FRESH research done by economists attached to the World Bank and a number of universities in the Americas have identified 20 Caribbean countries in which coral reef and mangrove restoration could result in strong return on investment (ROI). They include Cuba and Jamaica.
Globally, there is a growing need for coastal and marine restoration but it is not clear how this is to be financed, given that environmental funding is low and national budgets are stretched in response to natural hazards. Restoration budgets amounting to billions of US dollars are often quoted.
But for locations in the Caribbean region, researchers using risk industry methods found that coral reef and mangrove restoration could yield strong ROI for flood risk reduction on shorelines across the 20 Caribbean countries.
“Return on investment for mangrove and reef flood protection” was submitted on 17 September 2021 by writers; received in revised form 19 April 2022; and accepted 17 May 2022 by Ecosystem Services 56 (2022).
It is currently a 2022 publication by Ecosystem Services. It is the result of collaborative research between the Institute of Marine Sciences, University of California, the Department of Coastal Studies, East Carolina University, The World Bank, the Nature Conservancy, and other institutes. The abstract is available at www.elsevier.com.
The researchers state, first of all, that knowledge increasingly exists on how to rebuild marine ecosystems, but how to pay for it has the challenge. The global budgets for conservation are in the billions of dollars, plus budgets and spending for disaster recovery are in the hundreds of billions of dollars, annually, and increasing.
In the abstract the researchers bring good news, stating, “We have identified where there could be significant returns on investment for coral reef and mangrove restoration across the Caribbean. ”
Coastal ecosystems such as reefs and mangroves act as natural barriers to waves and storm surges, and reduce flood damage to people and property.
These benefits are critical across the Caribbean, where there have been substantial increases in storm risk and extensive habitat loss. To identify where reef and mangrove restoration could yield significant returns on investment, the researchers built on recent work that values the annual flood risk reduction benefits of coastal habitats (Beck et al., 2018, Men´endez et al., 2020).
To assess return on investment, they started by estimating flood protection benefits and followed the expected damages approach (Barbier 2015, World Bank 2016), which is also commonly used by the risk industry (eg in the insurance and engineering sectors).
The researchers also used a set of probabilistic hydrodynamic and economic models to map flooding on reef and mangrove coastlines, with and without habitats, for four storm return periods (1-in-10, − 25, − 50, − 100-yr events).
They assessed flooding in cross-shore transects every 2 km or less globally, and produced flooding maps (flood depth and extent) at 30-m resolution.
They also made use of socioeconomic exposure data from the World Bank. For mangroves, researchers assumed that the flood protection benefit of restoring 1 ha of mangrove forest in a 20-km study unit is equivalent to the average decline in benefit from the loss of 1 ha of mangroves in that unit.
For coral reefs, they assume the benefit in restoring 1 m in reef height is equivalent to the average decline in benefit from the loss of 1 m in reef height in that study unit. These assumptions rely on the full restoration of the habitat characteristics that provide flood protection benefits such as reef height and mangrove density.
This full restoration may not be immediate, which can reduce the overall benefits. On the other hand, restoration projects for flood protection would likely be cited to maximise (or at least do better) than the average flood protection in a given study unit, which means assumptions could underestimate potential restoration benefits.
Researchers admitted that a significant shortcoming is that there is little data on opportunity or maintenance costs for habitat restoration projects. Almost all of the cost data on mangrove and reef projects was the initial (direct investment) costs associated with habitat restoration.
Researchers added sensitivity analyses to assess how discount rates and time to access full project benefits could affect return on investment.
Funding for restoration
In trying to identify sources of funding for restoration work, the researchers note that re-insurers have sold policies to protect reefs and are developing approaches that could be used to invest in restoration upfront to build resilience and reduce future payouts (Kousky and Light 2019, Reguero et al., 2020).
They note, “There are opportunities to align conservation, flood risk reduction and climate adaptation to reduce storm risks. There are many places across the Caribbean where habitat restoration for risk reduction could be cost-effective, and these values open significant opportunities to pay for their needed restoration.”
ROI estimates in the paper are conservative. Researchers note, “We do not consider indirect benefits from averted flooding such as avoided business interruption, which is estimated from claims to be 139 per cent larger than direct damages to property (Allianz 2019). We also do not add values from additional ecosystem services such as carbon sequestration, tourism, and fish production.
“We do not factor in sea level rise or increasing storminess, which would increase the flood reduction benefits.”
They also assume that restoration costs are fixed, but they will likely decrease with economies of scale (eg, mangrove restoration is much cheaper in Southeast Asia in part for these reasons).
The present value analyses allow project proponents to consider all the potential break-even restoration costs, which could include values that are rarely reported such as costs of overcoming restoration failures or opportunity costs (eg, land acquisition for mangroves).
Researchers also assume that risk reduction benefits will remain static over time in the future, and note, “We have shown that these benefits increase greatly over time for mangroves (World Bank 2021). These results open new opportunities to support restoration.”