of adaptation the latter being the balance between the costs of adaptation, the benefits of adaptation, and residual impacts after adaptation (OECD, 2015a).

This approach was adopted in a World Bank study of the economics of adaptation to climate change (EACC). However, while fisheries were included, the full analysis of costs and benefits was limited. The global EACC study published a discussion paper on the Cost of Adapting Fisheries to Climate Change (World Bank, 2010a). This estimated the future impact (using a projected climate change and fisheries model) of climate change at USD 80 billion per year (2050) from the loss of fisheries gross revenues [USD 2005]. The study then investigated four aspects to estimate the costs of adapting fisheries to these impacts: potential loss in gross revenues or landed values due to climate change; potential loss in household incomes from fisheries as a result of climate change; the capital required as an endowment to replace the projected loss in gross revenues through time; and the estimated cost of adjusting fisheries to catch declines as a result of climate change. The resulting total estimate of the annual direct adaptation cost was between USD 7 billion and USD 30 billion over time to 2050 [USD 2005]. The impacts of climate change, and the adaptation costs, were predominantly in developing countries.

The EACC study also undertook some country studies. In Viet Nam, the analysis looked at aquaculture, considering the impacts of climate change from increased flooding and salinity due to sea-level rise (World Bank, 2010b) and potential adaptation responses. This examined the direct costs, and the (autonomous/spontaneous) adaptation costs and benefits over the following decade and out to 2050. Focusing on catfish, it reported that successful adaptation would require a combination of better feed conversion and improvements in marketing, together with investments in upgrading dykes to reduce flooding and salinity intrusion. For semi-intensive and intensive shrimp producers, the analysis found additional estimated costs of water pumping to maintain water and salinity levels. It identified that these costs would be borne by operators, rather than by government, and estimated the total cost of adaptation at an average of USD 130 million per year over the period 2010-2050 (equivalent to 2.4 percent of total costs) [USD 2005].

However, these future-oriented studies – and the resulting adaptation options and costs and benefits they identify – use a science-first, impact assessment methodology. They tend to focus on the medium term (e.g. 2050 and even 2100). While the information they produce is important to understand future risks and future options, they do not provide the information for informing early and practical adaptation decisions (UNFCCC, 2009), i.e. the costs and benefits of near-term adaptation policy and plans, as might inform national adaptation plans (NAPs), sector adaptation plans, or specific projects or investments. Moreover, they are stylized and rarely consider wider (non- climatic) drivers and existing policy, and they often focus on technical adaptation. This means they often omit important opportunity, transaction and implementation costs associated with practical adaptation (OECD, 2015a).

More-recent studies have addressed these issues by moving to a policy or decision- first led approach (see Ranger, Reeder and Lowe, 2013) and focusing on early adaptation that might be undertaken within the next five or ten years (see Warren et al., 2018).

More recently, there has been a greater focus on the use of decision-making under uncertainty (DMUU) approaches, which also include economic analysis (Watkiss et al., 2014). These approaches (discussed in more detail in Chapter 4) are becoming more widely used (ECONADAPT, 2017), although there has been very little application of these DMUU approaches in the fisheries and aquaculture sector to date.

The estimates reported in this chapter are presented in terms of United States dollars, unless otherwise stated, and are presented as the original values with the relevant price year.