COASTAL MANAGEMENT IN THE
21ST CENTURY: COPING STRATEGIES
 FOR VULNERABILITY REDUCTION


         by

R.K. Turner, D. Burgess, D. Hadley,
  E. Coombes and N. Jackson

CSERGE Working Paper ECM 06-04
   COASTAL MANAGEMENT IN THE 21ST CENTURY: COPING STRATEGIES FOR
            VULNERABILITY REDUCTION

                       by

     R.K. Turner2*, D. Burgess1,3, D. Hadley2, E. Coombes2, and N. Jackson3,4
         1
         Agri-Food and Bioscience Institute, Belfast, BT9 5PX
    2
     CSERGE, School of Environmental Sciences, University of East Anglia,
                 Norwich, NR4 7TJ
 3
  Formerly at CSERGE, School of Environmental Sciences, University of East Anglia,
                 Norwich, NR4 7TJ
               4
               Upstream, London, WC2A 1HR




                  Author contact details:
                 Email: r.k.turner@uea.ac.uk
                 Phone: +44 (0)1603 592551
                 Fax: +44 (0)1603 593739




Acknowledgements
The support of the Economic and Social Research Council (ESRC) is gratefully acknowledged.
This work was part of the interdisciplinary research programme of the ESRC Research Centre
for Social and Economic Research on the Global Environment (CSERGE).

ISSN 0967-8875
Abstract

European coasts are coming under increasing threat as a result of climate change from erosion
and flooding, with 20% of the coastline seriously impacted and 15 km2 of land lost each year
(Doody et al. 2004). While coastal defences such as sea walls have been constructed since
Roman times to protect human settlements from the sea, it is now increasingly recognised that
these defences are unsustainable. The security provided by the ‘hard’ engineered defences
has encouraged excessive development on the coast, and the defences themselves have led to
the loss of intertidal habitat and the natural protection it provides.

An alternative to maintaining ‘hard’ defences (hold-the-line) to protect land from increasing sea
levels is managed realignment, where the engineered defences are deliberately breached. By
allowing the coastline to recede to a new line of defence further inland intertidal habitat is
created providing natural protection from flooding and erosion.

In the face of rising sea levels and as existing coastal management strategies are being
reviewed, it is pertinent to assess the economic efficiency of all methods of coastal defence. In
this study, a cost-benefit analysis is undertaken in the Humber Estuary in North-east England,
comparing a strategy of holding-the-line with various managed realignment scenarios. Cost-
benefit analysis is viewed as one component of a wider policy appraisal process within
integrated coastal management.


Keywords: Managed realignment; Cost-benefit analysis; Coastal defence; Scenario analysis
1. INTRODUCTION

Traditional sea defence and coastal erosion strategies in England and Wales have sought to
provide long-run engineered ‘hold the line’ fixed protection for people, property and other assets
against the vagaries of dynamic coastal environments. The British coast has been heavily
modified by flood and coastal defences for the last 600 years (Evans et al., 2004), with intensive
construction periods around the First and Second World Wars when the need for agricultural
self-sufficiency was paramount. Currently, the English coastline is protected by over 2000 km of
flood defences – 860 km of erosion protection and 1259 km of flood protection structures
(Crooks, 2004). Many of these structures are now reaching the end of their design lives. The
expenditure of public funds on the implementation of this approach has been justified by
reference to a rank ordering system underpinned by standard economic cost-benefit analysis
(CBA) applied on a project by project basis (Penning-Rowsell et al., 2005). However, set
against a contemporary and likely future context of increasing sea levels and increasing severity
and frequency of storm conditions (Nicholls and Klein, 2005), both the cost and the
effectiveness of traditional coastal management must be seriously questioned. As our
knowledge of coastal dynamics and climate change improves it has become increasingly
apparent that sole reliance on engineered ‘hard’ defences is unlikely to be sustainable. Instead
emphasis is switching to a ‘coping strategy’ based on a mixed approach, with protection focused
on strategic and high value areas and the rest of the coastline left to adapt to change more
naturally. Measures such as ‘managed realignment’ which involves the deliberate breaching of
engineered defences to allow coastal migration and the creation of extended intertidal marshes
and mudbanks is typical of this new approach (Reed et al., 1999; Andrews et al., 2000; Pethick,
2001; Pethick, 2002; Winn et al., 2003).

This reorientation towards a more flexible management process will not be a straight forward
transition. In principle, the new know-how and arrangements should be better able to cope with
changing circumstances, changing social tastes, improvements in knowledge about coastal
processes, human behaviour and ecosystem ‘values’, as well as changing technology, factor
prices and political ideology (Bower and Turner, 1998). In practice, because of the range of
stakeholders and competing resource usages typical of coastal areas a number of challenges
need to be urgently addressed. The politics of coastal management has become increasingly
polarised and contested (Fletcher, 2003). Consultation processes seeking to take forward new
shoreline management plans in England, for example, have stalled and controversy surrounding
compensation, planning and development and equity and natural justice has intensified
(O’Riordan et al., 2005). The new coastal strategy will also serve to expose and re-ignite a long
standing debate about the appropriateness of a decision support system anchored to economic
CBA and related appraisal methods. It is the latter problem which is examined in this paper.
The next section will look at the evolution and current standing of project and policy appraisal
methodology and practice and assess its role in the new approach to coastal management. A
case study of managed realignment in the Humber estuary in England will then be presented to
illustrate the advantages and limitations of CBA. In the final section, some concluding
comments on future ways forward will be set out.


2. COST-BENEFIT ANALYSIS VERSUS POLICY ANALYSIS: DECISION RULE OR
  HEURISTIC AID

Simplifying matters, CBA can be utilised as a method for identifying a “decision rule” for
choosing a preferred alternative, or as a component of a comprehensive policy analysis with an
heuristic purpose. In the former role, economic CBA has been directly deployed in order to


                        1
indicate which option is welfare maximising according to a utilitarian social welfare function and
hence prescribing that option choice. The options assessed must have well defined outputs that
are quantifiable and reducible to a single money metric, as costs or benefits. Individual flood
protection and/or coastal erosion protection schemes fit this reference frame quite well. It is
also possible to perceive of CBA in terms of an ‘indirect deployment’, with the analysis reflecting
rational choice theory outcomes and offering a ‘sounding board’ against which other forms of
appraisal and outcomes can be compared. CBA is based on a particular utilitarian (economic
efficiency) social welfare function but as there are no meta ethical rules for selecting social
welfare functions then a ‘sounding board’ comparative evaluation against alternative social
welfare functions might be beneficial. The choice will then turn on criteria such as, among
others, ‘ethical reasonableness’ and ‘consensus achievement potential’.

In the latter heuristic role, the art of policy analysis is a “set of procedures for inventing,
exploring and comparing the alternatives available for achieving certain social ends - and for
inventing, exploring and comparing the alternative ends themselves – in a world limited in
knowledge, in resources and in rationality” (Rowan, 1976 p137). The concept of integrated
coastal management (ICM) seems to require this wider policy appraisal approach. There has
nevertheless been a continuing debate in academic and policy making circles about the realities
of environmental policy formation and implementation and the most appropriate enabling
decision support system and methods and techniques. Is environmental policy better enabled
via CBA which requires the aggregation of individual choices made independently in a market
context; or via a multi-criteria assessment (MCA) process (which may or may not include a form
of economic CBA as one component) that is adapted to real political economy in which plural
and contested interests and values have somehow to be reconciled and consensus achieved?
Or, can a hybrid policy appraisal method encompassing elements of CBA and MCA as separate
but complementary assessment arrays do the best job? Or, is the technical – rational model of
appraisal so unreliable that politicians should find alternative ways of legitimising policy
decisions (Owens et al, 2004).

Formal CBA techniques have been required to support environmental regulation in the USA
since the early 1970s. In the UK, together with Western Europe, environmental policy
assessment through CBA was slower to develop and more piecemeal in its application (Pearce
1998; Hanley 2002). The centralised sectoral and ministerial political system in the UK probably
accounts for the different characteristics of the policy appraisal approach.      Individual
government ministries/departments such as those concerned with transport policy and flooding
and coastal protection and defence policy have a long track record in project-based CBA going
back to the 1960s/70s. The then Ministry of Agriculture Fisheries and Food (MAFF) which also
had responsibility for aspects of flooding and sea defence policy rank ordered projects using a
CBA methodology which was continually updated and made more extensive in its impacts
converge. Guidance evolved from depth-damage property calculations to human health and
environmental “intangibles” valuation (Penning-Rowsell and Chatterton, 1977; Parker et al 1987;
Penning-Rowsell et al 1992; Penning-Rowsell et al 2005). The first crude application, in 1986, of
a prototype environmental contingent valuation study within a public sector project (a sea
defence project), for example, was funded within this context (Turner, Bateman and Brooke,
1992). Critics of land drainage and flood protection appraisals conducted during the 1970s and
80s correctly highlighted the importance of the political and institutional framework and warned
that this could easily lead to ‘regulatory or institutional capture’ of CBA (Bowers, 1988). In the
last few years the Government has sought to re-orientate its coastal change strategy and to
adopt both the principles and practice of integrated coastal zone management (ICZM) (Bower
and Turner, 1998). Much greater stakeholder inclusion and participation is the avowed aim



                        2
(Evans et al. 2004; Defra, 2005; English Nature, 2005) but the implications for technical decision
support systems have yet to be clarified.

Other areas of government have been more resistant to the advances of CBA and related
techniques and it was not until 1990 following the publication of the Pearce Report (Pearce et al
1989) and a Government white paper ‘This Common Inheritance’ (1990) that implementation
became in principle more extensive. Best practice guidelines for the valuation of environmental
goods using stated preference methods were published in 2002 under a joint initiative of two
government departments DTLR and DEFRA (Bateman et al. 2002). But a key point to note was
that under official guidance both project appraisal via CBA and wider policy appraisal were twin-
tracked. This juxtaposition of approaches has been a continuing source of confusion and
debate within government circles, confusion which the plurality of relevant academic
argumentation has only served to magnify.

So given the at best ‘patchy’ take up of CBA by policy makers and the sharp divisions about its
efficacy in academic and policy circles, is CBA ‘fit for purpose’? If society is simply the sum of
isolated individuals, and their wants/needs are, if not infinite, many and diverse, and if resources
are scarce (relative or absolute) then CBA and its economic efficiency based social welfare
function is relevant to and useful for public policy choice making. Further, given that all policy
choices are made by humans, some conception of “preferences” and their human motivation lie
behind any environmental policy. But many would contend that collective society is more than
the aggregation of individuals and that other social welfare functions have validity (e.g. Sagoff,
2000). They would also dispute the economic (new welfare economics) explanation of how
preferences are determined and would not agree that self-interestness is the only ‘rational’
motivation, rather than ‘other regarding’ preferences towards humans and entities in nature.
These differing theoretical and applied viewpoints do not, however, necessarily mean that all
forms of technical-rational models of resource allocation appraisal should be abandoned. While
there is a very strong case for arguing that technical analysts need to develop a far better
understanding of the pressures on and motivations of actual decision makers; and that we
currently lack an adequate theory of environmental policy. It is equally true that policy
practitioners need to acquire a far better understanding of technical appraisal methods.
Environmental problems are often too complex to be solved/mitigated by technical analysis
alone, but taking decisions without any formal decision support system would not seem sensible
either.

A large body of theoretical work since the 1950s has shown that the concept of a Potential
Pareto Improvement (PPI) determined by the Kaldor-Hicks compensation test, which underpins
traditional CBA, is not a reliable basis for evaluating environmental policies (e.g. Scitovsky,
1941; Sen, 1970; Boardway, 1974; Bromley, 1990).. The Kaldor-Hicks approach states that a
policy is to be judged socially beneficial if the gainers secure enough benefits so as to be able to
compensate any losers and still have some net gain left over. Such a policy is justified (on
efficiency grounds) even if no actual compensation is paid. But a number of theoretical
difficulties (the Scitovsky, Boardway paradoxes etc) ensure that PPIs cannot be consistently
identified by comparing individual welfare changes. Gowdy (2004) concludes that there is no
theoretically justifiable way to make welfare judgements without interpersonal comparisons of
utility and this is forbidden by the assumptions of neoclassical welfare economics. If
compensation is not actually paid it is necessary to know if the gainers really could compensate
the losers i.e. the relative size of the gains and losses must be known, which means comparing
utilities across different individuals. A way out is to argue that compensation should be actual
but this introduces distributional issues which the Kaldor-Hicks approach seeks to avoid. Since
managed realignment policy if it is implemented on an extensive basis in the future is likely to


                         3
create winners and losers the need for a fair system of compensation is a significant
requirement which cannot be avoided.

If CBA (broadly interpreted) is to continue to play a role in the policy process then the neglect of
distributional or equity concerns needs to be rectified. A two stage approach needs to be
adopted in which the spread of costs and benefits across different affected individuals and
groups in society needs to be accounted for and then weighting could be applied. Project
appraisals funded by development agencies have often included distributionally weighted costs
and benefits calculations but this practice has not been commonplace in other public sector
applications in the donor countries themselves. As a minimum, the way in which the CBA
‘accounts’ are set out and formatted needs to be changed in order to incorporate and highlight
financial transfers and the distributional impact of the costs and benefits across stakeholders.
Krutilla (2005) has set out a tableau format which disaggregates the benefits and costs of a
project or policy among stakeholders and encompasses and records all inter-stakeholder
financial transfers. It also serves to highlight key issues such as the level of aggregation
adopted and the project/policy accounting boundary.

Adaptive coastal management inevitably involves winners and losers, for example, the
deliberate removal of erosion protection on one stretch of coast to allow an accretion of beach
material further along; or the realignment of defences to allow extended intertidal marshes at the
expense of agricultural land. Compensation/reimbursement measures are not currently in
place, although both monetary (e.g. agri-environmental scheme payments, developer
compensation funding, environmental taxation (carbon etc.)) and non-monetary (‘like-for-like’
habitat creation/restoration schemes etc.) mechanisms are possibilities. Aggregation and
boundary issues are also important in coastal CBA. The old scheme by scheme approach is
not suitable in managed realignment contexts where the spatial scales involved are often at
estuary level and encompass a series of sites. The ‘whole’ estuary strategy needs to be
appraised.

Environmental change impacts such as climate change and biodiversity loss often carry with
them long term consequences and so policy responses need to be flexible and adapted to long
time horizons and future ‘surprises’. The standard CBA practice of positive, fixed and short term
(<25 years) discounting does not sit easily with these contexts but is critical in determining
whether a project/policy passes a CBA test (Lind, 1982). What is indisputable is that
discounting at a constant positive social rate of discount is problematic (increasingly so the
higher the rate) over a time horizon of 100 years or more. The effect is to make even large
costs/benefits incurred in the distant future seem inconsequential and this intuitively feels wrong
(Weitzman, 1998). Groom et al (2005) comment that contemporary decisions taken on the
basis of standard CBA appear to tyrannise future generations and in some cases impose future
risk because future costs carry no weight (due to positive discounting) e.g. nuclear
decommissioning, or when current inaction inhibited by cost considerations neglects low
weighted future benefits e.g. climate change.

While zero discounting may be a threat to the least well-off in today’s society, and a single
invariant low rate of discount could allow a greater volume of projects to pass the CBA test and
therefore strain resource capacities, some modification to the standard procedure is overdue.
There is now a growing consensus on the adoption of a time declining discount rate (DDR)
procedure over at least a 100 year time horizon. Official guidance on UK public sector
project/policy appraisal now advocates such an approach (HMT, 2003) and it also fits more
easily with the strategic policy goal of sustainable development.



                         4
For some the case for DDR is, however, still not proven beyond doubt (Groom et al, 2005). But
given the underlying message in this paper, that whatever decision support system is eventually
adopted it must be suitable for utilisation by real policymakers operating iteratively in the non-
linear real world political economy, then DDR has more advantages than limitations. Along
similar lines, critics of CBA have questioned the way in which standard CBA values the losses
and gains connected to projects/policies. Knetch (2005) claims that individuals discount future
losses at a lower rate than the value of future gains and that therefore rates reflecting observed
individual preferences would give more weight to future environmental losses, justify greater
current sacrifices to deal with them and support policies that reduce the risk of future losses.
We adopt a 100 year time horizon for the managed realignment case study analysis and also
highlight the influence of DDR.

Over the years work done by behavioural and experimental scientists have shown that
individuals’ preferences do not always conform with the standard assumptions of CBA theory
(Gowdy 2004). The theory assumes that each individual has consistent preferences over all
combinations of private and public goods, that these preferences are reasonably stable across
time and that they are independent of the contexts in which, and the mechanisms through
which, they are revealed. Analysts working with stated preferences techniques (contingent
valuation surveys and choice experiments) in environmental and other contexts have found
responses that contravene these assumptions (so-called “anomalies”). Psychologists have
found explanations for these behavioural responses which to the standard economist seem
‘non-rational’. Other critics of standard economics argue that it is the rational choice theory
itself which is problematic because it denies the existence of ‘endogenous preferences’ i.e.
preferences that depend on personal experiences, social context and historical/cultural
background.

To navigate a route through the complex and diverse set of arguments about human
preferences and motivations specifically in relation to environmental policy a few simplifying
assumptions will be introduced. In the first instance, we will assume that there is a legitimate
and meaningful role for market transactions and related human behaviour in the environmental
domain and that therefore CBA is not ruled absolutely out of scope (Aldred, 2002). For a
critique of this assumption, see O’Neill (1997) and Burgess et al. (2000). Second, we assume
that a typology of environmental values based on ‘use’ and ‘non-use/existence’ value concepts,
more or less captures human-related instrumental and intrinsic environmental values (Turner,
1999); and that comparability and monetary incommensurability problems are not totally
intractable (Aldred, 2002), at least as far as ‘use’ and option values are concerned. Existence
values do not fit into this consumer frame of reference and are better elicited through more
deliberative forms of valuation in which individuals are encouraged to act as citizens in a
collective process (O’Connor, 2002). For arguments in favour of including moral sentiments i.e.
non use/existences values, via WTP/WTC, in CBA see Zerbe et al. (2006). Thirdly, that since
public (environmental) goods often do not have market price tags and society requires that their
provision should be decided by collective decisions, it is legitimate to take into account
individual preferences, values or attitudes and guard against the dominance of special interest
groups and/or special pleading (Sugden, 2005). The aggregation of individual preferences
represents the collective choice outcome and the individual preferences themselves are given
and context independent.

Given these assumptions a pragmatic way forward is to accept that behavioural anomalies (i.e.
preferences that fail to satisfy standard economic coherence conditions) exist but that their
prevalence can be reduced to such an extent that stated preference studies/data can play a
useful role in the project/policy appraisal process (Hanley and Shogren, 2005; List, 2005).


                        5
Other economic valuation methods such as revealed preference methods (travel costs, hedonic
pricing) are also still available and relevant for ‘pricing’ a wide range of environmental
goods/services. So comparisons of value findings derived from similar methods across different
environmental goods/services and rough ‘ball park’ comparisons across method outcomes can
provide some meaningful indication of economic value (short of absolute money values).

As the process of environmental change across local to regional and up to the global scale has
intensified and increased in pace, so the risks posed to the integrity and resilience of
ecosystems, not least in coastal areas have increased in parallel. Unanticipated irreversible
damage to “critical natural capital” is a risk that not only impacts on environmental systems but
also on their provision of livelihood support. In the past, nature conservation and protected area
policy has been justified by a combination of scientific and ethical ‘intrinsic value’ arguments.
But in contemporary conditions where natural resources are under severe development
pressures the traditional arguments in support of ecosystem conservation may not be sufficient
to win political arguments. Rather, we require the additional support of what has been called
the ‘ecosystem services’ methodology. This is based on ‘instrumental’ values in nature
(expressed in monetary terms and fitted into the CBA format) to support the case for more
protected areas or better management and sustainable use of ecosystems under threat of
conversion or degradation from economic development (Costanza et al., 1997; Daily, 1997;
Bockstael et al., 2000; Balmford et al., 2002). Both the general amenity value and the value of
the carbon storage function provided by coastal wetlands (Turner, et al. 2000) are investigated
and included in the case study presented in the next section.

The individual ecosystem goods/service valuation approach which fits most easily into the CBA
approach can however mislead policymakers (Turner et al. 2003a). The total system value is
greater than the sum of its parts and threshold effects may lead to non-linear damage impacts.
The hierarchical and multifunctional characteristics of ecosystems means that the double
counting of benefits from individual services during any valuation aggreation produre is an ever
present danger (Barbier, 1994).

This section began by highlighting the two basic rules for CBA, as a “decision rule” method or a
“heuristic aid” operating as one component of policy analysis. At various points, issues have
been raised which point to a mismatch between CBA (rule variant) as a process of aggregating
independent individual choice in a market context and the real world policy process. In the real
world it is claimed that the policy challenge is about reconciling contested value realms and
achieving consensus and that policy evolves in a recursive and iterative manner (Rhodes, 1997;
Sabatier, 1998).

On balance, it seems that the future for CBA as a policy relevant decision aid lies in the policy
analysis frame. It is unlikely to become more relevant if it remains as a procedure for identifying
which option is welfare-maximising according to a single social welfare function, and if it seeks
to prescribe the option choice on claimed “rationality” grounds. As one complementary
component of a wider, multi-criteria policy analysis decision support system there is still an
important role for economic analysis.    CBA accounts properly formatted to highlight
distributional issues and incorporating DDR can provide useful information on environmental
valuation and policy problems. The appropriate scope for CBA should probably be limited to
use and option values in the environmental context, with existence value questions left to other
forms of analysis. In the next section we present a case-study of managed realignment in the
Humber Estuary to illustrate how CBA could be deployed within a wider policy analysis.




                        6
3. MANAGED REALIGNMENT POLICY APPRAISAL

The analysis presented below must be viewed as preliminary and partial but as also providing
one significant component of a more comprehensive coastal policy appraisal. The managed
realignment example that it is focussed on has a number of particular characteristics which may
not always be typical of a more extensive managed realignment strategy. People and property
assets as well as nature conservation designation sites, are not part of the trade-off in this set of
realignments. The sites have been deliberately chosen to avoid such conflicts and all involve
the loss of agricultural land for a compensating gain of saltmarsh and mudflat habitats. In the
longer term future, the mixed approach to coastal management may well have to face up to
more ‘politically sensitive’ and highly ‘contested’ trade offs, especially if the more severe climate
change modelling predictions are accurate. But this only serves to emphasise the argument in
favour of economic CBA as a complementary component within a policy analysis-based
decision support system which will have to grapple with compensation, planning law and
regulations, public trust and social norms of fairness and accountability dimensions of decision
making. With these caveats in mind we turn to the application of the CBA model to managed
realignment policy.

The construction of coastal defences effectively immobilises a naturally dynamic and adaptive
ecosystem at the land-sea interface. In response to rising sea levels, a modified coast is unable
to adapt by migrating landwards with the result that valuable intertidal habitats are eventually
lost (“coastal squeeze”). There are two main consequences of this “squeeze” effect. It can be
argued that the ability of the intertidal zone to absorb energy and water and thereby contribute
to sea defence will be diminished. The loss of a ‘first line’ of defence against waves and tides,
especially during storm conditions, can result in increased capital and maintenance costs for
engineered defences (Reed et al., 1999; Dixon et al., 1998). Secondly, “squeeze” results in
degraded or destroyed mudflats, sandflat and saltmarsh habitats. These habitats are significant
reservoirs of biodiversity (Boorman, 2003), and have attracted a range of conservation
designations. Under the EU Water Framework Directive loss of conservation area must be
compensated for on a ‘like for like’ basis. But the situation is further complicated because many
freshwater coastal sites are also protected on nature conservation grounds. Pethick (2002) has
claimed that a stalemate might develop between the requirements of freshwater and intertidal
habitats conservation. If sea defences are removed the freshwater habitat is compromised, if
the defences are maintained then the intertidal habitat is reduced. Managed retreat seems to
offer a way of mitigating this problem by deliberately breaking defences, allowing the coastline
to recede and the intertidal zone to expand.

While managed realignment seems to provide a number of benefits the realignment process
also incurs engineering costs and other opportunity costs (e.g. the unsubsidised value of any
land lost which was previously protected). Government guidance on CBA now emphasises,
where appropriate, the need to use a declining discount rate over a long run time horizon and to
include as many benefits and costs (market and non-market) as is feasible with a money metric
and existing knowledge (HMT, 2003). The CBA then becomes one component of an overall
policy analysis which itself is a three-stage process (Turner et al., 2003b). Figure 1 sets out the
scoping, analysis and evaluation stages of the decision support system.

4. MANAGED REALIGNMENT IN THE HUMBER ESTUARY, ENGLAND

Cave et al. (2003) have used the framework in Figure 1 to examine the complex interplay of
factors in the Humber estuary and catchment. Ledoux et al. (2005) have applied futures
scenario analysis to help scope possible management strategies for the Humber estuary. The


                         7
case study presented here builds on this existing body of work and adopts the five scenarios (a
“hold the line” approach versus four other possible states of the world with increasing reliance
on managed realignment measures) of possible futures set out by Ledoux et al. (2005).

Figure 1: Decision support system for the Socio-Economic Analysis of coastal and flood
     defences

                 1. Scoping Stage
   •  Assessment of the environmental change process - Driving Forces–
     Pressure–Sate-Changes–Impacts–Responses (DP-S-I-R framework)
   •  Institutional and Stakeholder mapping and analysis
                 2. Analysis Stage
   •  Scenario setting and Management options analysis
   •  Data-collection and initial Monitoring (including Geographical Information
     Systems (GIS) data)
   •  Ecosystem functioning and valuation analysis
                3. Evaluation Stage
   •  Cost-benefit modelling and valuation
   •  Multi-Criteria Assessment


Adapted from: OECD, 1993 and Turner et al., 1998




The five scenarios are based on the following assumptions:

  1. Hold-the-line (HTL): the existing defences are maintained to a satisfactory standard, but
   intertidal habitat will be lost due to continued development and coastal squeeze.

  2. Business-as-usual (BAU): this option takes into account existing realignments; however
   compliance to the Habitats Directive is also lax, with continued economic development
   leading to an overall net loss of habitat due to coastal squeeze.

  3. Policy Targets (PT): Economic growth is combined with environmental protection, with
   realignment undertaken to reduce flood defence expenditure and compensate for past
   and future intertidal habitat loss in compliance with the Habitats Directive.

  4. Deep Green (DG): Environmental protection takes priority over economic growth, while
   development continues; the maximum feasible area of intertidal habitat is created.

  5. Extended Deep Green (EDG): A greater emphasis is placed on habitat creation, with
   less restrictive criteria being used to identify suitable areas for realignment.




                        8
The macro-tidal Humber estuary is one of the largest in the UK, fed by two principal river
systems, the Ouse and the Trent. With a maximum tidal length of 147 km from Cromwell Weir
on the Trent to the Humber’s mouth, and maximum width of 15 km, it is comparable with the
Thames and Severn Estuaries (Andrews et al. 2000). Draining over a fifth of the land area of
England (24,000Km2), the Humber estuary is the largest source of freshwater (approximately
250 m3sec-1) into the North Sea from all the British rivers (Jarvie et al. 1997). Much of the land
surrounding the Estuary is the result of historical land reclamation, created from the enclosure of
salt marshes and mudflats. For example, Davidson et al. (1991) estimated that 4,600 hectares
of intertidal habitat was reclaimed in the Humber between 1600 and 1850. Consequently,
approximately 90,000 hectares of land surrounding the Humber Estuary is below high spring
tide level and is currently protected by 235 km of flood and coastal defences (405 km including
those defences along the tidal reaches of the Rivers Trent and Ouse) (Winn et al. 2003). This
area is comprised of mainly agricultural land (85%), limited housing (8%) and commercial or
industrial activities (3%).

The Humber Estuary is of international importance for wildlife, particularly birds, with a large
area of intertidal habitat of between 10-11,000 hectares (Environment Agency 1998; Andrews et
al. 2000), of which around 90% consists of mudflats and sandflats with the remainder being
mainly saltmarsh (Winn et al., 2003). This intertidal habitat plays an important role within the
estuary, through the recycling of nutrients within the estuary, and their role as soft sea defences,
dissipating wave energy. They are highly productive biologically in terms of bird species - the
Humber is recognised internationally for its breeding, passage and wintering birds. The entire
estuary has been proposed as a marine ‘Special Area of Conservation’ (SAC) while the Humber
Flats are designated a ‘Special Protection Area’ (SPA), ‘Site of Special Scientific Interest’ and
Ramsar site.

However, through land-claim, the Humber estuary has an uncharacteristically low extent of
saltmarsh for an English Estuary (Davidson and Buck, 1997). Jickells et al. (2000) have
estimated that more than 90% of the intertidal area and sediment accumulation capacity of the
Humber estuary has been lost over the last 300 years with protected areas becoming
threatened. In areas with extensive seawalls and commercial development, such as around
Grimsby and Hull, tidal flats are narrow (<100m wide) or absent. The natural succession of
marine to terrestrial environments has been truncated by the construction of seawalls. Before
extensive human involvement the vegetation succession probably incorporated much wider
tracts of saltmarsh, progressing to less saline fen and carr environments, it now ends at mature
saltmarsh. These types of marginal marine-terrestrial environments are no longer present in the
Humber system (Andrews et al., 2000).

In addition to the loss of intertidal habitats through reclamation and coastal squeeze, there is
also concern regarding the state of traditional sea defences within the Humber Estuary (Ledoux
et al., 2005). As many of the defences in the estuary were built following the 1953 flooding
disaster on the East Coast, they are now reaching the end of their design life and are currently
unsatisfactory and in need of repair or replacing (Environment Agency, 2000). Both of these
problems are likely to be exacerbated by climate change related sea level rise and increased
storm conditions (Evans, et al. 2004). With the reduction of intertidal habitats and increasing
costs of maintaining defences, the flood defence strategies for the Humber estuary are being
reassessed and a limited amount of realignment work has begun. In 2003, the EA undertook
the first realignment of the flood and coastal defences in the Humber, by breeching the
defences at Thorngumbald, on the north bank of the Humber, east of Hull creating 80 hectares
of intertidal habitat, having identified a further 11 potential sites (Environment Agency, 2000;
Pilcher et al., 2002).


                         9
To identify areas suitable for future possible realignment in the Humber for each of the
scenarios outlined in previous section, five key criteria were considered – see Figure 2

Figure 2: GIS – based realignment site location criteria


 Criterion 1 – The Area below the High Spring Tide Level
 The high spring tide level is the highest point at the coastline that is reached by the sea
 during a spring tide. The area below the high spring tide level illustrates the maximum area
 of intertidal habitat that could be created, before other factors are considered.
 Criterion 2 – The Present Land Use of the Area
 In all the managed realignment scenarios, i.e. BAU, PT, DG and EDG, it was not considered
 appropriate to carry out realignment where protected flora or fauna or historical/cultural
 assets would be put at risk. Therefore Sites of Special Scientific Interest (SSSI), Special
 Areas of Conservation (SAC) and other similarly protected areas together with historically
 significant buildings were excluded from the realignment areas.
 Criterion 3 – The Infrastructure of the Area
 For all of the scenarios, the transport network – including roads, railway lines and canals –
 were taken into account.
 Criterion 4 – The Historical Context of the Area
 The BAU, PT and DG scenarios considered the historical context of the potential areas for
 realignment. This constraint dropped for the EDG scenario.
 Criterion 5 – The Spatial Context of the Areas
 SIZE: The BAU, PT and DG scenarios considered that it would only be cost effective to
 realign areas that are greater than 5 ha in size (Pilcher et al., 2002), while EDG scenario did
 not comply with this restriction, considering the creation of any intertidal habitat to be
 beneficial.
 SHAPE: The BAU, PT and DG scenarios considered that the optimum shape for realignment
 areas can be considered as a trade-off between creating a wide intertidal area to maximise
 benefits, while ensuring that the length of realigned defences to protect the surrounding land
 is no greater than those which already exist (Pilcher et al., 2002). This limitation was relaxed
 in the EDG scenario.
 ELEVATION: All of the scenarios favoured retreat to an elevation above the high spring tide
 level where possible.
 PROXIMITY TO EXISTING INTERTIDAL HABITATS: All of the scenarios considered that it
 is preferable to create intertidal habitats where they will fit in with the overall vegetation
 succession to facilitate the movement of species between habitats (Bergstrom et al., 1996).




                        10
Details of the areas that were identified as suitable for realignment, for each of the scenarios,
are illustrated in Table 1. The table shows the implications of realignment on defence length, the
amount of habitat that could be created and the subsequent impacts on carbon sequestration.
Figure 3 illustrates the extent of the area of habitat that could be created under each of the
scenarios.

Table 1: Details of areas suitable for realignment



                               Scenarios

                   HTL    BAU      PT      DG     EDG

Length of defences    before
                   405.3     405.3   405.3     405.3    405.3
realignment (km)

Length of defences      after
                   405.3     396.8   361.6     318.2    284.5
realignment (km)a

Length of realigned defences
                     0.0      7.0    30.8     69.0    102.7
(km

Length  of  unsatisfactory
                    64.6     61.9    42.2     38.2     34.0
defences after realignment
(km)

Amount of intertidal habitat
                     0.0     300.2   1320.9    2332.4    7493.6
created by realignment (ha) b

Estimated tonnes of Carbon
                      0    660.6   2908.8    5135.1   16501.8
stored each year c

Notes:
a
 The process of realigning defences can involve the maintaining of existing defences and
potentially the creation of new sea walls therefore the length of defences after realignment is
greater than the length before minus the length to be realigned.
b
Due to uncertainty over the loss of intertidal habitat due to coastal squeeze over the next 50
years, it is assumed that no further coastal squeeze takes place. Therefore, the Hold-the-line
scenario as the baseline scenario assumes no loss of intertidal habitat and no carbon
sequestration, and the habitat creation and sequestration in the other scenarios are relative to
base.
c
Estimates of the carbon storage capacity of newly created inter-tidal habitat are derived from
Andrews et al, 2000.




                        11
Figure 3: Areas suitable for managed realignment in the Humber Estuary under the various scenarios




                             12
5. REALIGNMENT COST- BENEFIT MODEL

The elements of the analysis are summarised in the three equations and Table 2 below and
follow the standard ‘with and without’ procedure which in this case sets the net discounted
benefits of realignment against the net discounted benefits of the hold-the-line traditional sea
defence strategy.

Hold-the-line ‘Status Quo’ Defences


                             [(               ]
                                      )
                     T
                          1
                C =∑            l sq Crsqt + Cm ,t + Cbr ,t
                  sq                 sq   sq

                        (l + r )
                  t               ,
                            t
Where:
                     t =0
       sq
     C     = Present value of total cost of status quo defences at time t (£million).
       t
     r     = Discount rate.
       sq
     l     = Length of the status quo defences (km).

       sq
     C     = Replacement cost of the status quo defences at time t (£/k).
       r, t
       sq
     C     = Maintenance cost of the status quo defences at time t (£/km/yr).
      m, t
      sq
     C    = Cost of repairing breaches in the status quo defences at time t )£/km).
      br , t

Managed Realignment


                         [(                     )]
                                   )     (
                T
                    1
               =∑        l mr Ckmr + Cm ,t + a mr Lagr ,t − Be ,t
             mr                 mr
          C
                   (l + r )
            t               ,t        agr
                       t
               t =0
Where:
       mr
     C     = Present value of total cost of managed realignment at time t (£million).
       t
     r     = Discount rate.
       mr
     l     = Length of the managed realigned defences (km).

      mr
     C   = Capital cost of realignment at time t (£/km).
      k,t
      mr
     C   = Maintenance cost of realignment at time t (£/km/yr).
      m, t
     mr
     a     = Area of intertidal habitat created by realignment (ha).

       agr
     L      = Forgone agricultural land value if realignment takes place (3/ha).
       agr , t


                              13
     B      = Environmental value gain associated with realignment e.g. habitat services,
       e, t
           functions and products (£/ha).

Net Present Value

                                (     )
                             t
                           = ∑ C tmr − C tsq
                         mr
                   NPV    t
                            t =0
Where:
           mr
     NPV        = Net present value of managed realignment in comparison to hold-the-
           t
              line for a given stretch of coastline (£ million).


Table 2 : Values used to estimate the costs and benefits of realignment


          Costs/Benefits                      Value
          Capital costs of realignmenta                 £878,159/km
          Opportunity costs:
           Grade 1 and 2 agricultural landb               £4,790/ha
           Grade 3 agricultural landb                  £5,458/ha
          Maintenance costs of defencesc               £3,560/km/yr
          Replacement costsd                     £668,441/km
          General habitat creation benefitse              £621/ha/yr
          Carbon sequestration benefits         £7.77/tonne CO2 equivalent

Notes:
All values are converted to 2005 prices using the GDP deflators published by HM Treasury
(http://www.hm-treasury.gov.uk/).
a
 Costs based on contemporary realignment schemes (Halcrow, 2000)
b
 Based on sale prices (DEFRA, 2004) and adjusted downwards for the effects of the single farm
 payment following Penning-Rowsell et al. (2005).
c
 Maintenance costs are taken from Black & Veatch/Halcrow (2005). These are assumed to
 increase in the future due to the effects of climate change. Following current government
 guidance (Penning-Rowsell et al. 2005) maintenance costs are increased by a factor of 1.5 for
 the period between 20 and 50 years into the future and by a factor of 2 for years further into the
 future.
d
 Only the costs of replacing unsatisfactory defences (DEFRA, 2001) not affected by realignment
 are included.
e
 Assumed to be gained immediately, although in practice habitat establishment may take some
 time before ‘maturity’ is achieved.


Edwards and Winn (2006) state that the intertidal habitat created by managed realignment can
produce benefits by dissipating wave energy and hence reducing the estuary’s erosive impact
on flood defences. Maintenance cost savings will vary from site to site according to wave
climate, coastal topography and consequent defence works. It therefore seems reasonable to
assume that across an estuary or extensive stretches of coast, realignment strategies will yield
significant maintenance cost savings. We take this possible effect into account within the CBA


                            14
by comparing the situation where the costs of maintaining defences are equal across non-
realigned and realigned defences with one where the costs of maintaining realigned defences
are 50% lower. These results are presented in Table 4 where changes in the ‘switching points’
(the year in which the NPV of managed realignment scenarios becomes positive) are apparent.
Sensitivity analysis indicated that decreases in maintenance costs of less than 50% had little
effect on the NPV of schemes.

In order to avoid double counting problems the environmental benefits derived from realignment
schemes, as intertidal habitats are created, were treated as one composite value. An estimate
of £574/ha/yr (£621/ha/yr when adjusted to 2005 prices) was used based on the results of a
meta analysis of wetland values (Woodward and Wui, 2001; Brander et al. 2006). But it is also
the case that ecosystems such as saltmarshes act as sinks for organic carbon (C) and nitrogen
(N) and particle reactive phosphorus (P) (Andrews et al. 2000; Jickells et al. 2000). The
nutrients (N and P) storage function has not been separately valued because its human welfare
impact is felt via better water quality and consequent amenity/recreational quality enhancement.
This impact we have assumed is already encompassed by our composite wetland value. The
same is not the case for carbon burial which we have included as an independent and
separately valued benefit of realignment.

Various approaches exist for estimating the monetary value of carbon storage. In this study we
made a modest monetary estimate (£7/tc, based on Pearce, 2003; Tol et al. 2000) of the
environmental damage done per tonne of carbon equivalent emitted into the atmosphere – the
“damage cost avoided” by storing rather than releasing a given quantity of carbon equivalent
units. Some damage cost avoidance estimates are high as £70/tc, but corroborative evidence
from the carbon credit trading market (related to the Kyoto Protocol and greenhouse gas
emissions taxation regimes) and from emissions abatement cost estimates, suggests that a
value per tc between £7 and £15 is realistic.

To estimate the net present value of providing defence for each of the scenarios, the present
value of all the costs were subtracted from the present value of all the benefits. The present
value for the Hole-the-line scenario was subtracted from the present values for the BAU, PT,DG
and the EDG scenarios respectively, to calculate the net present value of realignment for each
scenario (on the basis of a declining discount rate, HMT, 2003). The results are presented in
Table 3 and indicate that managed realignment is more cost-effective the longer the time
horizon over which the appraisal is undertaken. This effect is particularly marked in the DG
scenario. If a constant discount rate or a gamma discount rate are used then the CBA results
are significantly different for the DG scenario and to a lesser extent for the EDG and the BAU
scenarios. The ‘switching points’ beyond which NPV becomes positive are summarised in
Table 4.




                       15
Table 3: Net present Values at 25, 50 and 100 years of Providing Flood Defence for the
    BAU, PT, DG and EDG scenarios as compared to the Hold-the-Line scenario
    using a declining discount rate.


       Scenario       25 Years      50 Years     100 Years


    Business as usual
    BAU              -72,748,196    -88,545,279   -106,964,304
    HTL              -70,404,389    -87,805,060   -107,611,098
    NPV              -2,343,807      -740,219      646,794

    Policy Targets
    PT              -73,335,164    -83,405,325    -96,795,875
    HTL              -70,404,389    -87,805,060   -107,611,098
    NPV              -2,930,775     4,399,735    10,815,223

    Deep Green
    DG              -97,509,518    -102,165,512   -110,870,115
    HTL              -70,404,389    -87,805,060   -107,611,098
    NPV              -27,105,129    -14,360,452    -3,259,017

    Extended     Deep
    Green
    EDG              -94,906,735    -73,084,078    -59,184,503
    HTL              -70,404,389    -87,805,060   -107,611,098
    NPV              -24,502,346     14,720,981    48,426,595

Notes:
A declining discount rate is used following current HM treasury guidance for project appraisal
(HMT, 2003); 3.5% for years 1 to 30, 3% for years 31 to 75 and 2.5% for years 76 to 100.




                       16
Table 4: Year in which NPV (scenario costs - HTL costs) becomes positive under
     alternative discount rates.


    Scenario                    Discount Rate Type
                         a
                             Decliningb      Gammac
                    Constant

    Assuming equal maintenance costs non-realigned and realigned defences

                     125        73          49
    Business as usual
                      34        34          30
    Policy Targets
                     Never        137         63
    Deep Green
                      41        39          34
    Extended Deep Green

    Assuming maintenance costs of realigned defences are 50% lower

                     71         58         44
    Business as usual
                     30         30         27
    Policy Targets
                     Never        88         55
    Deep Green
                     37         36         32
    Extended Deep Green

Notes:
a
 Discount rate constant for years 1 to 100 at 3.5%.
b
 See note for Table 3.
c
 The hyperbolic gamma discounting method described by Weitzman (2001) is used here.


Concluding comments

Using for the most part conservative assumptions and estimates, the CBA shows that managed
realignment assessed over an extensive spatial and temporal scale and with nm-constant
discounting provides efficiency gain. This positive finding needs to be evaluated alongside
other considerations in a comprehensive coastal policy appraisal, underpinned by integrated
coastal management (ICM) principles and practice. Current coastal policy and institutions fall
well short of ICM and issues of distributional equity, compensation and remuneration, and
inclusion, trust and accountability all remain to be satisfactorily resolved. Setting out the CBA in
a format which highlights the financial flows between stakeholders will be a necessary future
requirement if the more flexible/adaptive coastal management strategy is to become the norm.
Greater stakeholder inclusion and more transparent technical aids to decision making are also
needed.




                         17
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