Catalysing Ocean Finance: Transforming Markets to Restore and Protect the Global Ocean


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  • In this presentation I will review the key results from “Catalysing Ocean Finance”, a recently launched UNDP/GEF report which documents twenty years of UNDP/GEF experience in promoting the protection and restoration of some of the world’s most important marine ecosystems. This report documents the successful application of three key ocean strategic planning methodologies that have proven highly effective in creating the necessary enabling policy environment for leveraging significant financial flows towards more sustainable ocean use.
  • Summarizes major ocean using and dependent sectors and critical role of oceans in provision of ecosystem services and to poverty reduction
  • Reviews and adds up estimates of the economic value of different ocean sectors to the world (market) economy.
  • Despite a number of commitments made by governments and other stakeholders over the last twenty or more years at global, regional, national and local levels, on the whole ocean health remains in decline globally and, perhaps most alarming, nearly all aggregate indicators for ocean health show degradation continuing geometrically/exponentially vs. linearly.
  • Summarizes and adds up estimated socioeconomic costs of poor ocean management and unsustainable use of marine resources. Contemporary costs to human societies may approach US $1 trillion per year; climate change impacts (warming, acidification, habitat degradation, etc.) will only increase these figures further.
  • All of the key challenges facing ocean ecosystems derive from various policy and market failures which result in environmental externalities which impact the oceans. Solutions to each of these challenges require ‘internalizing’ these externalities into the costs of ocean using and ocean impacting industries and markets.
  • When one reviews recent popular media, one could get the impression that our oceans have already passed point of no return in terms of degradation and ‘tipping points’. However, UNDP/GEF experience demonstrates that there remains substantial hope and opportunities to reverse these negative trends and place the global oceans back on the path to sustainability.
  • These are the 3 core strategic planning methodologies and approaches UNDP/GEF has successfully applied over the last 20 years that have helped to create an enabling policy environment (at global, regional, national and/or local scales) that in turn has served to catalyse significant public and private financial flows for ocean restoration and protection and in several cases, delivered measurable improvements in ocean ecosystem status and associated livelihoods.
  • GEF-UNDP-IMOGloBallast program played (and continues to play) a pivotal catalytic role in the processes that led to the negotiation, adoption and ratification of the international convention on ship’s ballast water and sediments. In addition to assisting over 70 countries with the governance reforms necessary for compliance and implementation of the convention, through a series of activities such as Global R&D fora, technology directories, the Global Industry Alliance on Ship Ballast water, and others, the program has helped to catalyse the creation of a whole new ballast water treatment industry, expected to be valued in the tens of billions of dollars when ships are required to achieve compliance with the convention once it enters into force.
  • From the late 1980’s, the NW shelf of the Black Sea was experiencing severe eutrophication and hypoxia leading to species and habitat loss and socioeconomic impacts which reached $500 million per year. Over a nearly 20 year period, UNDP/GEF helped the 17 countries of the Danube/Black Sea basin to better understand the immediate and root (policy failure) causes of the hypoxia and to put in place the necessary policies, legislation and investments needed to reduce nutrient pollution in the basin. Through the identification and facilitation of pollution reduction investments, the series of GEF projects helped to catalyse over $3 billion in public and private sector investments and sizeable reductions in Danube and Black Sea pollution loads. This ultimately led to the reversal of the Black Sea hypoxia area (one of world’s first documented reversal of a major hypoxic zone) and measurable improvements in the status of both the Danube and Black Sea ecosystems.
  • This slide summarizes the key results of the other 4 case studies in Catalysing Ocean Finance, each example documenting leverage of billions of dollars in public and private financial flows catalysed by the enhanced enabling policy environment created through the GEF projects.
  • This slide summarizes the 6 case studies: total GEF grant (via multiple, 2-4, GEF projects over 13-20 year time frames), the total catalysed public and private finance, and the ‘catalytic finance ratio’ of the latter two figures. The ratios range from 57-2,5000 with a cumulative catalytic ratio of 458 leveraging nearly $65 billion.
  • Catalysing Ocean Finance then examined the question, drawing from the 6 case studies as ‘proxies’ for estimating the costs required to transform markets and restore ocean ecosystems, what would be the approximate public costs, socioeconomic benefits and total catalysed finance associated with a global scaling up of these methodologies to address the key ocean challenges comprehensively.
  • Roughly 40% of global stocks now overexploited or collapsed; wild fisheries catch has been flat at about 80 million mt/year since the mid-1980’s, deficit largely made up from aquaculture which now makes up about 46% of globally consumed seafood products by volume. WB/FAO estimate approximate $50 billion annual economic loss due to overfishing.
  • One time catalysed finance $238 bn. reflects scaling up of UNDP/GEF experience with moving Yellow Sea and W/C Pacific fisheries towards sustainability (which alone represent 5% global fish catch). One time public costs dominated by costs to establish MPAs to achieve 10% Aichi target of 10% of world oceans under MPA, recurring public costs similarly dominated by annual management costs of MPAs. Recurring catalysed finance represents redirection of ‘bad’ subsidies ($16 billion/yr) and use of Individual Transferable Quota (ITQ) revenue (~$40 billion/yr) towards more sustainable fishing and aquaculture practices. Avoided costs represents elimination of the estimated annual $50 billion economic loss due to overfishing
  • Now nearly 500 hypoxic areas globally, doubling roughly every 10 years since beginning 20th century. Dominated in Europe, US, Australia but increasingly appearing in rapidly growing regions including East Asia, South Asia and Latin America. Under business as usual scenario, global nitrogen loads to ocean will double or triple again by 2050, seriously exacerbating ocean hypoxia, and most of this growth is projected to occur in the developing world.
  • One time public costs about $2.5 billion to scale up TDA/SAP (too small to be visible in this graph) and local/national ICM programs in LMEs impacted by hypoxia. One time catalysed finance about $80 billion calculated via global scaling up of UNDP/GEF experience in Danube/Black Sea to LMEs impacted by hypoxia. Avoided costs represent average of estimated range ($200-$790 billion/year) global socioeconomic impacts of eutrophication and hypoxia.
  • Main two vectors for global transfer of aquatic invasive species are ship ballast water (5 billion tons being transferred around the world at any given moment) and ship hull fouling. 100’s of invasions have already occurred, causing estimated $100 billion/year in economic damages, and will only increase unless these two vectors are controlled much more effectively. Unlike pollution, overfishing, etc. aquatic invasions are nearly impossible to reverse so the ecosystem and socioeconomic damages are inherently permanent and therefore worse. Through GEF-UNDP-IMO GloBallast program, int’l community has made tremendous steps to reduce the risks from ballast carried invasives but similar steps are needed to address the risks from hull fouling.
  • One time public costs of around $20 million (too small to be visible in graph) would be for a GEF or other global initiative, modeled after GloBallast, to catalyse public and private action on ship hull fouling through governance reform and cataysed investment. Policy etc. commitments articulated under a global framework would in parallel be mainstreamed into LME management programs to facilitate uptake at regional and national levels (as was done by GloBallast).
  • Marine organisms threatened by ocean acidification include those that fix calcium carbonate in their shells, not only shellfish but a sizeable fraction of the world’s phytoplankton, the basis of the ocean food chain that produce half of the oxygen delivered to us by the biosphere. Lower pH can also negatively impact other aspects of organismal functioning – respiration, growth, reproduction, communication, etc. Ocean pH dropping at fastest rate in at least last 60 million years and previous major changes in ocean pH have been associated with mass extinction events.Pteropods (keystone zooplankton species) in Antarctic already showing impacts of acidification as it is happening fastest there due to cold water absorbing CO2 more readily. In ‘business as usual’ CO2 emissions scenario, ocean pH, already decreased by 0.1 pH unit, by 2100 could drop a further 0.3-0.4 units with potentially catastrophic effects on marine ecosystems. Only solution to ocean acidification is to reduce CO2 emissions, geoengineering solutions that regulate solar input to earth would not address acidification (could speed it up in fact with less incentive to reduce CO2)SEM photo on top right of incompletely formed marine coccolithophorid grown under lower pH environment.
  • Global shipping volume has been growing at 3-4% per year and projected to continue to do so for the foreseeable future especially as middle income/BRICs continue rapid growth and associated increase in purchasing power. Worst case scenario, shipping could grow to 12-18% of global CO2 emissions. Through IMO, international community recently passed aggressive ship design (EEDI Energy Efficiency Design Index) and energy efficiency (SEEMP Ship Energy Efficiency Management Plans), regulations went into effect 1 Jan 2013. A concerted international (UN, industry, governments) effort to implement the new standards could avoid nearly 1 Gigaton CO2 emissions from shipping compared to the ‘business as usual’ scenario, this represents about 3% of present day global CO2 emissions so would be a sizeable contribution and prevent shipping from becoming a major piece of the climate change problem.
  • Robust blue carbon methodologies are needed and presently being developed to permit blue carbon schemes access to carbon markets and promote a global scaling up of Blue Carbon in same context as REDD.
  • One time public costs for 1. shipping EE initiative modeled after GloBallast ($20 m.), 2. scaling up Blue Carbon initiatives in the 40 countries that host the majority of seagrass and mangrove habitat biomass ($400-800 m.). One time catalysed finance is estimated private sector flows for new investments in controlling hull fouling ($20 billion), recurring catalysed finance is $0.3-5.1 billion/year in global sales of blue carbon credits. Avoided costs represents contribution of avoided shipping and blue carbon CO2 emissions to reduced global impacts of CC drawing from Stern report. Use ICM and TDA/SAP as tools to help mainstream blue carbon into regional, national and local ocean planning processes.
  • Catalysing Ocean Finance: Transforming Markets to Restore and Protect the Global Ocean

    1. 1. Catalysing Ocean Finance: Transforming Markets to Restore and Protect the Global Ocean Andrew Hudson, Head, UNDP Water & Ocean Governance Programme 7th GEF IW Conference Barbados 30 October 2013
    2. 2. Value of ‘blue’ ocean to the ‘green’ economy • Food security • Tourism • Transport • Energy (fossil fuels, renewables…) • Ecosystem Services (carbon and nutrient cycling , climate moderation, habitat, etc.) • Poverty Reduction – GDP contribution ocean sectors as high as 20% in some developing countries
    3. 3. Market value of ocean goods & services Sector Fisheries & Aquaculture Value $100 billion/year, 45 million jobs Transport/Shipping $435 billion/year, 13.5 million jobs, moves 90% international trade Oil & Gas 30% global oil is offshore, $90 billion/year, increasing Tourism 5% global GDP, 6% global jobs, coastal is major segment, ~$271 billion/year (US as proxy) Global contribution ~$1 trillion/year, 500 million jobs of the ‘ocean economy’
    4. 4. But our oceans – and trillions $ in goods and services - are at serious risk …. Overfishing Coastal hypoxia Invasive Species Habitat Loss Ocean Acidification Most are accelerating
    5. 5. Global costs of poor ocean management on socioeconomic development Ocean Issue Overfishing Costs to Society $50 billion/year Coastal Hypoxia/Eutrophication $200 - $790 billion/year Invasive Aquatic Species $100 billion/year Coastal Habitat Loss Unknown but large Ocean acidification $1.2 trillion/year (2100) in “BAU” scenario Total Costs today at least $350 - $940 billion/year
    6. 6. Market & Policy failures drive ocean degradation Ocean Issue Market/Policy Failure(s) Coastal hypoxia/eutrophication (fertilizer & manure run-off, poorly treated wastewater) Lack of internalizing cost of nutrient damage into price of fertilizer and human & livestock wastewater management Marine Invasive Species – shipping as main vector Lack of internalizing economic damage invasives into shipping operations, internalize cost to clean up ship ballast water Loss Coastal Habitats Lack proper valuation of ecosystem services coastal habitats provide Overfishing Lack internalizing socioeconomic and environmental costs of overfishing into (sustainable) fisheries management; ‘bad’ subsidies to fisheries Ocean acidification (dissolution of anthropogenic CO2 into ocean) Lack of proper price on carbon which incorporates environmental and economic damage of acidification
    7. 7. Is declining ocean health irreversible? - Not necessarily
    8. 8. Three Ocean Planning Instruments (Volume II – Methodologies & Case Studies) • Transboundary Diagnostic Analysis/Strategic Action Programme (TDA/SAP) • Integrated Coastal Management/Framework for Sustainable Development of Coastal Areas (ICM/SDCA) • Building on Regional and Global Ocean Legal Frameworks
    9. 9. Key Results from the Case Studies
    10. 10. GEF-UNDP-IMO GloBallast Programme • 2004 adoption international convention ship’s ballast water & sediments; likely to come into force soon • 70+ countries & several regions reforming policies & legislation for convention compliance • $100 million+ ballast water treatment R&D • New ballast water treatment industry ~$35 billion
    11. 11. UNDP-GEF support to Reversing Eutrophication & Hypoxia in Danube River/Black Sea • $3 billion catalysed nutrient reduction investments (>200) delivered 25,000 mt/year N, 4,000 mt/year P pollution reduction, comparable to observed reductions in Danube nutrient loads to Black Sea • Reversal of large scale Black Sea hypoxic area, ecosystem in recovery • For N, P, Chl-a, 68, 88, 100% Danube waters rated Class I or II water quality
    12. 12. Tangible Impacts on other Marine Systems Yellow Sea Large Marine Ecosystem – commitments to reduce fishing pressure 2530%, reduce nutrient discharges 10% every 5 years through 2015, scale up MPAs and sustainable mariculture Rio de la Plata/Maritime Front $2.62 billion in commitments to pollution reduction and wetland protection East Asian Seas/PEMSEA – 11% of region’s coastline with ICM programmes against near zero baseline early 90’s; 20% ICM target by 2015; over $10 billion in cumulative environmental investments leveraged through ICM programmes W/C Pacific Ocean Fisheries – fisheries representing 40% world’s tuna stocks moving towards sustainability – VMS, observers, ecosystem-based catch quotas, etc. Tripling of tuna landings/value by Pacific Island countries.
    13. 13. Case Studies – Catalytic Finance Ratios GEF Grant(s) ($ million) Catalysed Public & Private Finance ($ million) Catalytic Finance Ratio 51.89 2,983 57 Yellow Sea 15.1 10,863 737 Rio de la Plata/MF 9.31 2,620 281 PEMSEA 36.1 10,000 277 W/C Pacific Fisheries 15.1 3,214 213 14 35,000 2,500 141.144 64,680 458 UNDP/GEF Program Danube/Black Sea basin GloBallast TOTAL
    14. 14. Using these UNDP/GEF results and public costs and other research/info as proxies, what would be the approximate: - Public costs - Catalysed finance - Benefits of scaling up proven ocean planning methodologies and policy instruments to address ocean challenges globally?
    15. 15. Fisheries exploitation trends
    16. 16. Restoring Depleted Fisheries Strategic Planning Methodologies Policy Instruments Build on Global & Regional Legal & Institutional Frameworks • Complete WTO negotiations to phase out negative fisheries subsidies • Strengthen RFMOs & LME institutions Shift negative fisheries subsidies $16 billion/yr to sustainable aquaculture, MPA, improved management TDA/SAP: Scale up in ~50 LMEs/fisheries areas facing depletion/overexploitation CBD Aichi Biodiversity Target #11: 10% oceans under MPAs ICM as cross sectoral tool to promote sustainable fishing & aquaculture Ensure sound science, ecosystem-based approaches, data sharing, precautionary principle in RFMOs & LME Scale up Individual Transferable Quotas (ITQ), potential revenue up to $40 billion/year, $ to MPA, sustainable aquaculture, improved management UN Fish Stocks Agreement, FAO Code of Conduct, Port State Measures, etc. 250,000 Reversing Overfishing (US$ millions) 200,000 150,000 100,000 50,000 One time public costs One time catalysed Finance Recurring public costs (per year) Recurring Avoided Costs catalysed (Benefits) per finance (per year year)
    17. 17. Coastal hypoxic & eutrophic areas increasing geometrically due to tripling of nitrogen loads to ocean
    18. 18. Reversing Ocean Hypoxia Strategic Planning Methodologies Policy Instruments Scale up TDA/SAP in 20 remaining LMEs (& linked river basins) facing hypoxia Nutrient management regulations Scale up ICM in LMEs as tool to leverage local level nutrient pollution reduction investments and protect nutrient sinks Nutrient emissions cap and trade in river basins (national, regional) Fertilizer subsidy reform Subsidies to agricultural nutrient reduction practices and technology Subsidies to wastewater and industrial nutrient recovery & re-use Global nutrient reduction fund capitalised by innovative financial mechanism(s) $600,000 Reversing Coastal Hypoxia (US $ millions) $500,000 $400,000 $300,000 $200,000 $100,000 $0 One time public costs One time Catalysed Finance Avoided Costs (Benefits) per year
    19. 19. Risks from invasive species will worsen as shipping trade continues to grow rapidly
    20. 20. Preventing aquatic invasives – ship hull fouling Strategic Planning Methodologies Policy Instruments Build on guidelines and/or anticipated international instrument on Ship Hull Fouling Tools, methodologies, standards & guidelines on hull fouling management Incorporate hull fouling issue into LME TDA/SAPs where invasives are priority issue Support to negotiations and enhanced capacity for implementation of possible new international agreement Facilitate private sector technology R&D Marine Invasive Species - Hull Fouling (US $ millions) 60,000 50,000 40,000 30,000 20,000 10,000 One time public costs One time Catalysed Finance Avoided Costs (Benefits) per year
    21. 21. As atmospheric CO2 continues to rise, ocean pH dropping (= increasing ocean acidity) at fastest rate in 25 million years, threatening very basis of marine ecosystems
    22. 22. As international trade continues to grow rapidly, shipping CO2 emissions projected to triple or more in BAU
    23. 23. Blue Carbon – potential contribution to climate change mitigation • “Blue Carbon” coastal habitats – mangroves, seagrasses especially – significant carbon sinks, much higher than tropical forests on a C/ha/year basis • Comprehensive program to protect and restore key blue carbon sites could represent 0.4 – 3.0% (0.15 – 1.02 Gt CO2/year) of present day CO2 emissions • Beyond CC benefits, substantial additional economic benefits would be realized - adaptation benefits (protecting coasts from storm surges, etc.) and maintaining other ecosystem services of coastal habitats (fish spawning areas and nurseries, recreation, etc.).
    24. 24. Ocean sectors contribution to slowing ocean acidification Strategic Planning Methodologies Policy Instruments Build on UNFCCC (or new MEA) • Ocean pH target (minimum) • Adoption & implementation of Blue Carbon Amend UNFCCC to incorporate safe ocean acidity limit & catalyse action (or create new multi-lateral environmental agreement – MEA) Build on new IMO ship energy efficiency guidelines Tools, methodologies, standards & guidelines to promote uptake of IMO energy efficiency guidelines • Ship EE management plans (SEEMP) • Ship EE design standards (EEDI) • Facilitate private sector R&D ICM, TDA/SAP to help promote scaling up local and national Blue Carbon initiatives Robust blue carbon inventory methodologies help to mainstream blue carbon into carbon finance Ocean sectors contribution to reversing ocean acidification (US $ millions) 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 One time public costs One time Catalysed Finance Recurring Catalysed Finance Avoided Costs (Benefits) per year
    25. 25. Conclusions • Reversing ocean degradation is not an intractable problem • Ocean sustainability can be a legacy of today’s generation of decision makers • A modest additional public investment of around $5 billion over 10-20 years could be sufficient to catalyse hundreds of billions, transform ocean markets and sustain the trillions of dollars in ocean goods and services into perpetuity • But these ocean planning processes and catalysis of action and investment, take TIME, ocean degradation is geometric, need to take action immediately to prevent continued decline and possible ‘tipping points’
    26. 26. Catalysing Ocean Finance credits & thanks Authors: • Volume II - Alfred Duda, Global Environment Facility (Chap 1.1); Yihang Jiang, UNDP-GEF Yellow Sea LME Project (Chap 1.2; Chap 1.3: Case Study #2); Andrew Hudson, UNDP-GEF (Chap 1.3: Case Study #1; Chap 3.1, 3.2); Percy Nugent, UNDP-GEF FrePlata Project, (Chap 1.3: Case Study #3); Adrian Ross, UNDPGEF PEMSEA Programme (Chap 2.1, 2.2, 2.3: Case Study #4); Barbara Hanchard, UNDP-GEF-FFA Pacific Oceanic Fisheries Project (Chap 3.3: Case Study #5); Jose Matheickal, UNDP-GEF-IMO GloBallast Programme (Chap 3.3: Case Study #6); Volume I - Andrew Hudson/Yannick Glemarec Peer Reviewers: • Dandu Pughiuc, Head, Marine Biosafety Section, International Maritime Organization; Carol Turley, Senior Scientist, Plymouth Marine Laboratory; Paul Holthus, Executive Director, World Ocean Council; Ned Cyr, Director, Office of Science and Technology, US National Oceanic and Atmospheric Administration (NOAA); Peter Whalley, Independent Consultant; Robert Diaz, Professor of Marine Science, Virginia Institute of Marine Science; Chua Thia-Eng, Chair, PEMSEA Partnership Council • Designer: Kimberly Koserowski, First Kiss Creative LLC • Project Management: Jane Fulton, UNDP