Allison - Economics of Adaptation to Climate Change: Vietnam's Aquaculture Sector
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Allison - Economics of Adaptation to Climate Change: Vietnam's Aquaculture Sector

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Eddie Allison (WorldFish). Economics of Adaptation to Climate Change: Vietnam's Aquaculture Sector. Presented at CCAFS Science Meeting, 1-2 December 2010

Eddie Allison (WorldFish). Economics of Adaptation to Climate Change: Vietnam's Aquaculture Sector. Presented at CCAFS Science Meeting, 1-2 December 2010

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Allison - Economics of Adaptation to Climate Change: Vietnam's Aquaculture Sector Allison - Economics of Adaptation to Climate Change: Vietnam's Aquaculture Sector Presentation Transcript

  • partnership excellence growth ! 1
  • Cost of CC adaptation case study 2009-2010•  Vietnam case study (World Bank Global EACC) –  2008, aquaculture production accounted for 6.6% of the national GDP –  Multiple productions systems (capture/culture, species, intensive/extensive) –  CC impacts: Temperature, rainfall changes, Sea level rise, (storm frequency and severity) (MONRE, 2009)FAO partnership excellence growth!
  • partnership excellence growth !Impact  assessment:   –  What  is  the  vulnerability  of  the  aquaculture  sector  to  CC   impacts?     –  What  are  the  physical  as  well  as  economic  losses  which   may  be  expected  over  the  period  2010  to  2050  as  a  result   of  CC?      Adapta.on  op.ons:   –  What  are  the  plausible  adapta?on  op?ons?       •  planned     •  autonomous   –  What  are  the  costs    and  benefits  of  these  adapta?on   op?ons?    3
  • Vulnerability analysis: country scale/provinceEXPOSURE (E) DEPENDENCY (D)Sea level rise: % of province area flooded Direct livelihood: % hh engaged in aquacultureTemperature rise: Avg temperature increase relative Indirect employment: employees in fishery enterprisesto 1980-99 as % of total enterprise employeesRainfall change: Annual rainfall change relative to Macro-economics: Fish output as % of country GDP;1980-99 seafood export processing facilitiesCoastal extreme events: Aquaculture area damaged, Food security: Per capita annual fish & shrimpdue to storms & typhoons 1989-2008 consumptionFloods: Aquaculture area damaged by floods,1989-2008 ADAPTIVE CAPACITY (AC) Poverty: % of population below poverty line; % of hh monthly food expenditure spent on fish & shrimp Infrastructure: Telephone lines per 100 people; # of hospital beds per 1000 people POTENTIAL IMPACTS (PI) Education: Graduates of 2o education as % of total -  impacts that will occur without adaptation candidates PI = f(E,D) Disaster response to CC: # of disaster management programs; DRM investments in construction projects; DRM investments in non-construction projects Social capital: share of fishery cooperatives as % of national total Education: % of fishery employees with education Black: Generic; Red: CC related; Blue: aquaculture sector VULNERABILITY - the nature & extent of losses incurred by the aquaculture sector due to CC V = f(PI, AC) partnership excellence growth!
  • Vulnerability indices by Province, Vietnam Provinces most vulnerable to climate-induced changes in the aquaculture sector are in the Mekong Delta, Red River Delta and Central Province Preliminary results World Bank study please do not cite partnership excellence growth!
  • The  Mekong  River  delta  •  Accounts  for    80%  of  Vietnam’s   total  shrimp  produc?on;    75%  of   total  fish  produc?on  Freshwater  ca6ish  (Pangasianodon hypophthalmus)  •  Inland  provinces  •  “Coastal”  provinces  Black  9ger  shrimp  (Penaeus monodon)  •  (Improved)  extensive  scale  •  Semi-­‐intensive/intensive  scale   6 partnership excellence growth!
  • CC Potential Impacts in the MRDAreas subjected to increments of maximum flooding depths during the rainy season (for 50-cm SLR by 2050 scenario), superimposed with catfish pond areas in An Giang, Dong Thap & Can Tho provinces Increment  of   Affected  ca6ish  pond  area,  ha  (%)   max  flood   depth  (m)   An  Giang   Dong  Thap   Can  Tho   <0.5     0.5-­‐1   1-­‐1.5   178     13%   273     26%   1.5-­‐2              163     8%    89     6%   FAO   509   48%   2-­‐2.5        1,236     62%    211     15%   286     27%   2.5-­‐3              394     20%   497     36%   >  3              210     10%   402     29%   Total   2,003   100%   1,376     100%   1,068     100 %   Preliminary results World Bank study please do not cite partnership excellence growth!
  • Traditional approach economics of adaptation1.  Baseline – no climate change2.  Impact with no adaptation => Future Society & Future Climate3.  With adaptation => Adapted Future Society & Future Climate=> Cost of adaptation is the difference between 3) & 2)Limita9on  of  tradi9onal  approach  •  Difficult  to  dis?nguish  between  impacts  and  responses    •  Assumes  autonomous  adapta?on  does  not  occur  =>  “dumb   farmer  hypothesis”   8 partnership excellence growth!
  • Fussel and Klein (2002)Expected impacts: Costs of autonomous adaptation included 9 partnership excellence growth!
  • 10partnership excellence growth!
  • STEP 1 Base production costs for catfish -­‐1 -­‐1     VND  million  ha  crop   Inland   Coastal   Gross  Income     4868.9   3738.1   Total  Costs     ~ 20,000 VD + 1 USD 4617.0   3644.7   Total  Fixed  Costs   20.9   28.3   -­‐  Deprecia?on  of  ponds   11.6   17.15   -­‐  Deprecia?on  of  machinery   7.17   8.15   -­‐  Land  taxes   2.13   3   Total  Variable  Costs   4596.1   3616.4   -­‐  Pond  prepara?on   23.6   27.2   -­‐  Seed   329.1   263.7   -­‐  Feed   3772.5   3051.2   94%, 96% of variable -­‐  Chemicals  and  drugs   205.4   152.4   costs -­‐  Dyke  upgrade   11   4.6   -­‐  Fuel  and  electricity   48.7   7.7   -­‐  Harvest  and  transporta?on   28.8   25.4   -­‐  Labour   39.2   44.7   -­‐  Interest  on  loans   127.4   33.9   -­‐  Miscellaneous   10.4   5.6   Net  Income   252.1   93.4   11 Sinh (2008) Margins: 5%, 3% partnership excellence growth!
  • STEP 1 Base production costs for shrimp -­‐1 -­‐1 Input  (VND  million  ha crop )   SII     Extensive   Gross  Income     431.1   65.9   Total  Costs     193.3   28.8   Total  Fixed  Costs   13.53   2.94   -­‐  Deprecia?on  of  ponds   7.58   1.79   -­‐  Deprecia?on  of  machinery   4.6   0.85   -­‐  Land  taxes   1.35   0.3   Total  Variable  Costs   179.68   25.86   -­‐  Pond  prepara?on   8.09   2.2   -­‐  Seed   9.35   3.13   88%, 81% of -­‐  Feed   119   13.7   variable costs -­‐  Chemical  and  drugs   21   1.88   -­‐  Dyke  upgrade   3.05   0.31   -­‐  Fuel  and  electricity   8.63   1.37   -­‐  Harvest  and  transporta?on   1.61   0.1   -­‐  Labour   6.11   1.45   -­‐  Interest  on  loans   1.41   1.14   -­‐  Miscellaneous   1.43   0.58   Net  Income   237.8   37.1   6.5 X higher for Margins: 123%, 129% SII shrimp 12 Sinh (2008) partnership excellence growth!
  • STEP 2 Summary of the CC impact pathways on aquaculture Climate change effect on Aquaculture system Costs affected by climate change production Coastal catfish feed, pond preparation, dyke upgrade, Decrease in survival rate and infrastructure damage longer growing period will likely medicine/chemical, fuel/electricity, pond decrease total production per year construction, pumping equipment Inland catfish feed, seed, dyke upgrade, labour, fuel/ Decrease in survival rate and electricity, pond construction, pumping longer growing period will likely equipment, infrastructure damage decrease total production per year Semi-intensive/intensive feed, dyke upgrade, medicine/chemical, Decrease in survival rate, but will shrimp fuel/electricity, pond construction, be offset by improved grow-out pumping equipment, infrastructure techniques. Yield is expected to damage decrease Extensive shrimp dyke upgrade, seed cost, pond Increase in survival rate & possible preparation, fuel/electricity, pond increase in aquaculture area. Yield construction, pumping equipment, is expected to increase. infrastructure damage 13 partnership excellence growth!
  • STEP 2 Stakeholders’ assessment of cost changes 2010   Expected  %   Cost  variable  for  coastal  ca6ish   Value   change  from   2010-­‐2020   Feed  cost   -­‐  Feed  price  (VND  kg-­‐1)   7,850   +75   -­‐  Food  conversion  ra9o   1.6   -­‐5   Seed  cost   -­‐  Stocking  density  (fish  m-­‐2)   33   0   -­‐  Seed  price  (VND  piece-­‐1)   663   +50   Chemicals/drugs  (VND  kg-­‐1  of  fish)   750   +125   Pond  prepara9on  (VND  million  ha-­‐1)   45   +25   … and similarly for the other three production systems 14 partnership excellence growth!
  • STEP 2 Stakeholders’ opinion on % of input costs attributed to CC impacts, 2000-2010 Input  cost   Percentage  (%)  of  cost  due  to  climate  change   Extensive   SII  shrimp   Coastal   Inland   shrimp   ca6ish   ca6ish   Fixed  cost   25   20   30   20   Feed   20   10   10   20   Seed   20   n/s   20   5   Chemicals/drugs   n/s   10   20   10   Pond  prepara9on   20   n/s   30   n/s   Fuel/electricity   20   20   20   30   Labour   n/s   n/s   10   n/s   n/s: not stated - Basis for Cost-benefit Analysis for “CC” and “NCC” scenarios 15 partnership excellence growth!
  • STEP 2 Experts’ opinion on changes in yield and price of outputs Yield   Price   -­‐1 t  ha  year   %  change     VND  kg-­‐1   %  change  year   -­‐1 -­‐1 2010   2010-­‐20   2010   2010-­‐20   2020-­‐50   Ca6ish  –  Coastal     399   Ca6ish  –  Inland   651   1.0%   17,000   3.0%   2.3%   Shrimp  –   0.60   2.3%   Extensive   Shrimp  -­‐  Semi-­‐ 100,300   1.4%   1.4%   int/Intensive   8.63   1.8%   Assumption: yields are maintained under CC scenario but at higher costs 16 partnership excellence growth!
  • STEP 3 Economic impacts of CC on inland catfish production system (farm-level analysis) Net Farm Income 2010-2020 Beyond 2020 CC hastens trend towards unprofitability 17 partnership excellence growth!
  • STEP 3 Economic impacts of CC on catfish production systems (farm-level analysis) Net Present Value (NPV) 18 Discount rate = 6% p.a. partnership excellence growth!
  • STEP 3 Economic impacts of CC on extensive shrimp production system (farm-level analysis) Net Farm Income 19 partnership excellence growth!
  • STEP 3 Economic impacts of CC on shrimp production systems (farm-level analysis) Net Present Value (NPV) Discount 20 rate = 6% partnership excellence growth! p.a.
  • STEP 4 - estimate area of current production impacted by cc - determine future area planned for aquaculture production - conduct Cost-benefit analysis of maintaining this area in production, distinguishing between farm- level adaptation (autonomous) and state-planned adaptation. partnership excellence growth!
  • STEP 4 Areas subjected to increments of maximum flooding depths (for 50-cm SLR scenario), superimposed with catfish pond areas in An Giang, Dong Thap & Can Tho provinces Increment  of   Affected  ca6ish  pond  area,  ha  (%)   max  flood   depth  (m)   An  Giang   Dong  Thap   Can  Tho   <0.5     0.5-­‐1   1-­‐1.5   178     13%   273     26%   1.5-­‐2              163     8%    89     6%   509     48%   2-­‐2.5        1,236     62%    211     15%   286     27%   2.5-­‐3              394     20%   497     36%   >  3              210     10%   402     29%   Total   2,003   100%   1,376     100%   1,068     100%   Source: SIWRP 22 partnership excellence growth!
  • STEP 4 Land use, 2007 Source: SIWRP Source: Sub- Increment of salinity intrusion (ppt) NIAPP for 50-cm SLR scenario Increment  of  water  salinity,  ppt   Province   <0   0-­‐1   1-­‐2   2-­‐3   3-­‐4   4-­‐8   Total   Bac  Lieu      20,720        48,041     14,451     16,563     6,189        2,014          107,978     Ben  Tre      11,806        30,027              41,833     Ca  Mau   109,420        34,739        1,607        1,972     2,588     15,821          166,147     Kien  Giang      27,059          747        1,776              29,583     Soc  Trang          2,652        14,613      4,300              31,565     Tien  Giang          2,559            1,201                  3,760     Tra  Vinh      12,848        17,837              30,685     Vinh  Long                    25                  124                        148     23 All  provinces   187,089     146,581     30,358     18,536     9,524     19,612          411,699     partnership excellence growth!
  • STEP4 Projected production area (ha) based on development plans 2010   2015   2020   Extensive  shrimp1   480,964   478,398   474,120   Semi-­‐intensive/Intensive  shrimp1   127,339   130,044   134,427   Coastal  ca6ish2   1,400   1,750   2,600   Inland  ca6ish2   7,200   9,250   10,400   1.  Projected  shrimp  areas  were  based  on  Op.on  IIIb  of  Lai  (2009)  for  the  whole   country,  with  the  assump.on  that  semi-­‐intensive/intensive  scale  of  shrimp   culture  is  prac.ced  outside  of  the  Mekong  River  delta.   2.  Projected  caLish  areas  are  based  on  MARD  (2009). 24 partnership excellence growth!
  • STEP 4 Economic impacts of CC (production industry level analysis) Net Present Value (NPV) Discount 25 rate = 6% partnership excellence growth! p.a.
  • STEP 5 Benefits of planned adaptation Benefits:  avoided  damage  costs  or  the  accrued  benefits  following  the   adop?on  and  implementa?on  of  adapta?on  measures     Our  study:     •  public  investment  needed  now  to  reduce  or  offset  the  cost  of   expected  impacts  farmers  will  have  to  face  in  the  future  =>    min.   amount  needed  to  maintain  the  same  net  income  as  achieved   with  autonomous  adapta?on.   •  focus  on  dyke  upgrading  &  water  pumping  costs   Dyke   Electricity   Total   Produc9on  system   upgrading   and  fuel     Extensive  shrimp   9.1   8.2   17.3   Semi-­‐intensive/Intensive  shrimp     117.8   26.3   144.1   Inland  cajish     432.9   14.8   447.7   Coastal  cajish   59.1   3.3   62.3   Total   618.9   52.6   671.5   26 partnership excellence growth!
  • STEP 5 Catfish Autonomous adaptation cost of upgrading dykes at the production industry level At the farm level: starting 2015 the cost of autonomously adapting to CC will be too high! 27 partnership excellence growth!
  • On catfish:•  Economic viability is precarious- average net income is 3-5% of total farm costs•  CC impacts and costs of autonomous adaptation may contribute to making the industry uncompetitive within the next decade•  Increase profit margins key to survival and adaptation to CC (“no- regret strategy”): 1) reduce cost of inputs, 2) transfer cost of adaption across the value chain and across sectors (dykes) partnership excellence growth!
  • On shrimp:•  Positive net benefits for a longer period than catfish operators due to lower total costs relative to gross income (Avg. net income 123-129% of total farm costs)•  Extensive systems: profitable, high level of dependency in terms of livelihoods, low capitalization => good candidate for planned adaption•  Threats: intensification and expansion risks of collapse (disease problems) + thermal stress, & costs of flooding & storm damage could increase costs and increase uncertainty of production•  CC impacts (SLR, increased salinity) offer new opportunities for increased production => trade-offs between maintaining delta land for rice, or allowing saline water intrusion for shrimp farming partnership excellence growth!
  • Key problems and limitations in analysis (1)•  CC impact costs based on perceived climate-related costs in last 10 years, projected forward (linear projection); not explicitly linked to results of vulnerability analysis•  Lack of clarity whether projected costs are in nominal or real terms•  The cost-benefit study projects forward only 10 years at present – may be extrapolated another 10 (to 2030), but beyond this, extrapolation becomes increasingly unreliable without better knowledge of likely feedback responses•  Economic analyses are done on average values; economic performance (of which feed is a major cost) varies significantly across the industry and only better performers are likely to survive 30 partnership excellence growth!
  • Key problems and limitations in analysis (2)•  Economic analysis focuses on the production stage, not on the value chain•  Stretching the NPV concept from an individual enterprise to an entire industry (i.e. exit-entry of actors)•  Costs of planned adaptation cannot be attributed only to aquaculture and must be spread among other sectors (agriculture, defense of coastal infrastructure, protection of homes, businesses and livelihoods etc) – needs integration of the sectoral studies•  Impacts on capture fisheries and mariculture (e.g. cage aquaculture) and other forms of aquaculture not analyzed in this study – so these make up only part of the likely total costs of CC to the fishery/aquaculture sector in Vietnam. 31 partnership excellence growth!
  • Key economic planning questions: •  Do current CC adaptation plans in the Mekong adequately consider the potential impact on aquaculture development trajectories? •  If not, is the aquaculture industry of sufficient economic importance to consider modifying existing coastal and land use planning for CC adaptation in the Mekong delta? •  What would these modifications cost, and what would their impacts on other sectors be? •  What other investments are required in aquaculture to ensure that the sector is able to respond to both a changing climate and a changing domestic economy and global market? 32 partnership excellence growth!
  • Further work •  Address data limitations: future drivers of change and scenario work with farmers (linear projection issue) •  Economic impacts of climate change on capture fisheries and other aquaculture systems •  Link with vulnerability and value chain analysis  Improved linkages with other economic sectors, and with macro-level planning, for adaptation policy analysis 33 partnership excellence growth!
  • Acknowledgements•  World Bank EACC for economic analysis•  QUEST_fish project (NERC/UK) for vulnerability analysisFull Report:Kam S.P, Badjeck M-C, Teh L., Teh L., Bé Năm V.T, Hiền T.T, Huệ N.T, Phillips M., Pomeroy R., Sinh L.X (2010). Economics of adaptation to climate change in Vietnam’s aquaculture sector: A case study. Report to the World Bank (currently embargoed) partnership excellence growth!