KNOWLEDGE SHEET 9 C O A S TA L N AT U R A L C A P I TA L A N D T H E E C O N O M I C S I N T H E C O A S TA L Z O N E KNOWLEDGE SHEET 9 Coastal Natural Capital and the Economics in the Coastal Zone T he West African coastal zone is home to a bounty of natural resources, or “coastal natural capital” that is essential to ecosystem services that support coastal community and marine, life and national economies. About one third of West Africa’s people live on the coast, Coastal communities will be increasingly confronted to many of whom are dependent on the resources located climate change. They rely on fisheries for their subsistence, there. The coastal zone is the source of 56 percent of West animal protein, and livelihoods. Yet the number of regional Africa’s GDP. Yet, natural coastal assets, from fisheries to fishery-related jobs is expected to drop by 50 percent by mangroves and lagoons –even the sand on the beach the 2050s due to declining fish stock. itself such as dune cordons– face significant threats from human interventions and the potential impacts of climate • $11 billion expected annual damage costs change. Mangrove areas have decreased by 25 percent in from coastal flooding by the 2050s the last quarter century, and the rate of erosion recorded in some areas of West Africa has reached 30 meters in • $1.5 billion is the estimated cost of coastal a given year. protection Source: WACA Infographics # 9, “Saving West Africa’s Coastal Assets”. The Challenges Ministries of Finance, Planning and Sector-related Coastal flooding, erosion and extreme weather events Infrastructure commonly account for the economic affect hundreds of millions of vulnerable people in coastal costs and benefits of built capital and infrastructure in zones worldwide, important infrastructure, tourism, and decision-making, but the critical role of coastal natural trade—causing significant human suffering and losses to capital, from mangroves to lagoons to reefs, in supporting national economies. The coastal population is becoming development is not fully understood nor included. increasingly vulnerable as a result of natural disasters and climate change, especially the poor, and every year, an average of half a million people in the region are put at • $3,874 per capita (47% of total capital) risk by floods and coastal erosion. is the natural capital in Guinea-Bissau • Adjusted Net Saving is negative due to Globally, insurers alone have paid out more than $300 unsustainable resource exploitation billion for coastal damages from storms in the past 10 Source: Report to the World Bank (2014), “Optimizing Guinea-Bissau’s natural wealth: A case study on Natural Wealth accounting”. years, which often goes toward rebuilding similar coastal infrastructure that is still vulnerable to coastal storms and flooding. Many coastal communities in West Africa do not have protection from flooding. These vulnerabilities Approaches like Integrated Coastal Zone Management or are likely to be exacerbated by increasing environmental spatial planning do account more fully for coastal natural degradation, natural disasters and climate change. capital, but usually take a biophysical or spatial approach KNOWLEDGE SHEET 9 C O A S TA L N AT U R A L C A P I TA L A N D T H E E C O N O M I C S I N T H E C O A S TA L Z O N E • $378 Million is the yearly cost of degradation in Mauritania, equivalent to 7.5 % of GDP in 2014 Source: Report to the World Bank (2017), “Mauritanie: Cout de la degrada- tion et de la restauration de L’environment cotier, marin et maritime: 2014” marine environment and people, including the production of goods (e.g., fish), tourism and recreation, shoreline protection (e.g., reducing flooding of the coastal zone, creating buffers and stabilizing the shores), as well as the space for critical infrastructure such as urban settlements, roads, commercial and industrial enterprises, harbors and ports needed for trade. Understanding the economic impacts and the value of natural capital becomes essential. While many understand that economic analyses can inform development strate- Photo: Maria B. (Mabe) Garcia-Rincon gies in the context of natural hazards and climate risks, it is important to pick the right analysis for the purpose. that does not fully reflect economic values and, thus, cannot be used to easily engage ministries of finance. The most commonly used environmental economic tools include: Given the shortcomings of both approaches, decision-mak- ing about development, infrastructure investments, human • Natural Capital Accounting integrates information settlements, and trade-offs among competing users of about the value of natural capital with national economic coastal natural capital is often made with incomplete and accounts, providing a clear picture of the links between imperfect information. This comes with a strong risk of the economy and the environment that are typically making poor decisions that do not contribute to sustainable not considered in commonly used economic variables development and poverty reduction over the long run. (such as GDP). For instance, coastal NCA integrates spatially explicit measures of the ‘blue economy’ with So, how can development practitioners and decision-mak- risk exposure to estimate the economies and social cost ers make the right choice when deciding how to manage of natural hazards. It thus allows for better-informed the precious coastal environment upon which communities design of development strategies in the context of and healthy economies depend? natural hazard and climate risk and sets up a framework for consistent and comparable monitoring over time. Economic Analysis • Policy, Program and Impact Evaluation Analyses, help understand the socio-economic effects of current as a Solution challenges and potential solutions in economic terms identifying the causal relationship between the program Thirty one percent of West Africans inhabit the coastal or policy and the outcomes of interest (e.g., poverty, zone are dependent on coastal natural capital for their income, employment, avoided losses). Impact evalua- livelihoods. Coastal erosion and flooding is already tions are part of a broader agenda of evidence-based having a negative impact, potentially increasing poverty, policy making and have received increasing attention in recent years since it helps to answer key question and governments have a significant role in engaging on policy making, such as: what works, what doesn’t, their communities on sensitive issues such as alternative where, why and for how much? livelihoods and voluntary resettlement. • Policy, Program and Project Economic Analyses , If coastal natural capital is properly managed, ecosystems help assess the economic and financial sustainability can provide a sustainable flow of services that benefit the of investment projects and the optimal allocation KNOWLEDGE SHEET 9 C O A S TA L N AT U R A L C A P I TA L A N D T H E E C O N O M I C S I N T H E C O A S TA L Z O N E of resources. It also helps to inform the design and undertaken at national scale and strategic scale, whereas select options that can contribute to a sustainable project economic analysis applied at project or investment improvement in the welfare of project beneficiaries. level. The main questions that each tools response and examples of use are detailed below (see Box 1) and by • Cost of Environmental Degradation Approach, places considering the relevant data (see Box 2) and climate a monetary value on the consequences of the dete- change scenarios, decision makers can better plan for rioration of the environment through the pollution of air, water bodies, soil and ecological systems, the future development location, properly address the risk of depletion of resources, and the destruction of ecosys- coastal hazards and better prepare, mitigate and respond tems and habitats. to effects of it and climate change. • Strategic Environmental Assessment is a systematic and Comprehensive and detailed temporal data (monthly, participatory decision support process based on quan- quarterly or yearly) and spatial data (at the highest disag- titative analysis, aiming to ensure that environmental gregation level) allow to show convincing evidence from and possibly other sustainability aspects are considered an economic viewpoint. Stakeholders will have more infor- effectively in policy, plan and program making. mation to make proper decisions and actions to protect current infrastructure, community life, economic activity These economic tools (and their inputs) are closely inter- and settlements. But these plans also need to take into related. Each tool could be used for different spatial and account what actions might be taken to reduce the risk time scales. For instance natural capital accounts is often and increase the resilience. Photo: Maria B. (Mabe) Garcia-Rincon KNOWLEDGE SHEET 9 C O A S TA L N AT U R A L C A P I TA L A N D T H E E C O N O M I C S I N T H E C O A S TA L Z O N E BOX 1 TOOLS KEY QUESTIONS EXAMPLES OF USE • What is the economic value of • Understanding how overexploitation of a fisheries natural resources and ecosystem resource, or loss of mangroves affect a country’s wealth services? • Identifying areas for priority interventions for Natural • Is natural capital being used mangrove rehabilitation and other shoreline protection Capital sustainably? interventions Accounting • What economic policy instruments • Improving land use management and planning at the could encourage more sustainable watershed level to reduce soil erosion and coastal natural resource management? degrading • Assessment of how natural shocks (for example, • What is the causal economic extreme weather event such as flooding) have a causal Policy, impact of a shock or program on an effect on economic development Program outcome of interest? • Evaluation of risk reduction investments on reduction and Impact • How is a shock or policy affecting of negative impacts of major natural events Evaluation the poor? • Assessment of economic tradeoffs and synergies Analyses • Is the program meeting a country’s across sectors to inform strategic coastal development development needs? planning and programs • Assessment of the economic benefits of investments Policy, to ensure resilience Program • Is the option producing sufficient • Estimation of the economic benefits of early warning and Project benefits to outweigh the costs or systems Economic losses? • Economic comparison of alternative coastal land Analyses management approaches and infrastructure investments (natural and built) Cost of • Estimation of economic cost (in GDP terms) of marine • What are the monetary costs due to Environmental pollution or coastal erosion the deterioration of the environment Degradation • Assessment of how environmental degradation affects or depletion of resources? Approach livelihoods, especially of the poor • How investments leading to Strategic economic growth will affect • Offshore gas and oil extraction Environmental livelihoods, economic value added • Ocean mining Assessment and natural capital in a coastal zone • Tourism development over a time period? Photo: Maria B. (Mabe) Garcia-Rincon KNOWLEDGE SHEET 9 C O A S TA L N AT U R A L C A P I TA L A N D T H E E C O N O M I C S I N T H E C O A S TA L Z O N E BOX 2 GEOPHYSICAL AND CLIMATOLOGICAL DATA SOCIO-ECONOMIC AND INFRASTRUCTURE DATA • Land cover and land use • Economic assets, income, GDP • Topography • Distribution and location of population in coastal zones • Inshore bathymetry and their socio-economic characteristics (e.g., population • Erosion potential at risk, the poor). • Location environmental assets (coral reef, • Distribution and location of structures in the coastal mangroves, seagrass beds, estuaries, and other zone (e.g., housing, infrastructure, industrial/commercial critical ecosystems) structures, hotels, government infrastructure, ports, off- • Detailed fish stocks, tree crops, other stocks of shore mining) natural capital • Detailed economic value of economic activities (capture • Detailed climatic variables (precipitation, fishing, aquaculture, tourism, marine transport, other temperature, etc.) economics activities in the coastal zone) • Historical data on damages REFERENCES Beck, M.W. and G-M Lange (2016). Managing coasts with natural solutions: guidelines for measuring and valuing the coastal protection services of mangroves and coral reefs. WAVES technical paper. Washington, D.C. The World Bank. Bolt, K.; G. Ruta; M. Sarraf (2005). Estimating the cost of environmental degradation: a training manual in English, French and Arabic. Environment working paper series No. 106. Washington, D.C. The World Bank. Ferraro, P.J. (2009). Counterfactual thinking and impact evaluation in environmental policy. In M. Birnbaum & P. Mickwitz (Eds). Environmental policy and policy evaluation. New directions for evaluation, 122, 75-84. Photo: Maria B. (Mabe) Garcia-Rincon The West Africa Coastal Areas Management Program (WACA) is a convening platform that aims to assist West African countries to sustainably manage their coastal areas and enhance socio-economic resilience to the effects of climate change. The program also seeks to facilitate access to technical expertise and financial resources for participating countries. www.worldbank.org/waca 2017