LatIN AMERIca & CARIBBEAN REGION Environment & Water Resources Uncertain Future, Robust Decisions OCCASIONAL PAPER SERIES The Case of Climate Change Public Disclosure Authorized Adaptation in Campeche, Mexico Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized © 2013 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. 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Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: [email protected]. All images courtesy of Thinkstock/Getty Images and The World Bank Environment and Water Resources LCSEN Occasional Paper Series Foreword The Latin America and Caribbean (LAC) region has the series is to contribute to the global knowledge a unique mix of qualities and challenges when exchange on innovation in environmental and it comes to the environment. It is exceptionally water resources management and the pursuit of endowed with natural assets, with globally greener and more inclusive growth. The papers significant biodiversity and valuable crops, and seek to bring to a broader public – decision makers, also harbors the world’s greatest carbon sink in development practitioners, academics and other the Amazon. At the same time, however, the region partners - lessons learned from World Bank- registers the highest rates of urbanization in the financed projects, technical assistance and other developing world with pollution, overuse of its water knowledge activities jointly undertaken with our and natural resources and detrimental impacts on partners. The series addresses issues relevant to the the health of people, especially the poor, and the region’s environmental sustainability agenda from environment. water resources management to environmental health, natural resource management, biodiversity Over the past twenty years, the LAC region has conservation, environmental policy, pollution made impressive gains in tackling these issues. management, environmental institutions and It leads the developing world in biodiversity governance, ecosystem services, environmental conservation and natural resource management financing, irrigation and climate change and their and is at the forefront in reducing urban pollution. linkages to development and growth. The World Bank has often been the partner of choice for those countries in the region that have In this particular case, we present to you the case had the initiative to pioneer innovative policies for of climate change adaptation in Campeche, one environmental protection and natural resource of Mexico’s coastal states, with high vulnerability management, strengthen institutions responsible to current and future climate impacts. The paper for environmental management, enhance highlights the concrete results for adaptation environmental sustainability, and introduce new planning that can be achieved by using a approaches to water resources management. Such combination of approaches, notably strategic initiatives include fuel and air quality standards environmental assessment, associated with the in Peru, carbon emission reduction in Mexico, cutting-edge real options theory approach, and payment for ecosystem services in Costa Rica, most importantly, a highly participatory process for participatory and integrated water resources developing and digesting the information. management in Brazil, and new approaches to We hope that this paper, just as the entire series, irrigation management in Mexico. will make a contribution to knowledge sharing In this context, it is our pleasure to introduce the within the LAC Region and globally. Environment & Water Resources Occasional Paper Series, a publication of the Environment and Karin Kemper Water Resources Unit (LCSEN) of the Sustainable Sector Manager, Environment & Water Resources Development Department in the World Bank’s Latin Sustainable Development Department America and the Caribbean Region. The purpose of Latin America and the Caribbean Region Table of Contents Abbreviations. .vi Acknowledgments ..........................................................................viii Abstract ....................................................................................x 1. Introduction and Context ...................................................................1 1.1 Introduction and Objectives .........................................................1 Background ......................................................................1 Objectives, Methodology, and Focus ..................................................2 1.2 Baseline Conditions in the State of Campeche ..........................................3 1.3 Economic and Institutional Analysis ...................................................5 1.4 Climate Change Impacts on the Coasts of Campeche ....................................6 Sea Level Rise ....................................................................6 Storms and Hurricanes ............................................................10 Floods ..........................................................................10 Coastal Erosion ..................................................................11 1.5 Climate Trends in Campeche .......................................................13 Rainfall .........................................................................14 Temperature .....................................................................14 Hurricane Activity .................................................................15 2. Decision Making under Uncertainty and Campeche’s Coastal Zone SEA ..........................17 2.1 Decisions under an Uncertain Future .................................................17 2.2 Climate Risk Matrix Approach .......................................................18 2.3 Results from Campeche SEA ........................................................19 2.4 Main Results and Conclusions ......................................................26 3. Application of Real Options Theory for Campeche .............................................27 3.1 Real Options Theory ...............................................................27 3.2 Implications for Campeche .........................................................28 Hard Infrastructure: A Sea Wall ......................................................30 Restoration of Mangroves ..........................................................30 Coastal Zone Management .........................................................31 3.3 Assessment of Real Options Approach in Campeche ....................................31 4. Conclusions .............................................................................33 References .................................................................................35 BOXES Box 3.1 A Simple Example: Option Value of Waiting ............................................29 Box 3.2 A Detour on Option Values .........................................................29 FIGURES Figure 1.1 Location and Municipal Division of Campeche ..........................................3 Figure 1.2 Natural Protected Areas in the State of Campeche ......................................4 Figure 1.3 Worldwide Sea Level Data 1992–2012 as Observed by Satellite ...........................7 iv Figure 1.4 Time Series of Mean Sea Level 1956–1991, Ciudad del Carmen, Campeche ................8 Figure 1.5 Projected Coastline Configuration of Southeast Coast of Campeche in 2030, 2050, and 2100 ........................................................................9 Figure 1.6 Modeled Category 4 and 5 Hurricane Tracks for Present and Warmed Climate ..............10 Figure 1.7 Storm Surges Associated with Hurricanes with Return Periods of 100 and 500 Years (Campeche) ................................................................12 Figure 1.8 Annual Rainfall Intensity for Escárcega (top) and Ciudad de Campeche