Risk reduction and management for resilience

There are a number of options that are focused on reducing and managing risks. There are studies on the benefits of weather and climate services for fisheries, including early warning systems, which are often classified as low-regret options. These have been found to have good benefit-to-cost ratios, across a range of sectors (ECONADAPT, 2015). Benefits arise from the use of information to improve decisions (the value of information), which reduces losses/enhances gains. However, to deliver benefits, there needs to be investment along the whole weather chain (i.e. including forecast accuracy, communication and end-user response) not just in meteorological infrastructure.

In the commercial fishing industry, weather forecasts (daily to weekly) including early warning systems are important for fishers’ safety. As extreme weather events have the potential to increase under climate change, these can also be considered as adaptation options. The benefits of early warning systems are high, especially when avoided fatalities are included.[1] There is also the potential to use longer-term climate services, such as seasonal forecasts, to look at enhanced fisheries management.

An earlier review (Clements and Anderson, 2013) identified six studies that had looked at the benefits of weather and climate services for the fisheries sector, although several of these were for recreational fisheries and all were based on the United States of America. These normally value the increased number of fishing days (commercial or recreational) or enhanced value of catch. Costello, Adams and Polasky (1998) estimated the value of perfect and imperfect forecasts for El Nino-Southern Oscillation (ENSO) forecasts for the coho salmon fishery in the Pacific. They estimated that perfect ENSO forecasts would produce annual welfare gains of about USD 1 million in consumer and producer surplus (e.g. profits for producers, and consumer surplus for recreational fishing). Some studies have looked at short-term forecasts, with studies of coho salmon fisheries in the State of Washington, the United States of America. Kaje and Huppert (2007) looked at the benefits of short-term climate information and estimated an improvement in the total value of 2-24 percent, with USD 90 million in welfare benefits, for boat-based recreational anglers in the Gulf of Mexico and Wieand (2008) estimated the value of forecast information (including improved ocean observation systems and ENSO forecasts) for recreational fishing. Clements and Anderson (2013) also report on one other study, by Jin and Hoagland (2008), who estimate the benefits of forecasts of harmful algal blooms at from USD 1 million to USD 50 million to near­shore commercial shellfish fisheries in New England, the United States of America (benefits varying with the frequency of blooms, prediction accuracy and response). The National Oceanic and Atmospheric Administration (NOAA, 2002) estimated values associated with improvements to the geostationary operational environmental satellites system, including for ocean fishing, as such satellites allow for better monitoring of storm development and movement. However, Orlove, Broad and Pettyl (2004) studied the response of fishers to ENSO forecasts in Peru, and Broad, Pfaff and Glantz (2001) studied misinterpretation of forecasts for forecast users within the Peruvian fisheries sector during the 1997-98 El Nino season. Both these studies highlight the challenges in producing good forecast information, accurate and timely communication, and the uptake and use of these forecasts to improve decisions.

There is ongoing cost-benefit analysis (CBA) of new early warning systems for fishers, including off the coast of the United Republic of Tanzania (multi-hazard early warning service [WISER, 2017]) and in Lake Victoria (Highway [WISER, 2018]). The latter is particularly important as the lake has some of the highest fatality rates for fishers anywhere in the world.

These weather and climate services also have potential for aquaculture, but there is less documented evidence of the development of targeted services.

There are also opportunities for insurance, risk pooling and risk transfer. Insurance is a potential low-regret option (IPCC, 2012), and has potential application to the fisheries sector for extreme events. This is a complementary tool to planned adaptation as it shares and transfers the financial risks of large-impact, low-probability extreme events across many different locations.[2] However, it should not be seen as an answer to address slow-onset change (trends) or very frequent extreme events because premiums become unaffordable (DFID, 2014). Insurance has potential benefits in helping to spread the risk of wind storms (and damage to fishing vessels and equipment) but not to changes in fish distribution or catches (trends). While climate change will alter the frequency, intensity, extent, duration and timing of extreme weather and climate events, and is likely to result in unprecedented extremes (IPCC, 2012), the impact on wind storms (especially tropical storms) is uncertain with respect to frequency, intensity and location (storm tracts). There is more evidence that human-induced global warming has increased the frequency and intensity of heavy precipitation events, and increasing extreme heat (IPCC, 2018), which are relevant for aquaculture.

There are existing insurance schemes for such risks, and their uptake is therefore a form of adaptation. There is also an emerging focus on insurance for aquaculture and existing pilots (FAO, 2016, 2017) although these highlight some challenges (premium levels, and moral hazard) which includes new insurance offerings such as index-based insurance. When these target small-scale fishers, there is often a need for some level of government support.

There is also a greater focus on national risk-pooling facilities (CCRIF, 2010; ARC, 2014) that provide macro and regional risk pooling, for example, to cover extreme tropical storm risk. Development cooperation providers have also pioneered the use of prearranged credit lines and disaster contingency funding (credit) to provide rapid access to funding following an extreme event (Campillo, Mullan and Vallejo, 2017; ADB, 2019).

For the most vulnerable people, there is the potential for targeted support, i.e. social protection and shock contingency response funds. These have been found to have high benefit-to-cost ratios in general (DFID, 2011; Cabot Venton and Coulter, 2013; Cabot Venton and Majmuder, 2013; Cabot Venton, Coulter and Schmuck, 2013), and there are some examples of the application to small-scale fisheries communities (FAO, 2015).

There is a wider range of risk reduction measures. One set of these relate to equipment and infrastructure, undertaken by fishers themselves. These can include specific targeted adaptation measures, for example, vessel type, safety and stability to address changing storm risks, stronger structure, or more resilient design for aquaculture.

In terms of coastal marine and coastal aquaculture, there are more obvious risk reductions to address rising sea-level rise and storm surges. Construction of sea walls or dykes has been highlighted as an adaptation for coastal aquaculture. As an example, Danh and Khai (2014) conducted a CBA of dykes, including the benefit/value of aquaculture by comparing the value of salinity-free production with salinity-affected production of giant river prawns.

Moving to coastal infrastructure, i.e. landing, port facilities and storage facilities, there is a large literature on the costs and benefits of coastal protection (for a review, see ECONADAPT, 2015). This literature shows high benefit-to-cost ratios when applied for densely populated coastal areas. However, in lower-density areas, the benefit to cost ratios of these larger-scale protection measures fall.

There are also studies that consider the use of alternative ecosystem-based adaptation for coastal protection, particularly in tropical countries. Some of these (corals and mangroves) are also promoted as an alternative to hard protection (sea walls), and studies show potentially high benefits with enhanced fisheries as an important co-benefit of the primary focus on shoreline protection. Examples include high benefits from coral (Jones, Hole and Zavaleta, 2012) and high benefits from mangroves (CWF, 2009; CCRFI, 2010) as alternatives to hard coastal protection. There are also benefits found for sand dunes and offshore sand banks, which offer greater flexibility and lower capital costs than hard alternatives, but have higher maintenance costs thus, the discount rate will affect the benefit-to-cost ratio (de Bruin, 2012). However, ecosystem-based adaptation usually has modest benefit-to-cost ratios due to fact that these systems take time to establish (benefits arise in the future), and they often have opportunity or transaction costs.

One particular area of focus is on the design of new infrastructure, including ports, jetties, etc. A key priority here is for enhanced climate risk screening. This is a low-cost step to assess the potential current and future risks, and to identify potential changes in design. The results of climate risk assessments can support the decision of whether to climate-proof infrastructure from the outset, make the project climate-ready, or wait for further information (ADB, 2015). This is being integrated as part of multilateral developments banks’ due diligence and investment appraisal project cycles, and has been applied to port and coastal investments (see for example, ADB, 2014). It can help to avoid decisions that are expensive or impossible to reverse later. Most multilateral development banks have now introduced climate risk screening. The benefits of these systems are informally captured through the identification of climate risks, and thus impacts prevented. This can be seen through the economic appraisal of options (ex ante) as compared to baseline (do nothing).

There is a further set of risk reduction measures along supply chains, i.e. processing, storage, transport, marketing (wholesale and retail) and final consumer retail. Identification of key elements along supply chains may be important in developing adaptation strategies. Plagányi et al. (2014) developed a quantitative metric to identify critical elements in a fisheries supply chain, and to understand the relative stability of different supply chain structures.

In general terms, disaster and emergency preparedness and response has very large benefits, as identified in reviews of the early adaptation literature (Shreve and Kelman, 2014, ECONADAPT, 2015). Although these reviews focus primarily on terrestrial disasters, they have high relevance for tropical storms and potential damage to the fishing industry.

[1]  These include the valuation of prevented fatalities, more specifically the change in the risk of a fatality. There is extensive literature on such valuation, although it is often still considered controversial. Recent World Bank documentation (Narain and Sall, 2016) suggests that, while the human capital approach is appropriate for financial analysis and accounting, an alternative approach – based on individuals’ willingness to pay to avoid or reduce the risk of premature mortality – is more appropriate for economic analysis. The appropriateness of the willingness-to-pay approach is discussed in more depth in Chapter 3.

[2]   However, this should be treated with caution as an extreme event can bring about the collapse of an entire system. In the literature, this issue is referred to as systematic risk problem. Chapter 3 discusses risks in more depth.