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COST-BENEFIT ANALYSIS OF ECOSYSTEM BASED ADAPTATION FLOODING IN CENTRAL VIETNAM Technical Report · August 2018 DOI: 10.13140/RG.2.2.30345.70248

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R. Lasage

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Vrije Universiteit Amsterdam

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Liselotte Hagedoorn

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Vrije Universiteit Amsterdam

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COST-BENEFIT ANALYSIS OF ECOSYSTEM BASED ADAPTATION FLOODING IN CENTRAL VIETNAM Luke Brander Ralph Lasage Philip Bubeck Paul Hudson My Pham Liselotte Hagedoorn Toon Haer Quang Tiến Lê


Summary This policy brief describes the economic analysis of investments in two Ecosystem based Adaptation (EbA) options in order to reduce the impacts of flooding in Central Vietnam. Specifically, we report the results of a Cost-Benefit Analysis (CBA) of these two investments in Thừa Thiên-Huế province: 1. Planting mangroves in Tam Giang lagoon; 2. Restoring urban ponds in Hue City.

Both options deliver high returns on investment driven by substantial reductions in expected flood damages and a range of ancillary benefits to local communities including tourism and fisheries.

Ecosystem-based adaptation

(EbA) can be a cost alternative approach compared to structural measures to increase flood resilience of vulnerable communities. According to the Convention on Biological Diversity, EbA “uses biodiversity and ecosystem services in an overall adaptation strategy. It includes the sustainable management and restoration of ecosystems to provide services that help people adapt to the adverse effects of natural disasters and climate change.” In the ResilNam project, we focus on two community level EbA measures: • Restoring, maintaining, and extending mangrove forests in coastal communities of Thua Thien Hue • Restoring and maintaining urban ponds and canals in Hue City of Thua Thien Hue

Figure 1: Cleaning of an urban pond in Hue to improve drainage, aesthetics and living environment


The problem of flooding in Thừa Thiên-Huế Province

Implementing Ecosystem based Adaptation

The Vietnamese province of Thừa Thiên-Huế is regularly hit by floods, which stand to get worse in the future(7). Recent flood events in November 2017 resulted in VND 830 billion damages and led to the loss of nine lives (1,2). Many of Thừa Thiên-Huế’s coastal communities depend on income sources that are vulnerable to flooding and have insufficient resources to recover from disasters. For an average coastal household, 55% of its income and a little less than 20% of its food consumption comes from seafood, showing the importance of this natural resource (3). The citadel of Hue is regularly flooded negatively affecting the residents. Often women and poorer households are most severely affected by flooding and require more time to recover (4). The threat posed by floods makes adapting and managing flooding a highly urgent matter. Our analysis provides information on the cost and benefits of EbA measures. Often such information is lacking, which makes decision making and the implementation of these types of projects difficult. The findings of our project lead to tangible recommendations based on the ‘true’ value of mangroves to society, including harder to measure impacts such as aesthetics and tourism. Providing solid evidence to local and regional policy makers in support of a shift towards more sustainable DRM and CCA.

In 2018, two EbA measures were implemented in Thừa Thiên-Huế province, by the Centre for Social Research and Development (CSRD), the Disaster Management Centre, the Women’s Union and local communities. Both EbA measures aim to reduce flood risks and support local livelihoods through a range of different ecosystem services, such as better fish stocks or an improved urban environment(4). Five hectares of mangroves were planted at two sites in Tam Giang lagoon. In the citadel area of Hue city, three urban ponds were cleaned and drainage from the ponds was restored. In bringing these groups of stakeholders together to actively adapt to climate change, the ResilNam project is helping to develop a more socially inclusive decision making process.

Figure 2: preparing for mangrove planting by the local community, with fencing materials and mangrove seedlings, photo: René Arnold


Cost-Benefit Analysis of Ecosystem Return on investment in mangrove based Adaptation investments Cost-Benefit Analysis (CBA) is a widely used economic method for evaluating investment options by directly comparing the costs and benefits of an investment in monetary terms. This shows the value of EbA measures in a way that is easy to understand and compare to the current management options and the status quo arrangement.

Conducting a CBA of the two EbA investments involves identifying and monetizing (putting a US$ value to) all costs and benefits over a period of time in which the impacts occur. In our project we use a period of 30 years (20182047). Costs and benefits that occur in the future are given lower weight using a discount rate of 5% to reflect society’s preference for current benefits and delayed costs. In this assessment multiple data sources were used including stakeholder consultations, household surveys, tourist surveys, flood risk modeling and published scientific literature. More elaborate descriptions of these activities are available in the other policy briefs of the ResilNam project (5,6). An investment represents value for money if the calculated benefits are larger than its costs (Benefits/Costs>1).

The results of the CBA of mangrove planting are represented in Figure 1. The total costs over 30 years are US$ 38,000 with the main components being the cost of buying seedlings, planting and equipment. The total benefits are US$ 86,000, which is comprised of reduced flood damage, enhanced fish harvest and eco-tourism. The fishermen informed us that the mangroves protect their boats during a typhoon, preventing their destruction. This saves US$ 3,000 per boat, which is included in the flood protection category. The ability to directly continue fishing after a storm has not been included in the CBA, as we were not able to measure the value of this benefit. The net present value (NPV) is US$ 48,000 and the benefit-cost ratio (BCR) of 2.3 (i.e. each dollar invested returns 2.3 dollars in benefits). The value of additional carbon stored by the mangroves is estimated to be US$ 35,000 but this figure is not included in the CBA since it represents a global rather than a local benefit.

100,000

Benefits

Present Value (USD; 5% discount rate; 30 year horizon)

80,000

Foreign tourism Domestic tourism

60,000 40,000

Flood protection

Net Present Value

20,000 Fisheries Equipment Seedlings -20,000 -40,000

Net Benefit

Costs

Planting Monitoring Maintenance Other costs

Figure 3: Costs and benefits of mangrove EbA investment


Return on investment in urban ponds

Conclusions

The results of the CBA of restoring urban ponds are represented in Figure 2. The total costs over 30 years are US$ 19,000 with the main components being the labour cost of cleaning the ponds and the cost of waste disposal. The total benefits are US$ 641,000, which is dominated by reduced flood damages, which we have assessed using a flood damage model assuming sluice gates are installed between the river and the citadel (displayed as “sluices in place in figure 4). Hence, the effect of this EbA measure is far larger if it is combined with an engineering measure. It is worth noting that the additional benefits from only recreation and tourism exceed the investment costs. The return on investment is very high with a net present value (NPV) of US$ 622,000, a benefitcost ratio (BCR) of 34 (i.e. each dollar invested returns 34 dollars in benefits).

700.000

Present Value (USD; 5% discount rate; 30 year horizon)

Foreign tourism Domestic tourism Recreation and aesthetics 600.000

Benefits (sluice in place)

500.000

The EbA options to plant mangroves in Tam Giang lagoon and restore urban ponds in Hue City both yield high returns on investment over a 30-year period, reflecting that these adaptation measures are not costly to implement and deliver high benefits to the local communities in terms of reduced flood damages and improved livelihood from fishing and tourism. We note that the analysis is not comprehensive, particularly in terms of including all identified benefits. It was not possible to monetise and include the emotional/wellbeing effects of flood protection (see the separate policy brief for details 4) or the improvement in sanitation and health from pond restoration. Including these additional benefits would further increase the return on these EbA investments. The flood damage models we developed are relatively simple and include several assumptions. Hence, the results have some uncertainty. However, sensitivity analysis shows that the final outcome of a positive C/B ratio does not change due to using other assumptions. These findings suggest that there is a strong economic rationale for Net present Value exploring the potential to scale up such EbA investments in Vietnam. Moreover, (sluice in place) by actively involving local communities in valuable adaptation projects we directly build their resilience while creating a more inclusive decision making process.

400.000 Flood protection 300.000

200.000

100.000 Benefits Labour Waste treatment Maintenance Other costs -100.000

Costs

Foreign tourism Domestic tourism Recreation and aesthetics

Figure 4: Costs and benefits of urban pond EbA investment

Net present Value


The ResilNam project In addition to this policy brief, the ResilNam project will complement these findings by also making further recommendations regarding: • The benefits of ecosystem-based adaptation measures for strengthening the flood resilience of poor and vulnerable; • How local communities value ecosystembased adaptation measures and their benefits;

photo: René Arnold

• Gender dynamics in disaster risk management;

• Community level adaptation projects.

The policy recommendations across all of the ResilNam activities can help to increase flood resilience of urban and coastal communities in Thua Thien Hue Province. Additionally, the Resilnam Project directly invests in ecosystembased adaptation measures in collaboration with local stakeholders to increase flood resilience and strengthen the role of women in disaster risk management. For instance, joint activities between the Women’s Union and the Disaster Management Centre are facilitated.

More policy briefs and information on the project can be accessed at the weADAPT platform. Contact:

References

My Pham (CSRD, Vietnam): dieumy.csrd@gmail.com Philip Bubeck (University of Potsdam Germany): bubeck@uni-potsdam.de Ralph Lasage (IVM, the Netherlands): ralph.lasage@vu.nl

KTTV. Thua Thien Hue: Khan truong khac phuc hau qua sau mua lu. 2017 [cited 2018 11th January]. News V. Historic flood hits Hue killing 2017 [cited 2017 19th December ]. 3. Pham TDM, Lam TTS. Gender needs and roles in building climate resilience in Hue City, Viet Nam IIED Report No.: Asian Cities Climate Resilience, Working Paper Series 33, 2015. 4. Hudson, P, Bubeck P, Pham M, et al. The impacts of flooding on well-being and the role of ecosystem-based adaptation. ResilNam policy brief #3. 2018 5. Hagedoorn LC, Brander L, Bubeck P, et al. Ecosystem-based adaptation as a tool to increase flood resilience of the vulnerable – evidence from central Vietnam. ResilNam policy brief #2, 2018 6. Hudson, P, Pham M, Hagedoorn LC et al. Gender differences in flood resilience in central Vietnam. ResilNam policy brief #1, 2018 1. 2.

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