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

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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

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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/province
EXPOSURE (E) DEPENDENCY (D)
Sea level rise: % of province area flooded Direct livelihood: % hh engaged in aquaculture
Temperature rise: Avg temperature increase relative Indirect employment: employees in fishery enterprises
to 1980-99 as % of total enterprise employees
Rainfall change: Annual rainfall change relative to Macro-economics: Fish output as % of country GDP;
1980-99 seafood export processing facilities
Coastal extreme events: Aquaculture area damaged, Food security: Per capita annual fish & shrimp
due to storms & typhoons 1989-2008 consumption
Floods: 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)

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


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

CC Potential Impacts in the MRD
Areas 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


Traditional approach economics of adaptation
1.  Baseline – no climate change
2.  Impact with no adaptation => Future Society & Future
Climate
3.  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

Fussel and Klein (2002)

Expected impacts: Costs of autonomous adaptation included
9

10

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%

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)

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

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

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

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

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

STEP 3 Economic impacts of CC on catfish production
systems (farm-level analysis)

Net Present Value (NPV)

18
Discount rate = 6% p.a.

STEP 3

Economic impacts of CC on extensive shrimp
production system (farm-level analysis)
Net Farm Income

19

STEP 3
Economic impacts of CC on shrimp
production systems (farm-level analysis)

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.


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

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


STEP
4
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

STEP 4

Economic impacts of CC (production industry level analysis)


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

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

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)


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


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

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

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

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

Acknowledgements
•  World Bank EACC for economic analysis

•  QUEST_fish project (NERC/UK) for vulnerability analysis

Full 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)


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