The World Bank Cost of Coastal Environmental Degradation, Multi Hazard Risk Assessment and Cost Benefit Analysis D7a: Cost Benefit Analysis of the selected DRR and CCA options for Ghana - Sector GH9-a New Ningo - Lekpoguno 8 December 2017 - version 2.0 Colophon International Marine & Dredging Consultants Address: Van Immerseelstraat 66, 2018 Antwerp, Belgium : + 32 3 270 92 95 : + 32 3 235 67 11 Email: info@imdc.be Website: www.imdc.be IMDC nv Cost of Coastal Environmental Degradation in collaboration with TE, UNESCO-IHE and VITO D7a: CBA of the selected DRR and CCA options for Ghana Document Identification Title D7a: Cost Benefit Analysis of the selected DRR and CCA options for Ghana - Sector GH9-a New Ningo - Lekpoguno Project Cost of Coastal Environmental Degradation, Multi Hazard Risk Assessment and Cost Benefit Analysis Client The World Bank Tender Selection 1206296 Document ref I/RA/12148/17.115/ABO Document name K:\PROJECTS\12\12148_P010078 - Coastal Environmental Degradation\10-Rap\D7 Cost Benefit Analysis of the selected DRM and ACC\RA17115 - D7a - Ghana\RA17115 - D7a CBA of selected DRM and ACC options for Ghana_v1.0.docx Revision Version Date Description Author Checked Approved 1.0 31/10/2017 First version LEO / ABO ABO LDN 2.0 08/12/2017 Final report LEO / ABO ABO LDN Contact within IMDC Name Annelies Bolle Phone number +32 3 270 92 90 e-mail Annelies.Bolle@imdc.be Distribution List Hard copy 1 Pdf The World Bank, Dahlia Lotayef & Nicolas Desramaut I/RA/12148/17.115/ABO 3 version 2.0 - 08/12/2017 IMDC nv Cost of Coastal Environmental Degradation in collaboration with TE, UNESCO-IHE and VITO D7a: CBA of the selected DRR and CCA options for Ghana Table of Contents LIST OF ACRONYMS AND ABBREVIATIONS .....................................................................5 1. INTRODUCTION .............................................................................................................6 1.1 THE ASSIGNMENT .....................................................................................................6 1.2 SCOPE OF THE REPORT .......................................................................................... 7 1.3 STRUCTURE OF THE REPORT.................................................................................7 2. DRR AND CCA MEASURES .......................................................................................... 8 2.1 SELECTED ALTERNATIVES ......................................................................................8 2.2 COST-BENEFIT ANALYSIS OF THE DRR AND CCA MEASURES ........................ 11 2.2.1 Cost-benefit assessment of scenario 1 - protection ..........................................11 2.2.2 Cost-benefit assessment of scenario 2a - planned retreat................................ 16 2.2.3 Cost-benefit assessment of scenario 2b - accommodation .............................. 21 2.2.4 Cost-benefit assessment of scenario 3 – combined alternative........................ 27 3. CONCLUSIONS ............................................................................................................30 3.1 METHODOLOGY .......................................................................................................30 3.2 COST BENEFIT ASSESSMENT FOR DRR AND CCA MEASURES....................... 31 3.2.1 CBA for protection (scenario 1) .........................................................................31 3.2.2 CBA for planned retreat and adaptation (scenario 2a and 2b) ......................... 31 3.2.3 CBA for combined measures (scenario 3) ........................................................ 32 4. REFERENCES ..............................................................................................................34 List of Figures FIGURE 2-1: ALTERNATIVE 0 - REFERENCE SCENARIO (DO NOTHING) ..........................................8 FIGURE 2-2: ALTERNATIVE 1 - PROTECTION SCENARIO ............................................................... 9 FIGURE 2-3: ALTERNATIVE 2A - COASTAL SETBACK ....................................................................9 FIGURE 2-4: ALTERNATIVE 2B - ADAPTATION OF BUILDINGS ......................................................10 FIGURE 2-5: ALTERNATIVE 3 - COMBINATION OF OPTIONS ......................................................... 10 List of Tables FIGURE 2-1: ALTERNATIVE 0 - REFERENCE SCENARIO (DO NOTHING) ..........................................8 FIGURE 2-2: ALTERNATIVE 1 - PROTECTION SCENARIO ............................................................... 9 FIGURE 2-3: ALTERNATIVE 2A - COASTAL SETBACK ....................................................................9 FIGURE 2-4: ALTERNATIVE 2B - ADAPTATION OF BUILDINGS ......................................................10 FIGURE 2-5: ALTERNATIVE 3 - COMBINATION OF OPTIONS ......................................................... 10 I/RA/12148/17.115/ABO 4 version 2.0 - 08/12/2017 IMDC nv Cost of Coastal Environmental Degradation in collaboration with TE, UNESCO-IHE and VITO D7a: CBA of the selected DRR and CCA options for Ghana LIST OF ACRONYMS AND ABBREVIATIONS CBA / ACB Cost Benefit Analysis / Analyse Couts Bénéfices CCA / ACC Climate Change Adaptation / Adaptation au Changement Climatique CI / IC Coastal Index / Indicateur Côtier CLC Corine Land Cover / Couverture Occupation des Sols Corine COCED Cost Of Coastal zone Environmental Degradation / Coûts de la Dégradation de l’Environnement Côtier CRAF Coastal Risk Assessment Framework / Plan d’évaluation des Risques Côtiers DRR / RRC Disaster Risk Reduction / Réduction des Risques des Catastrophes ESL Extreme Sea Level / niveau marin extrême EVI / IVE Economic Vulnerability Index / Index de Vulnérabilité Economique EWS Early Warning System / Système d’Alerte Précoce GDP / PIB Gross Domestic Product / Produit Intérieur Brut IPCC / GIEC Intergovernmental Panel on Climate Change / Groupe d'experts intergouvernemental sur l'évolution du climat IRR / TRI Internal Rate of Return / Taux de Rendement Interne IUCN / UICN the International Union for Conservation of Nature / Union Internationale pour la Conservation de la Nature NDF / FND the Nordic Development Fund / Fonds de Développement Nordique NPV / VPN Net Present Value / Valeur Présente Nette RCP Representative Concentration Pathways RSLR Relative Sea Level Rise / élévation relative du niveau marin SVI / IVS Social Vulnerability Indicator / Indicateur de Vulnérabilité Sociale TA / AT Technical Assistance / Assistance Technique ToR / TdR Terms of Reference / Termes de Reference WACA West Africa Coastal Areas management program / Programme de Gestion des Zones Cotieres d’Afrique de l’Ouest WAEMU / UEMAO West African Economic and Monetary Union / Union Economique et Monétaire d’Afrique de l’Ouest I/RA/12148/17.115/ABO 5 version 2.0 - 08/12/2017 IMDC nv Cost of Coastal Environmental Degradation in collaboration with TE, UNESCO-IHE and VITO D7a: CBA of the selected DRR and CCA options for Ghana 1. INTRODUCTION 1.1 THE ASSIGNMENT The West African coastal area hosts big infrastructure, major industries, tourism, agriculture and fishing activities as well as human settlements and its forerunners (e.g. communication routes) that drive economic growth and provide the livelihoods of many people. It is one of the most rapidly urbanising areas in the world and in many of the West African countries the economic activities that form the backbone of national economies are located within the coastal zone; however population pressures and increasing exploitation of coastal resources have led to rapid coastal environmental degradation. Coastal ecosystems in West Africa now face a range of challenges, including: coastal erosion, overexploitation of natural resources (such as fisheries and sand/gravel mining), marine and coastal pollution, rapid urbanization and unsustainable land use, and overall poor environmental governance (The World Bank, 2016). To address these challenges, the World Bank is developing a Programmatic Technical Assistance (TA) for a West Africa Coastal Areas Management Program (WACA). The project ‘WACA Erosion and Adaptation’ is part of the WACA Programmatic TA and aims to promote sound coastal management practices for a selected group of countries. In the countries covered by the present assignment, that is Benin, Côte d’Ivoire, Ghana and Togo, the project is financed by the Nordic Development Fund (NDF), which has entrusted the World Bank with its implementation. As part of the project ‘WACA Erosion and Adaptation’, the main objectives of the consultancy services for the ‘Cost of Coastal Environmental Degradation, Multi Hazard Risk Assessment and Cost Benefit Analysis’ are:  To conduct a multi hazard and climate risk assessment of the coastal zone's vulnerability to climate change and climate variability in Benin, Cote d'Ivoire, Ghana and Togo, with a special focus on 4 selected sites;  To assess the Cost Of Coastal zone Environmental Degradation (COCED);  To evaluate the most efficient options to protect the populations, the natural assets, the capital assets, the cultural assets and the activities of the selected pilot zones. The following deliverables are expected:  D0: Inception Report;  D1a,b,c,d: Reports on the qualitative review of natural hazards and risk mapping, for each country;  D2: Report on the definition of the pilot sites for each of the four countries and the detailed methodology;  D3a,b,c,d: Reports for the quantitative risk assessment of coastal erosion and flooding for each pilot site; I/RA/12148/17.115/ABO 6 version 2.0 - 08/12/2017 IMDC nv Cost of Coastal Environmental Degradation in collaboration with TE, UNESCO-IHE and VITO D7a: CBA of the selected DRR and CCA options for Ghana  D4a,b,c,d: Reports for the COCED analysis for each of the countries;  D5: An Executive Comparative Report on the coastal zones management and the COCED results;  D6a,b,c,d: Reports on the identification and justification of Disaster Risk Reduction (DRR) and Climate Change Adaptation (CCA) measures for each pilot site;  D7a,b,c,d: Reports on the Cost Benefit Analysis of the selected DRR and CCA options [present deliverable];  D8: An Executive Comparative Report on the selected DRR and CCA options;  D9a,b,c,d: PowerPoint presentations for the meeting with each communities council;  D10: Policy note COCED, policy measures and recommendations;  D11: Final project report. 1.2 SCOPE OF THE REPORT This document presents the Report Cost Benefit Analysis of the selected DRR and CCA options of the consultancy services for the ‘Cost of Coastal Environmental Degradation, Multi Hazard Risk Assessment and Cost Benefit Analysis’. The scope of this Report on DRR and CCA measures is to identify possible soft to hard adaptation options to reduce, prevent and mitigate risks and environmental degradation, through protection measures (construction of dykes, beach nourishment…), retreat, coastal ecosystems reinforcement for current and future climate variability. It is also within the present report to make a justified selection of DRR and CCA measures that are focused on ecosystems so as to ensure that future development, the quality of the commons, the shoreline recession, protection against floods and strategies for the development of wetlands are perfectly balanced. The report partly fulfils the objectives of Task 4 ‘Economic modelling and analysis of environmental remediation and adaptation options in selected pilot areas’ . The analysis presented herein builds on and assimilates the findings in previous phases of this study, for which cross-references are established where appropriate. 1.3 STRUCTURE OF THE REPORT The report is structured as follows:  Chapter 1 presents a brief introduction to the assignment as well as the scope and structure of the report;  Chapter 2 reminds the selected DRR and CCA measures, and describes the results of the Cost Benefit Analysis for each of the alternatives.  Conclusions are formulated in chapter 3, followed by the list of references in chapter 4. I/RA/12148/17.115/ABO 7 version 2.0 - 08/12/2017 IMDC nv Cost of Coastal Environmental Degradation in collaboration with TE, UNESCO-IHE and VITO D7a: CBA of the selected DRR and CCA options for Ghana 2. DRR AND CCA MEASURES 2.1 SELECTED ALTERNATIVES The different types of DRR and CCA measures have been presented and discussed in deliverable 6 (IMDC, 2017a). The selected alternatives for further alternative are shown on the figures below and are:  Alternative 0: reference situation, without any action  Alternative 1: Protection  Alternative 2a: Planned retreat  Alternative 2b: Accommodation, changes to houses & infrastructure  Alternative 3: combined alternative, start with protection, from 2050 on planned retreat and accommodation. The cost benefit analysis will be performed for each of these alternatives. Figure 2-1: Alternative 0 - Reference scenario (do nothing) I/RA/12148/17.115/ABO 8 version 2.0 - 08/12/2017 IMDC nv Cost of Coastal Environmental Degradation in collaboration with TE, UNESCO-IHE and VITO D7a: CBA of the selected DRR and CCA options for Ghana Figure 2-2: Alternative 1 - Protection scenario Figure 2-3: Alternative 2a - Coastal setback I/RA/12148/17.115/ABO 9 version 2.0 - 08/12/2017 IMDC nv Cost of Coastal Environmental Degradation in collaboration with TE, UNESCO-IHE and VITO D7a: CBA of the selected DRR and CCA options for Ghana Figure 2-4: Alternative 2b - Adaptation of buildings Figure 2-5: Alternative 3 - Combination of options I/RA/12148/17.115/ABO 10 version 2.0 - 08/12/2017 IMDC nv Cost of Coastal Environmental Degradation in collaboration with TE, UNESCO-IHE and VITO D7a: CBA of the selected DRR and CCA options for Ghana 2.2 COST-BENEFIT ANALYSIS OF THE DRR AND CCA MEASURES The benefits of the measures in scenario x are the difference of the damages in the reference scenario and the scenario x. Benefits scenario x = damages in the reference scenario – damages in scenario x. 2.2.1 Cost-benefit assessment of scenario 1 - protection 2.2.1.1 Costs of scenario 1 The costs of scenario 1 have been based on cost estimates for selected projects involving DRR and CCA measures in Ghana and worldwide. These cost estimates are presented in Error! Reference source not found. and Table 2-2. Table 2-1: Cost estimation for projects involving DRR and CCA measures in Ghana Region Cost Estimate Available description Observation, references Year Unit cost per structure: ~8.000.000 € Unit cost for nourishment: Ghana 5 Mm3 of sediment and ~18 €/m3 265.000.000 € 2015 22 groynes over 15 km Note: assuming a 2/3 – 1/3 split between structures and nourishment, actual division is unknown 122 ha of land reclamation, a Ghana 85.000.000 $ revetment and six large headland - 2014 groynes Ghana 60.000.000 $ Unknown - unknown Ghana 160.000.000 $ Unknown - unknown Ghana Estimation for coastal protection Unit cost 9.000 $ per linear 90.000.000 $ n.a. works and nourishment over 10 km meter of coast Table 2-2: Overview of some representative cost estimation available for worldwide projects involving DRR and CCA measures Region Observations & Cost Estimate Available description Year References Unit cost per structure: Coastal protection works : 8 Bénin 68.400.000 € 7.600.000 € groynes and a seawall Note: assuming structures I/RA/12148/17.115/ABO 11 version 2.0 - 08/12/2017 IMDC nv Cost of Coastal Environmental Degradation in collaboration with TE, UNESCO-IHE and VITO D7a: CBA of the selected DRR and CCA options for Ghana Region Observations & Cost Estimate Available description Year References have approximately the same length and cross- section, which are unknown Coastal protection works and Bénin 90.000.000 € - artificial nourishment Unit cost per structure: 12.000.000 € Coastal protection works : 2 Note: assuming structures Bénin 60.000.000 € seawalls and 3 groynes have approximately the same length and cross- section Ouvrages de protection du chenal Côte 27.000.000 $ er travaux de construction (épis et Étude de faisabilité d’Ivoire dragage) 85 groynes, construction of 2 brise- Togo 112.700.700 € lames and extension of 2 other and INROS LACKNER (2015) 2015 construction of 2 digues Refurbishment of 27 groynes, Togo construction of a seawall 22.500.000 € ARTELIA (2017) 2016 (estimated unit cost: ~800.000 € per structure) Placement of about 0.9 Mm3 of sediment (estimate unit cost: Togo 21 €/m3) 19.100.000 € ARTELIA (2017) 2016 Estimated maintenance volume is 300.000 m3 every 10 years (not yet budgeted) Togo Investments in coastal erosion and AnteaGroup (2017) 76.124.000 € 2017 flooding protection Unit cost for nourishment: 6,00 €/m3 Europe 1 Mm3 of sediment, over a 6.000.000 € Note: sediment and dredging 2009 distance of 2 km alongshore equipment was readily available Refurbishment of existing coastal Unit cost for refurbishment: Europe 8.000.000 € structures, 2.5 km seawall and 7 ~2100 € per linear meter 2009 groynes Europe Unit cost for nourishment: 45.000.000 € 4 Mm3 of sediment 2017 ~11 €/m3 Europe Unit cost for nourishment: 17.000.000 € 1 Mm3 of sediment 2017 17 €/m3 I/RA/12148/17.115/ABO 12 version 2.0 - 08/12/2017 IMDC nv Cost of Coastal Environmental Degradation in collaboration with TE, UNESCO-IHE and VITO D7a: CBA of the selected DRR and CCA options for Ghana Region Observations & Cost Estimate Available description Year References Unit cost per structure: 5.625.000 € Europe 8 new or refurbished coastal Note: assuming structures 45.000.000 € 2017 protection works have approximately the same length and cross- section, which are unknown Based on the figures in Table 2-1 and Table 2-2Error! Reference source not found., the assumed lower and upper tier prices are given in Table 2-3 for the alternatives aiming at holding the (existing defence) line. Table 2-3: Lower and upper tier prices for alternatives aiming at holding the (existing defence) line Reference: Description Lower Upper Type Adaptation option Assumption Assumption 153.000.000 $ 340.000.000 $ Initial Unit cost of 9.000$ Unit cost of 20.000$ Investment per linear meter of per linear meter of coast protected coast protected Alternative 1 : protection 381.250.000 $ 847.250.000 $ scenario Refurbishment Assuming initial cost Assuming initial cost Hold the line in 2050 +5% for more +5% for more extreme conditions extreme conditions Maintenance 12.500.000 $ (every 10 years, Assuming a loss of 0.8 Mm3 of sand at till 2100) 25 $/m3 unit cost for the nourishment The total costs of scenario 1 for different time horizons and discount rates is given in the table below, for both low and high cost assumptions. We assume that the costs for nourishment of 25 $/m³ increase over time at the same rate as economic growth per GDP in Ghana (lower bound) or with 2,5 % (higher bound). The cost-benefit analysis is based on the present value of all future costs and benefits. To calculate the present value, we use a discount rate of 6% as the central value. We look at a wider range of discount rates in order to allow under which conditions these costs can be earned back by benefits of avoided costs. We use 4% for sensitivity analysis from the perspective of sustainable development and calculate the impact of two more additional discount rates (2%, 8%). The initial investment costs in 2015 have an important share in total costs. Maintenance costs are important in the lower discount rates. I/RA/12148/17.115/ABO 13 version 2.0 - 08/12/2017 IMDC nv Cost of Coastal Environmental Degradation in collaboration with TE, UNESCO-IHE and VITO D7a: CBA of the selected DRR and CCA options for Ghana Table 2-4 : Total costs of measures for different time horizons and discount rates Ghana pilot site Total aggregated costs of scenario 1 Time horizon million $ / period Not discounted Discounted at Frozen DeEcGr incl Low estimate 2% 4% 6% 8% (1) (2) 2015 153 153 153 153 153 153 2015-2020 (1) 164 165 164 163 163 162 2015-2030 186 192 186 181 177 174 2015-2050 227 250 221 202 190 181 2015-2075 439 576 373 273 223 196 2015-2100 494 669 395 278 224 197 Frozen DeEcGr incl High estimate 2% 4% 6% 8% (1) (2) 2015 340 340 340 340 340 340 2015-2020 (1) 351 351 351 350 349 349 2015-2030 373 379 373 368 364 360 2015-2050 414 453 417 395 380 370 2015-2075 823 1466 897 621 486 419 2015-2100 877 1781 970 638 490 420 (1) Frozen world = demography and economy as in 2015, sea level rise as in IPCC projections (2) DeECGr incl = demographic and economic growth = assessment of damages and risks, including the impact of demographic and economic growth, based on data from table 4-6 (3) Total aggregated costs over full period 2015-2020 (in million $ / period) 2.2.1.2 Benefits of scenario 1 As we may assume that all risks will be avoided, benefits of scenario 1 are equal to the risks for erosion and floods in the reference scenario. These benefits are based on the values reports in deliverable D4 (IMDC, 2017b). I/RA/12148/17.115/ABO 14 version 2.0 - 08/12/2017 IMDC nv Cost of Coastal Environmental Degradation in collaboration with TE, UNESCO-IHE and VITO D7a: CBA of the selected DRR and CCA options for Ghana Table 2-5 : Total benefits of scenario 1 for different time horizons and discount rates Ghana pilot site Total aggregated benefits of scenario 1 Time horizon million $ / period Not discounted Discounted at Frozen DeEcGr incl 2% 4% 6% 8% (1) (2) 2015-2020 (1) 4,4 5,0 4,7 4,6 4,4 4,2 2015-2030 12,5 17,3 14,9 12,9 11,3 9,9 2015-2050 25,9 47,1 33,1 24,1 18,1 14,1 2015-2075 38,8 89,9 49,5 30,4 20,6 15,0 2015-2100 52,9 152,9 64,2 33,8 21,3 15,2 (1) Frozen world = demography and economy as in 2015, sea level rise as in IPCC projections (2) DeECGr incl = demographic and economic growth = assessment of damages and risks, including the impact of demographic and economic growth, based on data from table 4-6 (3) Total aggregated benefits over full period 2015-2020 (in million $ / period) 2.2.1.3 Cost-Benefit analysis for scenario 1 The table below presents the Net Present Value (NPV) or net benefit for scenario 1 under different time horizons, discount rates and low and high estimates of costs. A positive NPV indicates that the benefits are bigger than the costs and that the project generates net welfare. Typically, this type of projects require big investments over the short run, which need to be earned back by yearly benefits (avoided costs) over a longer term. It is logic that the NPV is negative in the short run. The NPV can only increase over time if the yearly benefits are bigger than the yearly maintenance costs. As for all time horizons and discount rates the costs are much larger than the benefits, the NPV is negative. Even if we would not discount the benefits at all, the benefits would just amount to 150 million $, which would cover for the initial investment in 2015 but not for maintenance costs. I/RA/12148/17.115/ABO 15 version 2.0 - 08/12/2017 IMDC nv Cost of Coastal Environmental Degradation in collaboration with TE, UNESCO-IHE and VITO D7a: CBA of the selected DRR and CCA options for Ghana Table 2-6 : Net Present Value (NPV) of scenario 1 for different time horizons and discount rates Ghana pilot site: costs Net Present Value of scenario 1 Time horizon in million $ /period, for 4 discount rates 2% 4% 6% 8% Low estimate costs 2015 2015-2020 (1) -159 -159 -158 -158 2015-2030 -171 -168 -166 -164 2015-2050 -188 -178 -172 -167 2015-2075 -323 -243 -202 -181 2015-2100 -331 -244 -202 -182 2% 4% 6% 8% High estimate costs 2015 2015-2020 (1) -346 -345 -345 -345 2015-2030 -358 -355 -352 -350 2015-2050 -384 -370 -362 -356 2015-2075 -848 -591 -465 -404 2015-2100 -906 -604 -468 -405 Net benefits = Net Present Value = total benefits (avoided costs) costs minus total costs. 2.2.2 Cost-benefit assessment of scenario 2a - planned retreat 2.2.2.1 Costs of scenario 2a The total costs of scenario 2a for different time horizons and discount rates is given in the table below, for both low and high assumptions. The costs include different cost categories:  Relocation costs for rebuilding fixed assets: These costs apply to build up areas in 2015 (mostly rural and urban) and that are vulnerable for erosion and or coastal flooding by 2050 or 2100. The value of these assets ($ per ha) is estimated based on a fixed ratio (2.1) between the GDP/ha.year for that grid cell, as explained in more detail in the methodology for values at risk for erosion and flooding. For urban and rural land-uses, this value per ha depends on the number of inhabitants for a given year. As about 95% of the people affected live in urban areas, the cost estimate for asset value per capita is based on our estimate for the GDP/capita for urban areas and the value of total assets amounts to 3600 $/ capita. This estimation compares well to our best estimate of the building costs for private dwellings. Our best estimate for the building costs for a new, average family house for the coastal area is 2114 $/capita (see costs of measures 2b, Table 2-10). There is an uncertain and important difference (factor 9) between the estimates for concrete buildings and more traditional houses. I/RA/12148/17.115/ABO 16 version 2.0 - 08/12/2017 IMDC nv Cost of Coastal Environmental Degradation in collaboration with TE, UNESCO-IHE and VITO D7a: CBA of the selected DRR and CCA options for Ghana To cover the range of this information, we use a low and high costs estimate. For the low cost estimate, we assume that 66% of this value are fixed assets, and 33% are not fixed (contents of buildings, cars or transport means …) and can be moved with limited costs. This rough estimate does not account for destruction costs, neither for the residual value of some construction materials that can be recuperated. On the other hand, there are indicators that this costs may be an underestimation. Therefore, the high estimate equals 100% of this value. The total fixed assets include in addition also costs for roads and other infrastructure.  For economic land uses, the value depends on the type of activity and the cost estimate is based on data from literature. As there are no industrial areas affected, this is not important for the pilot study in Ghana, and this is not further discussed here.  Second, we account for productivity loss due to changing to a new location. In addition to these relocation costs, we account for a loss of productivity due to relocation. This cost is very uncertain, and we assume that it is equal to a loss of 10% for a 10 year period. The indicator data and assumptions are consistent with these used to assess the indirect damages from erosion. We apply this to urban and rural activities, as we assume that urban fabric is a mix between economic activities (services, small industry) and habitation.  It has to be noted that these costs do not include the productivity loss associated with the loss of productive farm land, which is included in the damage costs for erosion. This is justified because the flood prone areas become available for other activities that can be combined with risk of flooding. Areas subject to erosion in 2050 will stepwise lose these possibilities, and this is accounted for in the estimation of damages.  For economic land uses, we use the same approach as used for the estimation of the relocation damages due to erosion. We include estimates for relocation of fixed assets and productivity loss.  For harbour activities, additional costs are calculated assuming that relocation will require a place nearby the harbour which is now used for urban land use. Consequently, in addition to costs of relocation of harbour activities, relocation of these urban land uses is accounted for (see methodology in deliverable D4 for the estimation of erosion damages (IMDC, 2017b)).  In the maximum cost estimate for industry and transport, it is assumed that industry and transport will also be relocated to former urban land use areas, and consequently, additional costs for relocation of this urban area are included.  The scenario for relocation considers two phases:  The first phase in 2015 includes areas likely to be flooded or eroded by 2050. This applies to 1227 ha, (400 ha vulnerable to erosion and 827 ha to flooding). Although these areas are mostly rural (+76%), the average population density amounts to 5 inhabitants/ha for 2015 with an estimated average relocation costs per ha of 11.400 I/RA/12148/17.115/ABO 17 version 2.0 - 08/12/2017 IMDC nv Cost of Coastal Environmental Degradation in collaboration with TE, UNESCO-IHE and VITO D7a: CBA of the selected DRR and CCA options for Ghana $/ha. This results in a direct relocation cost of 9 to 14 million $, and an additional cost of 4,4 million $ for productivity losses.  In the second phase, after 2050, the total area is smaller (360 ha, only erosion) but the average population density in 2015 for this area is larger (15 inhabitants/ha). In case there is no restriction on further development and population growth in these areas, the number of people, and thus also the relocation costs are likely to double by 2050. On the other hand, a stepwise phasing out of habitation in these areas could prevent the costs of relocation of fixed assets in 2050. Therefore, the relocation costs after 2050 are not included in the minimum cost assessment. The maximum cost assessment takes into account these costs, and also assumes a further demographic and economic growth in these areas up to 2050.  In both phases, there is no industrial land-use affected. The overall costs of scenario 2a vary from 9 to 14 million $ in 2015 and 12 to 23 million $ for the full period from 2015 to 2100. These costs are significantly (at least 90%) lower compared to scenario 1. Even the high cost assessment for scenario 2a is more than 90% lower compared to the low cost assessment of scenario 1. Table 2-7 : Total costs of scenario 2a for different time horizons and discount rates Ghana pilot site Total aggregated costs of scenario 2a Time horizon million $ / period Not discounted Discounted at Frozen DeEcGr incl Low estimate 2% 4% 6% 8% (1) (2) 2015 / 9,3 9,3 9,3 9,3 9,3 2015-2020 (1) / 11,0 10,9 10,9 10,8 10,7 2015-2030 / 13,7 13,2 12,8 12,4 12,1 2015-2050 / 13,7 13,2 12,8 12,4 12,1 2015-2075 / 13,7 13,2 12,8 12,4 12,1 2015-2100 / 13,7 13,2 12,8 12,4 12,1 Frozen DeEcGr incl High estimate 2% 4% 6% 8% (1) (2) 2015 / 13,9 13,9 13,9 13,9 13,9 2015-2020 (1) / 15,7 15,6 15,5 15,4 15,3 2015-2030 / 18,3 17,8 17,4 17,1 16,8 2015-2050 / 18,3 17,8 17,4 17,1 16,8 2015-2075 / 74,1 44,6 30,2 23,0 19,5 2015-2100 / 74,1 44,6 30,2 23,0 19,5 (1) Frozen world = demography and economy as in 2015, sea level rise as in IPCC projections (2) DeECGr incl = demographic and economic growth = assessment of damages and risks, including the impact of demographic and economic growth, based on data from table 4-6 (3) Total aggregated costs over full period 2015-2020 (in million $ / period) I/RA/12148/17.115/ABO 18 version 2.0 - 08/12/2017 IMDC nv Cost of Coastal Environmental Degradation in collaboration with TE, UNESCO-IHE and VITO D7a: CBA of the selected DRR and CCA options for Ghana 2.2.2.2 Benefits of scenario 2a In scenario 2a, the same area is flooded or eroded as in the reference scenario, but the population and infrastructure affected is much lower compared to the reference scenario. We assume that after relocation, the areas can be further used for agriculture. This also means that some residual damages will remain in case of further erosion or flooding. These residual damages have been assessed with a simplified method, assuming that values per ha and damage function for the most rural land use considered – R1 – apply. Compared to the reference, the residual damages are limited, because most of the damage is associated with buildings and other economic activity. We estimate residual damages to be in the range of 3% for erosion and 1% for flooding. Consequently, in scenario 2a, 97% of damages for erosion and 99% of the damages for flooding are avoided. So the benefits are very similar to these of scenario 1. Avoided damages for flooding account for around 80% of these benefits. Table 2-8 : Total benefits of scenario 2a for different time horizons and discount rates Ghana pilot site Total aggregated benefits of scenario 2a Time horizon million $ / period Not discounted Discounted at Avoided damages Frozen DeEcGr incl 2% 4% 6% 8% Erosion (1) (2) 2015-2020 (1) 1,5 1,7 1,6 1,6 1,5 1,4 2015-2030 4,5 6,3 5,4 4,7 4,1 3,5 2015-2050 10,6 19,9 13,7 9,7 7,1 5,4 2015-2075 16,9 41,1 21,7 12,7 8,3 5,9 2015-2100 25,9 81,7 31,1 14,9 8,8 6,0 Avoided damages Frozen DeEcGr incl 2% 4% 6% 8% Floods (1) (2) 2015-2020 (1) 2,8 3,2 3,0 2,9 2,8 2,7 2015-2030 7,7 10,7 9,2 8,0 7,0 6,1 2015-2050 14,8 26,3 18,9 14,0 10,7 8,4 2015-2075 21,2 47,0 26,9 17,1 11,9 8,9 2015-2100 26,0 67,9 31,9 18,3 12,2 9,0 Frozen DeEcGr incl 2% 4% 6% 8% Total Benefits (1) (2) 2015-2020 (1) 4,3 4,9 4,7 4,5 4,3 4,1 2015-2030 12,3 17,0 14,7 12,7 11,1 9,7 2015-2050 25,4 46,3 32,5 23,7 17,8 13,9 2015-2075 38,0 88,1 48,6 29,8 20,2 14,8 2015-2100 51,9 149,7 62,9 33,1 20,9 14,9 (1) Frozen world = demography and economy as in 2015, sea level rise as in IPCC projections (2) DeECGr incl = demographic and economic growth = assessment of damages and risks, including the impact of demographic and economic growth, based on data from table 4-6 (3) Total aggregated benefits over full period 2015-2020 (in million $ / period) I/RA/12148/17.115/ABO 19 version 2.0 - 08/12/2017 IMDC nv Cost of Coastal Environmental Degradation in collaboration with TE, UNESCO-IHE and VITO D7a: CBA of the selected DRR and CCA options for Ghana 2.2.2.3 Cost-Benefit analysis for scenario 2a The table below presents the Net Present Value (NPV) or net benefit for scenario 2a under different time horizons, discount rates and low and high estimates of costs. A positive NPV indicates that the benefits are bigger than the costs and that the project generates net welfare. The table indicates that the NPV becomes positive before 2050, at the 6% discount rate for both the low versus high cost estimate. This indicates that the initial costs for relocation are paid back in terms of avoided costs within four decades. These data illustrate that it is cheaper to relocate urban and economic land uses from flood prone areas where we expect them to flood frequently (at least once every ten years), with relative high damages (e.g. 22% to 38% of total assets for a flood depth of 0.5 metres). It also illustrates that a planned retreat of urban and economic activities from areas subject to erosion is cheaper, because it avoids that additional relocation costs for buildings and infrastructure build after 2015. In the high costs scenario, the NPV becomes negative after 2050 due to the high relocation costs of phase 2. These costs are not earned back before 2100 at the 6% discount rate, but are earned back at the 4% discount rate. This also shows the importance of preventive action before 2050 to limit further economic development and investments in infrastructure, which has to be relocated later on, or which will be subject to erosion or flooding. Table 2-9 : Net Present Value (NPV) of scenario 2a Ghana pilot site: costs Net Present Value of scenario 2a Time horizon in million $ /period, for 4 discount rates Low estimate costs 2% 4% 6% 8% 2015 2015-2020 (1) -6,3 -6,4 -6,5 -6,6 2015-2030 1,5 -0,1 -1,4 -2,4 2015-2050 19,3 10,9 5,4 1,7 2015-2075 35,4 17,0 7,7 2,6 2015-2100 49,7 20,3 8,5 2,8 High estimate costs 2% 4% 6% 8% 2015 2015-2020 (1) -10,9 -11,0 -11,1 -11,2 2015-2030 -3,2 -4,7 -6,0 -7,1 2015-2050 14,7 6,2 0,7 -2,9 2015-2075 3,9 -0,3 -2,9 -4,7 2015-2100 18,3 3,0 -2,1 -4,6 Net benefits = Net Present Value = total benefits (avoided costs) costs minus total costs . I/RA/12148/17.115/ABO 20 version 2.0 - 08/12/2017 IMDC nv Cost of Coastal Environmental Degradation in collaboration with TE, UNESCO-IHE and VITO D7a: CBA of the selected DRR and CCA options for Ghana 2.2.3 Cost-benefit assessment of scenario 2b - accommodation 2.2.3.1 Costs of scenario 2b The costs of scenario 2b (accommodation) are lower than the costs for scenario 2a because the people and industry in the flooded areas are not relocated, but instead additional measures are taken to make the buildings flood proof. Especially for concrete and industry buildings, these costs are much cheaper than relocation. For 2015, these cheaper measures can be applied to 60% of the families affected. This results in a total cost (for the period from 2015 to 2030) which is about 58% of the costs of scenario 2a. The costs of making buildings flood proof, builds on the assumptions and indicator data listed in table below. These costs include:  A differentiation between brick/stone/concrete buildings and cheaper buildings in more traditional materials.  Costs for these buildings are based on costs of concrete buildings per m² (Huizinga et al., 2017), with an indication of the price gap with more traditional building materials.  Additional costs for flood proof building are based on expert judgement.  We assume the measure is applied in 2015 on all areas subject to a T100 flood in 2015, but not in the areas that will erode before 2050. We assume one building of 50m² per family, and a family size of 6 persons.  We assume that the extra investment costs will generate additional maintenance costs, equivalent to 2% of investment costs/year. We assume that maintenance costs increase over time in line with economic growth. We account for maintenance costs for the period up to 2100, and assume that these costs also cover additional adaptation costs related to major renovation of these buildings.  The low estimate only takes into account the costs of adaptation for the current stock of buildings in the flood prone area, including maintenance costs over the full period of time (up to 2100).  The high cost estimate accounts in addition for the adaptation costs for new buildings, built after 2015, in line with demographic growth. We further assume that these costs grow in line with economic growth, which reflects that houses will get bigger or other materials are used as people get wealthier. I/RA/12148/17.115/ABO 21 version 2.0 - 08/12/2017 IMDC nv Cost of Coastal Environmental Degradation in collaboration with TE, UNESCO-IHE and VITO D7a: CBA of the selected DRR and CCA options for Ghana Table 2-10 : Costs estimates for scenario 2b: flood proof buildings Urban Industry Source Type of building Stone/ Traditional Average concrete materials Share in total buildings 50% 50% 100% (1) Size of building (m²) 50 50 50 Cost per m² ($/m²) 457 51 254 (2) Cost per house 22.827 2.536 12.682 Cost per ha 150.234 Add. Costs flood proof 10-20 % 10-20 % 50-100% (3) Average add costs 15% 15% 75% 45% Additional cost Per building 3.424 1.902 2.663 Per ha 22.535 N° of families/building 1 1 1 Family size 6 6 6 (4) (1) (Nguyen and Dizon, 2017) World bank (1), 2017, p39, data for zone 4 (2) (Huizinga et al., 2017) (3) (IMDC, 2017c), range of additional costs (4) Own estimate, based on data for Benin For industry, we apply a 15% to the estimation of the costs of the fixed assets per ha for industrial buildings, as explained in the methodology for estimation of values at risk. All these costs are added to the costs of measures of relocation of people and activities in the areas affected by erosion before 2050. The total costs of scenario 2b for different time horizons and discount rates is given in the table below, for both low and high assumptions. Overall, these costs are about 50% of the costs of scenario 2a. I/RA/12148/17.115/ABO 22 version 2.0 - 08/12/2017 IMDC nv Cost of Coastal Environmental Degradation in collaboration with TE, UNESCO-IHE and VITO D7a: CBA of the selected DRR and CCA options for Ghana Table 2-11 : Total costs of scenario 2b for different time horizons and discount rates Ghana pilot site Total aggregated costs of scenario 2b Time horizon million $ / period Not discounted Discounted at Frozen DeEcGr incl Low estimate 2% 4% 6% 8% (1) (2) 2015 / 5,3 5,3 5,3 5,3 5,3 2015-2020 (1) / 6,1 6,1 6,0 6,0 6,0 2015-2030 / 7,2 7,0 6,9 6,7 6,6 2015-2050 / 7,2 7,0 6,9 6,7 6,6 2015-2075 / 7,2 7,0 6,9 6,7 6,6 2015-2100 / 7,2 7,0 6,9 6,7 6,6 Frozen DeEcGr incl High estimate 2% 4% 6% 8% (1) (2) 2015 / 5,3 5,3 5,3 5,3 5,3 2015-2020 (1) / 6,3 6,2 6,2 6,2 6,1 2015-2030 / 8,4 8,1 7,7 7,4 7,2 2015-2050 / 11,7 10,0 8,9 8,2 7,6 2015-2075 / 59,2 32,1 19,1 12,8 9,7 2015-2100 / 67,2 34,0 19,5 12,9 9,8 (1) Frozen world = demography and economy as in 2015, sea level rise as in IPCC projections (2) DeECGr incl = demographic and economic growth = assessment of damages and risks, including the impact of demographic and economic growth, based on data from table 4-6 (3) Total aggregated costs over full period 2015-2020 (in million $ / period) 2.2.3.2 Benefits of scenario 2b In scenario 2b, the same areas are flooded or eroded as in the reference scenario, but the population and infrastructure affected is much lower compared to the reference scenario. The benefits for erosion are the same as those for scenario 2a. For floods, there is still some risk that cannot be avoided by the technical measures. This is the case for the indirect damage to industrial areas for interruption of activities (50 % of costs of flooding for these areas). For urban fabric, we assume that due to interruption, also 10% of the damages will remain. In sum, the total benefits are 7% lower compared to scenario 2a. I/RA/12148/17.115/ABO 23 version 2.0 - 08/12/2017 IMDC nv Cost of Coastal Environmental Degradation in collaboration with TE, UNESCO-IHE and VITO D7a: CBA of the selected DRR and CCA options for Ghana Table 2-12 : Total benefits of scenario 2b for different time horizons and discount rates Ghana pilot site Total aggregated benefits of scenario 2b Time horizon million $ / period Not discounted Discounted at Avoided damages Frozen DeEcGr incl 2% 4% 6% 8% Erosion (1) (2) 2015-2020 (1) 1,5 1,7 1,6 1,6 1,5 1,4 2015-2030 4,5 6,3 5,4 4,7 4,1 3,5 2015-2050 10,6 19,9 13,7 9,7 7,1 5,4 2015-2075 16,9 41,1 21,7 12,7 8,3 5,9 2015-2100 25,9 81,7 31,1 14,9 8,8 6,0 Avoided damages Frozen DeEcGr incl 2% 4% 6% 8% Floods (1) (2) 2015-2020 (1) 2,6 2,9 2,8 2,7 2,5 2,4 2015-2030 7,0 9,7 8,4 7,3 6,4 5,6 2015-2050 13,5 24,0 17,2 12,7 9,7 7,7 2015-2075 19,3 42,8 24,4 15,5 10,8 8,1 2015-2100 23,6 61,7 29,0 16,6 11,1 8,2 Frozen DeEcGr incl 2% 4% 6% 8% Total Benefits (1) (2) 2015-2020 (1) 4,1 4,6 4,4 4,2 4,0 3,9 2015-2030 11,6 16,1 13,8 12,0 10,4 9,1 2015-2050 24,1 43,9 30,8 22,4 16,8 13,1 2015-2075 36,1 83,9 46,1 28,3 19,1 14,0 2015-2100 49,5 143,5 60,0 31,5 19,8 14,1 (1) Frozen world = demography and economy as in 2015, sea level rise as in IPCC projections (2) DeECGr incl = demographic and economic growth = assessment of damages and risks, including the impact of demographic and economic growth, based on data from table 4-6 (3) Total aggregated benefits over full period 2015-2020 (in million $ / period) 2.2.3.3 Cost-Benefit analysis for all measures in scenario 2b In the table below presents the Net Present Value (NPV) or net benefit for scenario 2b under different time horizons, discount rates and low and high estimates of costs. A positive NPV indicates that the benefits are bigger than the costs and that the project generates net welfare. The table below shows that under low costs estimates, the NPV of scenario 2b is positive before 2030 and for all discount rates, and both for the low and high estimate of the costs. Although costs increase after 2050 in the high cost estimation, so do the benefits and the NPV further increases. Scenario 2b has a better benefit/cost ratio than scenario 2a in terms of NPV because it can generate 94% of the benefits of scenario 2a at half of the costs. However, residual risks are a little higher. I/RA/12148/17.115/ABO 24 version 2.0 - 08/12/2017 IMDC nv Cost of Coastal Environmental Degradation in collaboration with TE, UNESCO-IHE and VITO D7a: CBA of the selected DRR and CCA options for Ghana Table 2-13 : Net Present Value (NPV) of scenario 2b Ghana pilot site: costs Net Present Value of scenario 2b Time horizon in million $ /period, for 4 discount rates Low estimate costs 2% 4% 6% 8% 2015 2015-2020 (1) -1,7 -1,8 -2,0 -2,1 2015-2030 6,8 5,1 3,7 2,5 2015-2050 23,8 15,5 10,1 6,5 2015-2075 39,1 21,4 12,4 7,4 2015-2100 53,0 24,6 13,1 7,5 High estimate costs 2% 4% 6% 8% 2015 2015-2020 (1) -1,9 -2,0 -2,1 -2,2 2015-2030 5,8 4,3 3,0 2,0 2015-2050 20,8 13,5 8,7 5,5 2015-2075 14,0 9,2 6,3 4,2 2015-2100 26,1 12,0 6,9 4,4 Net benefits = Net Present Value = total benefits (avoided costs) costs minus total costs . 2.2.3.4 Cost-Benefit analysis for scenario 2b: only flood measures In this section we only look at the costs and benefits of the additional flood proofing measures of scenario 2b. The difference between the low and high estimate of costs are above. As these measures are very effective for the reduction of the damage costs of flooding, we estimate that these additional investments will generate a quick a high return, and that the NPV will become positive before 2020 under all assumptions. I/RA/12148/17.115/ABO 25 version 2.0 - 08/12/2017 IMDC nv Cost of Coastal Environmental Degradation in collaboration with TE, UNESCO-IHE and VITO D7a: CBA of the selected DRR and CCA options for Ghana Table 2-14 : Costs of scenario 2b (flood proofing measures) Total aggregated costs of scenario 2b Ghana pilot site flood measures only Time horizon million $ / period Not discounted Discounted at Frozen DeEcGr incl Low estimate 2% 4% 6% 8% (1) (2) 2015 / 1,6 1,6 1,6 1,6 1,6 2015-2020 (1) / 1,7 1,7 1,7 1,7 1,7 2015-2030 / 1,9 1,9 1,9 1,8 1,8 2015-2050 / 1,9 1,9 1,9 1,8 1,8 2015-2075 / 1,9 1,9 1,9 1,8 1,8 2015-2100 / 1,9 1,9 1,9 1,8 1,8 Frozen DeEcGr incl High estimate 2% 4% 6% 8% (1) (2) 2015 / 1,6 1,6 1,6 1,6 1,6 2015-2020 (1) / 1,9 1,9 1,9 1,8 1,8 2015-2030 / 3,0 2,8 2,6 2,4 2,3 2015-2050 / 6,3 4,8 3,8 3,2 2,8 2015-2075 / 12,1 7,0 4,6 3,5 2,9 2015-2100 / 20,1 8,8 5,1 3,6 2,9 (1) Frozen world = demography and economy as in 2015, sea level rise as in IPCC projections (2) DeECGr incl = demographic and economic growth = assessment of damages and risks, including the impact of demographic and economic growth, based on data from table 4-6 (3) Total aggregated costs over full period 2015-2020 (in million $ / period) Table 2-15 : Benefits of scenario 2b (flood proofing measures) Total aggregated benefits of scenario 2b Ghana pilot site flood measures only Time horizon million $ / period Not discounted Discounted at Avoided damages Frozen DeEcGr incl 2% 4% 6% 8% Floods (1) (2) 2015-2020 (1) / / 2,8 2,7 2,5 2,4 2015-2030 / / 8,4 7,3 6,4 5,6 2015-2050 / / 17,2 12,7 9,7 7,7 2015-2075 / / 24,4 15,5 10,8 8,1 2015-2100 / / 29,0 16,6 11,1 8,2 (1) Frozen world = demography and economy as in 2015, sea level rise as in IPCC projections (2) DeECGr incl = demographic and economic growth = assessment of damages and risks, including the impact of demographic and economic growth, based on data from table 4-6 (3) Total aggregated benefits over full period 2015-2020 (in million $ / period) The NPV indicates that the costs of flood proofing measures will be recovered within a decade. The risk of flooding is indeed high and it is likely that these areas will be flooded at least once before 2025. Even with shallow flood depths, the damage functions indicate that the damage will be equivalent to 22% of the maximum value of building assets (+ content). On the other hand, we estimate that these buildings can be protected at an additional cost I/RA/12148/17.115/ABO 26 version 2.0 - 08/12/2017 IMDC nv Cost of Coastal Environmental Degradation in collaboration with TE, UNESCO-IHE and VITO D7a: CBA of the selected DRR and CCA options for Ghana of 15% (for concrete buildings and industry). Flood risks being dominated by frequent floods (T10), there is strong evidence that the cost recovery period for these measures is low (a few decades). This conclusion remains valid if we use the upper limit for estimating the costs of the adaptation measures. Table 2-16 : Net Present Value (NPV) of scenario 2b (flood proofing measures) Net Present Value of scenario 2b Ghana pilot site: costs flood measures only Time horizon in million $ /period, for 4 discount rates Low estimate costs 2% 4% 6% 8% 2015 2015-2020 (1) 1,1 1,0 0,9 0,8 2015-2030 6,5 5,4 4,5 3,8 2015-2050 15,3 10,8 7,9 5,9 2015-2075 22,6 13,7 9,0 6,3 2015-2100 27,1 14,7 9,2 6,4 High estimate costs 2% 4% 6% 8% 2015 2015-2020 (1) 0,9 0,8 0,7 0,6 2015-2030 5,6 4,7 3,9 3,3 2015-2050 12,4 8,9 6,5 4,9 2015-2075 17,5 10,9 7,3 5,2 2015-2100 20,1 11,5 7,5 5,3 Net benefits = Net Present Value = total benefits (avoided costs) costs minus total costs . 2.2.4 Cost-benefit assessment of scenario 3 – combined alternative 2.2.4.1 Costs of scenario 3 Up to 2050, the costs of scenario 3 are identical to those of scenario 1, both for the low and high estimate (protection). After 2050, the measures include relocation of the inhabitants in areas subject to erosion (400 ha) and adaptation of buildings in flood prone areas (600 ha). The low cost scenario assumes some additional preventive adaptation action to limit the number of people to be relocated in 2050, and assumes that no additional buildings are allowed after 2015 resulting in a decrease of 25 % of the number of people to be relocated. In the high cost estimate, further demographic growth is allowed in areas subject to erosion after 2050. As adaptation of buildings is relatively low, demographic growth is allowed in flood prone areas, both in the low and high cost scenario. I/RA/12148/17.115/ABO 27 version 2.0 - 08/12/2017 IMDC nv Cost of Coastal Environmental Degradation in collaboration with TE, UNESCO-IHE and VITO D7a: CBA of the selected DRR and CCA options for Ghana Table 2-17 : total costs of scenario 3 for different time horizons and discount rates Ghana pilot site Total aggregated costs of scenario 3 Time horizon million $ / period Not discounted Discounted at Frozen DeEcGr incl Low estimate 2% 4% 6% 8% (1) (2) 2015 / 153 153 153 153 153 2015-2020 (1) / 162 162 161 161 160 2015-2030 / 189 184 179 176 173 2015-2050 / 250 221 202 190 181 2015-2075 / 254 223 203 190 182 2015-2100 / 254 223 203 190 182 Frozen DeEcGr incl High estimate 2% 4% 6% 8% (1) (2) 2015 / 340 340 340 340 340 2015-2020 (1) / 349 348 348 348 347 2015-2030 / 376 370 366 362 359 2015-2050 / 453 417 395 380 370 2015-2075 / 459 420 396 380 370 2015-2100 / 459 420 396 380 370 (1) Frozen world = demography and economy as in 2015, sea level rise as in IPCC projections (2) DeECGr incl = demographic and economic growth = assessment of damages and risks, including the impact of demographic and economic growth, based on data from table 4-6 (3) Total aggregated costs over full period 2015-2020 (in million $ / period) 2.2.4.2 Benefits of scenario 3 Up to 2050, benefits are the same as for scenario 1. After 2050, most of the damages related to erosion are avoided. As we assume that after relocation the areas will be used for agriculture, the residual damages are limited to loss of agriculture land after erosion. In line with the simplified assessment for scenario 2a, these amount to 3% of the damage of the reference scenario. For floods, some damages remain, related to interruption of economic activities and in urban fabric. In line with the simplified assessment for scenario 2a, we estimate that the residual damage is 10% of the damage in the reference scenario. In addition we account for the fact that a large area (600 ha for a T100) is flooded under the conditions of scenario 3. For erosion, the area is similar in size. Overall, the benefits after 2050 in scenario 3 amount to 90% of these of scenario 1. I/RA/12148/17.115/ABO 28 version 2.0 - 08/12/2017 IMDC nv Cost of Coastal Environmental Degradation in collaboration with TE, UNESCO-IHE and VITO D7a: CBA of the selected DRR and CCA options for Ghana Table 2-18 : total benefits of scenario 3 for different time horizons and discount rates Ghana pilot site Total aggregated benefits of scenario 3 Time horizon million $ / period Not discounted Discounted at Frozen DeEcGr incl 2% 4% 6% 8% (1) (2) 2015-2020 (1) 4,4 5,0 4,7 4,6 4,4 4,2 2015-2030 12,5 17,3 14,9 12,9 11,3 9,9 2015-2050 25,9 47,1 33,1 24,1 18,1 14,1 2015-2075 35,0 81,5 44,8 27,4 18,5 13,5 2015-2100 48,2 140,1 58,4 30,6 19,2 13,7 (1) Frozen world = demography and economy as in 2015, sea level rise as in IPCC projections (2) DeECGr incl = demographic and economic growth = assessment of damages and risks, including the impact of demographic and economic growth, based on data from table 4-6 (3) Total aggregated benefits over full period 2015-2020 (in million $ / period) 2.2.4.3 NPV of scenario 3 As the costs are dominated by the investments in 2015, as in scenario 1, the NPV remains negative in scenario 3 for all discount rates and cost assumptions. Table 2-19 : Net Present Value (NPV) of scenario 3 Ghana pilot site: costs Net Present Value of scenario 3 Time horizon in million $ /period, for 4 discount rates 2% 4% 6% 8% Low estimate costs 2015 2015-2020 (1) -157 -157 -156 -156 2015-2030 -169 -166 -164 -163 2015-2050 -188 -178 -172 -167 2015-2075 -179 -176 -172 -168 2015-2100 -165 -173 -171 -168 2% 4% 6% 8% High estimate costs 2015 2015-2020 (1) -344 -344 -343 -343 2015-2030 -355 -353 -351 -350 2015-2050 -384 -370 -362 -356 2015-2075 -375 -368 -362 -357 2015-2100 -362 -365 -361 -357 Net benefits = Net Present Value = total benefits (avoided costs) costs minus total costs. I/RA/12148/17.115/ABO 29 version 2.0 - 08/12/2017 IMDC nv Cost of Coastal Environmental Degradation in collaboration with TE, UNESCO-IHE and VITO D7a: CBA of the selected DRR and CCA options for Ghana 3. CONCLUSIONS 3.1 METHODOLOGY An initial assessment of the costs and benefits of the different alternatives was made for the pilot site. Costs include investment costs and maintenance costs. We calculated all investment and maintenance costs at different time horizons (2015, 2020, 2030, 2050, 2075 and 2100), using a range for lower and higher estimates, and taking into account the impact of demographic and economic growth on these costs. The cost-benefit analysis is based on the present value of all future costs and benefits. To calculate the present value, we use a discount rate of 6% as the central value, use 4% for sensitivity analysis from the perspective of sustainable development and calculate the impact of two more additional discount rates (2%, 8%). The benefits of the measures include the reduction of coastal erosion and flood risk, as calculated in the COCED analysis for Ghana (deliverable D4a) (IMDC, 2017b). These benefits are valued at different time horizons, with the same parameters to account for demographic and economic growth and discount rates as used in the cost assessment. The criterion in the cost-benefit analysis in this report is the net present value (NPV) or the net profit for the different scenarios, according to different time horizons, discount rates and the low and high estimate for cost. A positive NPV indicates that the benefits are greater than the costs and that the project generates a net welfare. Typically, these types of projects require large investments (costs) in the short term, which must be paid back over a long term by annual profits (risk reductions). These avoided damages are typically smaller today but grow over time as sea level rises and economic and demographic growth enlarges damages. It is therefore logical that the NPV is negative in the short term. The NPV can only decrease over time if the annual maintenance costs are greater than the annual benefits. The application of this methodology shows that the costs and benefits of the scenarios studied can be assessed, and that they differ significantly in both costs and benefits and the cost/benefit ratio. It has to be noted that the costs, benefits and cost/benefit ratio of the measures studied in the pilot site for Ghana differ significantly from some of those for other case studies. This illustrates that the measures cannot be examined in general, but that location specific analysis of both costs and benefits is required. I/RA/12148/17.115/ABO 30 version 2.0 - 08/12/2017 IMDC nv Cost of Coastal Environmental Degradation in collaboration with TE, UNESCO-IHE and VITO D7a: CBA of the selected DRR and CCA options for Ghana 3.2 COST BENEFIT ASSESSMENT FOR DRR AND CCA MEASURES 3.2.1 CBA for protection (scenario 1) In alternative 1, with protective measures, all risks related to erosion or coastal flooding are avoided, and this alternative is the best in terms of residual risks. However, this implies high investment costs in 2015, even for the low estimates (150 million euros in 2015). As all the risks are avoided, the benefits amount to the total risks in the reference scenario, i.e. 21 to 34 million $ for the time horizon to 2100 and at 6% and 4% discount rate. As these benefits are much smaller than the costs, the net present value for this alternative is negative for all discount rates and assumptions. Even if we would not discount the costs at all, the benefits would just amount to 150 million $, which would cover for the initial investment in 2015 but not for maintenance costs. 3.2.2 CBA for planned retreat and adaptation (scenario 2a and 2b) 3.2.2.1 Planned retreat (scenario 2a) Alternative 2a looks at the costs and benefits of planned retreat of people and economic activities from areas prone to erosion or coastal flood risk to safer areas in the coastal zone. The analysis accounts for the lower costs of this relocation, and the higher residual risks. The cost assessment pays particular attention to consistency with the benefit assessment (with respect to assumptions and data). The method distinguishes between the relocation of buildings for rural and urban areas, taking into account the costs of rebuilding infrastructure and productivity losses due to adaptation. For the planned retreat of the industry and services, the same cost categories are taken into account. In alternative 2a, we assume resettlement measures applicable to all flooded and eroded areas by 2050. In the low cost assessment, we assume preventive measures are envisaged to limit further economic development in zones at risk for erosion or flooding after 2050. In the high cost estimate, it is assumed that urban and economic development can continue in these areas, up to 2050. This lack of preventive action leads to higher withdrawal costs in 2050 and beyond. The overall costs of scenario 2a vary from 9 to 14 million $ in 2015 and 12 to 23 million $ for the full period 2015-2100. These costs are significantly (at least 90%) lower compared to scenario 1 (protection). Even the high cost assessment for scenario 2a is more than 90% lower compared to the low cost assessment of scenario 1. The residual risks in alternative 2a refer to potential damage after the implementation of the measures. We assume that after relocation, the areas can be further used for agriculture. This also means that some residual damages will remain in case of further erosion or flooding. These are estimated using a simplified methodology. Compared to the reference, the residual damages are limited, because most of the damage is associated with buildings and other economic activity. We estimate residual damages to be in the range of 1 to 3%. So, the benefits of scenario 2a amount to 98% of those of scenario 1. I/RA/12148/17.115/ABO 31 version 2.0 - 08/12/2017 IMDC nv Cost of Coastal Environmental Degradation in collaboration with TE, UNESCO-IHE and VITO D7a: CBA of the selected DRR and CCA options for Ghana Alternative 2a has a much better cost/benefit ratio than alternative 1, as it can provide about 98% of benefits at 2% of costs. The net present value turns positive before 2050 - at a discount rate of 6% - and for both lower and higher cost estimates. These data illustrate that it is cheaper to relocate urban and economic land uses from flood prone areas where we expect them to flood frequently (at least once every ten years), with relative high damages (e.g. 22% to 38 % of total assets for a flood depth of 0.5 metres). It also illustrates that a planned retreat of urban and economic activities from areas subject to erosion is cheaper, because it avoids that additional relocation costs for buildings and infrastructure build after 2015. 3.2.2.2 Adaptation of buildings to flooding (scenario 2b) In alternative 2b, measures are taken to adapt buildings and infrastructure in areas at risk of flooding. These measures are a cheaper alternative, but the residual risks are higher. For people and activities subject to erosion risk, the measures, costs and benefits are the same as those of alternative 2a. These adaptation measures can be applied to flooded areas (80% of the total area at risk in 2050) and, on average these costs are 75% lower than the planned retreat costs. As a result, the costs of scenario 2b are only half of these of scenario 2a. On the other hand, the residual risks in flood prone areas are higher, especially related to indirect damages for economic land uses. As this land use is limited in the affected areas, the overall benefits are only 7% lower compared to scenario 2a. The analysis shows that the net present value of scenario 2b turns positive before 2030, for all discount rates and for both the low and high cost estimate. Scenario 2b has a better benefit/cost ratio than scenario 2a because it can generate 94% of the benefits of scenario 2a at half of the costs, but the residual risks are a little higher. The analysis of flood proofing measures only indicates that the costs of flood proofing measures will be recovered within a decade. The risk of flooding is indeed high and it is likely that these areas will be flooded at least once before 2025. Even in shallow depths, the damage functions indicate that the damage will be equivalent to 22% of the maximum value of building assets (+ content). On the other hand, we estimate that these buildings can be protected at an additional cost of 15% (for concrete buildings and industry). Flood risks being dominated by frequent floods (T10), there is strong evidence that the cost recovery period for these measures is low (a few decades). This conclusion remains valid if we use the upper limit for estimating the costs of adaptation measures. 3.2.3 CBA for combined measures (scenario 3) Scenario 3 is the combination of the short-term protection measures of alternative 1 and the long-term planned retreat and adaptation measures (after 2050) of alternative 2b. Until 2050, the costs and benefits of alternative 3 are identical to those of alternative 1. After 2050, the measures include relocation of the inhabitants in areas subject to erosion (215 ha) and adaptation of buildings in flood prone areas. The low cost scenario assumes some additional preventive adaptation action to limit the number of people to be relocated in 2050, and assumes that no additional buildings are I/RA/12148/17.115/ABO 32 version 2.0 - 08/12/2017 IMDC nv Cost of Coastal Environmental Degradation in collaboration with TE, UNESCO-IHE and VITO D7a: CBA of the selected DRR and CCA options for Ghana allowed after 2015 resulting in a decrease of 25% of the number of people to be relocated. In the high cost estimate, further demographic growth is allowed in areas subject to erosion after 2050. As adaptation of buildings is relatively low, demographic growth is allowed in flood prone areas, both in the low and high cost scenario. Up to 2050, benefits are the same as for scenario 1. After 2050, some residual damages remain in eroded areas (damage to agriculture) and in flooded areas (indirect damages from flooding). Overall, these residual damages are estimated to be small and the benefits after 2050 in scenario 3 amount to 90% of these of scenario 1. As the costs are dominated by the high investment costs in 2015, the NPV remains negative in scenario 3 for all discount rates and cost assumptions. The ratio of costs and benefits is similar as in scenario 1. I/RA/12148/17.115/ABO 33 version 2.0 - 08/12/2017 IMDC nv Cost of Coastal Environmental Degradation in collaboration with TE, UNESCO-IHE and VITO D7a: CBA of the selected DRR and CCA options for Ghana 4. REFERENCES AnteaGroup, 2017. Plan d’actions pour le développement et l’adaptation aux changements climatiques du littoral Togolais, West Africa Coastal Areas Management Program (WAVA), Rapport FInal, Avril (No. 4217243014). ARTELIA, 2017. Etudes complémentaires pour la préparation du projet de renforcement de la résilience climatique des infrastructures en zone côtière au Togo – Résilience des infrastructures - Rapport final (ref. 871 4397 R3a – V2b), Janvier, 62pp+annexes. Huizinga, J., Moel, H., Szewczyk, W., 2017. Global flood depth-damage functions. Methodology and the database with guidelines, additional information provided in excell worksheet. IMDC, 2017a. D6a: DRM and ACC measures Ghana (No. I/RA/12148/17.111/LDN), Cost of Coastal Environmental Degradation, Multi Hazard Risk Assessment and Cost Benefit Analysis. IMDC, 2017b. D4a: COCED analysis for Ghana (No. I/RA/12148/17.026/ABO/), Cost of Coastal Environmental Degradation, Multi Hazard Risk Assessment and Cost Benefit Analysis. IMDC, 2017c. D7b: Analyse coûts-bénéfices pour les options DRM et ACC sélectionnées pour le site pilote au Togo (No. I/RA/12148/17.116/ABO/), Cost of Coastal Environmental Degradation, Multi Hazard Risk Assessment and Cost Benefit Analysis. INROS LACKNER, 2015. Etude technico-économique, environnementale et sociale des mesures à court, moyen et long termes de lutte contre l’érosion côtière sur le littoral togolais (APS, APD, Etude d’impact environnemental et social), Ministère de l’Environnement et des Ressources Forestières. Nguyen, N.T.V., Dizon, F.J.F., 2017. The Geography of Welfare in Benin, Burkina Faso, Côte d’Ivoire, and Togo. the World Bank Group, Washington, D.C. The World Bank, 2016. Terms of Reference of the consultancy services for the “Cost of Coastal Environmental Degradation, Multi Hazard Risk Assessment and Cost Benefit Analysis”, West Africa Coastal Areas Technical Assistance Program, Adaptation to Climate Change in West Africa Coastal Areas Project. 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