Annexes A to C UNEP / GEF / SP-MED-LME / February 2008 ANNEX A. INCREMENTAL COSTS AND BENEFITS OF THE PROJECT: 1. Background The GEF Incremental Costs analysis requires a consideration of the baseline and additional costs associated with achieving ‘domestic’ benefits (i.e., those accruing to the participating countries) and global environmental benefits (i.e., those accruing beyond the jurisdiction of the participating countries). The regional scope of this project presents methodological difficulties in assessing costs that are normally calculated in a purely national context. As with any legitimate GEF project, the benefits arising from this project will accrue at global, regional and national scales. The purpose of this analysis is to attempt to segregate the costs of project activities benefiting conditions and resources in coastal areas under national jurisdiction, on the one hand, and the costs of project activities that provide additional (incremental) benefits in the form of reduced stress and improved conditions in international waters areas beyond the individual jurisdictions of the participating countries. This analysis also provides justification for the incremental costs by assessing the incremental benefits and showing, where possible, that these outweigh the incremental costs of the project. Global Benefits Assessing the global benefits of a GEF project necessitates, in the first instance, a consideration of the comparative environmental importance, from a global perspective, of the region or area covered by the project, together with an understanding of the extent to which the project reduces environmental loss or degradation. This reduction in environmental degradation represents the predominant environmental benefit of the project at all scales. Partitioning the total benefit at global, regional and national scales poses problems in the context of incremental cost calculations because, in many cases, the benefits cannot be valued in purely monetary terms and, furthermore, predicting the distribution of benefits among geographical areas is profoundly difficult. In the context of international waters, however, interventions addressing transboundary environmental issues and concerns are considered to be wholly incremental. This project comprises two major foci: first, the prevention of pollution in the Mediterranean Sea (implementation of SAP-MED); and second, measures to enhance the preservation of biodiversity in this same enclosed Sea. In addressing those two foci, the project adopts a combination of holistic and sectoral (for technical/methodological reasons) approaches. The first component comprises integrated approaches for the implementation of both SAPs and their NAPs through ICZM, IWRM and Management of Coastal Aquifers and provides mutual support to the two major foci. The second and third components address them separately with targeted activities for each of them. The fourth component addresses Project coordination, management and M&E, including replication and communication strategies and NGOs involvement plan. The Mediterranean Sea is universally recognized as the most enclosed marginal sea. Within its catchment lay the oldest cradles of modern civilization, Egypt, Greece and Rome. Today, it contains diverse social and cultural entities, including the countries of North Africa, the eastern Mediterranean, the Balkans and Southeastern member states of the European Union. The importance of the Mediterranean Sea to the economies of these countries, whether for transportation or the recovery of resources, is indisputable. It is clear from the number and scale of GEF projects in Mediterranean countries that the social, political and environmental importance of the region is already well-recognized. The pilot project on POPs is a direct contribution of Mediterranean Countries to the global efforts to reduce the adverse impacts on health and environment of POPs. A - 1 Annexes A to C UNEP / GEF / SP-MED-LME / February 2008 Baseline Activities and Costs At a national level all the countries of the region have sought, over the last decade, to strengthen their national capacity for sound and sustainable management of the marine environment. Following the past emphasis on assessment of problems, significant experience has been built up at a national level. In some instances, however, countries have been unable to devote sufficient resources internally to developing such capacity; hence the stage of development varies widely from country to country. Strictly, baseline activities in the region are of two types. The first type comprises activities undertaken by the participating countries predominantly for national purposes to improve the social and environmental conditions that offer social and economic benefit. The second type comprises contemporary activities being undertaken by international agencies and supported by a wide variety of donor institutions, both bilateral and multilateral, in which the developing countries of the Mediterranean participate. An effort has been made in the text of the project brief and in the estimation of baseline costs to identify and segregate these two types of baseline activity. The primary reason for such segregation is to ensure that there is a specific allocation of baseline costs to issues of national action directed primarily at obtaining domestic benefits. International projects support not only the acquisition of domestic benefits to the participating countries but also a variety of regional and global benefits in engendering the introduction of uniform and effective management and surveillance mechanisms throughout the developing world. Incremental Costs The analysis of incremental costs is the main subject of this annex. In addition to the estimation of incremental costs, an effort is made to determine and distinguish between any additional domestic benefits provided by the project as distinct from those accruing in areas beyond individual national jurisdictions. Such projections of benefit are fraught with difficulty as noted above. Therefore, frequently it is only possible to examine the likely scale of incremental benefits accruing from project activities as a means of providing justification for the incremental costs and the investment of GEF financing. Domestic Benefits The domestic benefits accruing from this GEF alternative project comprise improvements in the condition of the environment under national jurisdictions and the enhancement of national capacities to manage and control the adverse environmental impacts of economic activities. Those components of the project directed towards enhanced management of land-based activities to reduce the entry of contaminants into the sea will yield major domestic benefits because the receiving coastal area is closest to the sources. The project components devoted to SAP-BIO implementation will have domestic benefits largely limited to the economic and social benefit accruing from increased biological diversity in coastal areas under national jurisdiction. Nevertheless, to the extent that such biodiversity enhancements align with international aspirations adopted from global perspectives, some of these benefits could be claimed as incremental. In large part, the capacity-building activities within the project will result primarily in domestic benefits to the participating countries. Nevertheless, to the extent that such national capacity- building enables improved coordination among national actions to protect and enhance the marine environment of the Mediterranean as a whole, there will exist incremental benefits. In relation to land- based source control, these incremental benefits will accrue at the regional level whilst greater harmonization of interventions directed towards biodiversity protection and enhancement can be argued to accrue at both regional and global levels. Incremental Benefits The present project adds significantly to the ‘regional baseline’ enabling the countries to accelerate the implementation of the two Strategic Action Programs, that on land-based activities and that on biodiversity. Timely implementation of these two SAPs is unlikely to occur in the absence of a GEF A - 2 Annexes A to C UNEP / GEF / SP-MED-LME / February 2008 intervention, since the level of funding currently available for regional coordinated action is insufficient to address all aspects of these programs. The incremental benefits of this project will accrue both to the international waters of the region and international waters beyond the Mediterranean. In the case of stress associated with contaminants derived from land-based activities, the greatest incremental benefits will be regional. Biodiversity preservation in the Mediterranean also constitutes an incremental benefit in the context of contemporary international initiatives. Incremental benefits of project interventions aimed at biodiversity enhancements fall into two categories: those relating to the mitigation of transboundary environmental impacts, such as loss of fish spawning and nursery habitats that serve as a source of propagules for fisheries elsewhere in the region or as habitat for endangered species; and those resulting from adoption of a harmonized regional approach to interventions. All activities within the proposed project have been based on the priorities identified in the two strategic action plans for the Mediterranean engendered through the Barcelona Convention. Thus, there exists a basis of regional coordination in the selection of priorities