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Climate risk
management for ports:
Taking a value chain
approach at the Port
of Manzanillo, Mexico
Dr Richenda Connell
CTO & Co-founder
Acclimatise
PIANC, 7 March 2016
Institution of Civil Engineers,
London
Overview
1.
2.
3.
4.
Study aims and approach
Overview of Port of Manzanillo
Climate risks, opportunities and adaptation measures
Adaptation Plan for the Port of Manzanillo
Study aims
& approach
Study aims
• Inter-American Development Bank
(IDB) and Integral Port Administration
of Manzanillo, S.A. de C.V. (API
Manzanillo) Technical Cooperation:
– Evaluate climate-related risks for Port of
Manzanillo
– Identify opportunities from early action and
adaptation responses
– Develop Climate Change Adaptation Plan
identifying actions to reduce medium- and
long-term risks for the port
– Build capacity among port stakeholders
Overview of approach
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Risk-based adaptation decision-making
Whole value chain approach
Financial analysis of current and future climate-related risks
Cost-effectiveness of adaptation measures
Development of adaptation pathways
Integration of adaptation measures into plans
Value chain approach to identification
and prioritization of risks
Each identified risk evaluated against
four key criteria:
1.
2.
3.
4.
•
Schematic of Port of Manzanillo value chain
and areas evaluated in the study
(Source: Report authors)
•
Current vulnerability is high
Projected impacts of climate
change are large
Adaptation decisions have long
lead times or long-term effects
Large uncertainties - scale of
future risk is uncertain but could
be large
Risk rated ‘high’ against two or
more criteria → high priority risk
Risks where current vulnerability
rated ‘high’ → high priority risk
Sources of climate and
oceanographic data
Trends in the frequency of occurrence of observed
daily rainfall (June) in excess of 20 mm (1979-2014).
(Source: Report authors).
Mean changes in wet season temperature (oC)
(RCP 8.5) by 2020s (top) and 2040s (bottom)
relative to 1979-2000 baseline period. (Source:
Report authors)
IPCC AR5 ‘Expert judgement statements’ for future
changes in tropical cyclones in North East Pacific
(IPCC AR5) developed into sensitivity tests
The Port of
Manzanillo
Overview of Port of Manzanillo
• Pacific coast of Mexico, State
of Colima
• Important regional traffic
hub, considered Mexico’s
leading port in the Pacific
• 47% of Mexico’s total TEUs
• Trades goods to and from 17
out of 31 Mexican states
• Maintains active trade
relationships with 14+
countries worldwide
API Manzanillo & the terminals
• Administered by Administración Portuaria Integral
de Manzanillo S.A. de C.V. ‘API Manzanillo’ federal agency with 50 year concession
• 14 terminals under
concession,
managed by private
investors
• Roles and
responsibilities
shared between API
Manzanillo and
terminals
Layout of the Port of Manzanillo
(Source: API Manzanillo)
Goods traded
• Handles containerized cargo, bulk minerals, general
cargo, agricultural bulk, petroleum products
• Total static capacity >49,000 TEUs
• Dynamic capacity >2 million TEUs
Port of Manzanillo projected
annual cargo throughput by
product line
(Source: API Manzanillo &
report authors)
Climate risks &
adaptation
measures
Risks with highest financial impacts
for whole port
1.
2.
3.
Increased surface water flooding of port entrance/access road
Increased sedimentation of port basin
Impacts of climate change on global economy, which could affect trade
through the port
If no action is taken
Financial impacts will be borne by both
API Manzanillo and the terminals
But no risks identified affecting long-term
continuity of business
Observed and future hydrology
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Port is focal point for rainfall drainage from surrounding area
High rainfall during storm events and debris accumulation in
drains leads to insufficient drainage capacity and flooding
Main port entrance, internal access road, rail connections
subject to almost annual surface water flooding events
Expected future increase in drainage water flow entering port
Likelihood of flooding event estimated to almost double by 2050
Port catchment area and Drain 3 that
commonly overflows. (Source: CNA, 2014)
Changes in peak discharge flows. (Source:
Report authors)
Surface water flooding causes
damage to port infrastructure
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Flooding damage is already costly for API Manzanillo
6 million MXN in maintenance costs for roads/customs area in 2015
More frequent / intense flooding events = greater damage
Extra 3 million MXN per year for maintaining internal roads/customs
area by 2050
Manzanillo post Hurricane
Jova 2011. (Source: API
Manzanillo).
Clearing mangrove channel post
Hurricane Bud 2012. (Source:
API Manzanillo).
Surface water flooding causes
disruption to port operations
• Average present-day downtime across all terminals is 1 to 2 days per year,
every other year
• Equates to average annual loss of EBITDA of around 10 million MXN
• Sensitivity analysis shows effect of:
– Doubling of frequency of drain surcharge
– Four other changing storm scenarios
Average annual loss of EBITDA across all
terminals due to surface flooding of
port access road and railway, under
various flooding scenarios
(Source: Report authors)
Increased sedimentation leads to
higher maintenance costs
Maintenance of drains
• 2014 costs: 19.5 million MXN (4.5%
of API Manzanillo’s total OPEX)
• Increase in sediment deposition by
2050: Additional 1.6 million MXN
per year
• OPEX changes under changing
storm scenarios in range 2.3% to
6.8%
Maintenance dredging
Changing drain maintenance costs.
(Source: Report authors)
• 2014 costs: 54 million MXN at 108 MXN per m3
• Increase in sedimentation by 2050: Additional 900,000 MXN per year
• Mean SLR would reduce costs by between 90,000 and 110,000 MXN per year
Cost effectiveness of adaptation
measures
• High level cost effectiveness analysis conducted for operational and physical
adaptation measures
• For example surface water flooding adaptation measures:
P1 Upgrade drainage system inside port
P5 Install sustainable drainage systems (SuDS)
P6 Upgrade and improve sediment traps
P7 Review and adjust maintenance program for
drainage system to ensure maximum capacity is
achieved e.g. frequency of drain clearance
P8 Catchment level landscape planning
P21 Implement traffic management measures to
minimize bottlenecks during flood events
Cost effectiveness of adaptation
measures for surface water flooding.
(Source: Report authors)
Conclusions from high level cost
effectiveness analysis
•
Operational measures tend to be low cost and have a medium effectiveness
at reducing risk
•
Engineered (grey) measures are often most effective at reducing risk, but are
generally more costly and have fewer additional beneficial consequences
•
Ecosystem-based (green) options have more positive additional
consequences, but are typically not as effective as engineered options at
reducing risk
•
Hybrid options tend to be in the middle in terms of cost effectiveness, and
can have positive additional consequences
Detailed analysis - upgrade of drainage
system
• Upgrading maximum capacity of drainage system and installing additional
sediment traps will reduce surface water flooding and sedimentation
• Study assessed combined financial performance of two measures:
– Upgrade Drain 3 – costs 93 million MXN
– Install additional sediment trap in all drains – costs 7 million MXN
• 2019 to 2023 green line = reduction in
API Manzanillo's EBIDTA as upgrade
investments are made
• 2023 onwards = ‘EBIDTA with
adaptation measures’ (green line) >
‘EBIDTA without adaptation’ (red line)
as impacts of climate change are
reduced
Effects of drainage-related climate
change impacts and upgrades to
drainage system on API Manzanillo’s
annual EBITDA (2015 MXN) (Source:
Report authors).
Adaptation implementation scenarios
for upgrade of drainage system
• Four scenarios for implementation of adaptation measures analyzed to
explore how finances are affected by completing projects in phases or
delaying projects
Scenario
Base case
Phased
5 year delay
10 year delay
Sediment trap installation
Drain 3 upgrade
Takes place over 3 years
from 2016 to 2018
Takes place in 3 phases, in
2016, 2018 and 2020
Takes place over 3 years
from 2021 to 2023
Takes place over 3 years
from 2026 to 2028
Takes place over 3 years
from 2020 to 2022
Takes place in 3 phases in
2021, 2025, and 2029
Takes place over 3 years
from 2025 to 2027
Takes place over 3 years
from 2030 to 2032
Performance of adaptation
implementation scenarios
• Drainage system investments are financially worthwhile
• Costs of implementation not large compared to API Manzanillo’s overall
annual OPEX
• Implementation scenarios where investments are delayed lowers net cash
flow (leaves port exposed to climate impacts for longer) but improves rate
of return on investment
Comparison of financial
performance of adaptation
implementation scenarios
for upgrades to drainage
system. (Source: Report
authors)
Relationship between global GDP
and trade through port
• Global GDP and revenue flows at Port of Manzanillo strongly
correlated
• For every 1% fall in global GDP, revenue at the port falls by 1.5%
Correlation between
global GDP and revenue
at Port of Manzanillo
over period 1994-2014.
(Source: Report
authors)
Potential climate change impacts on
trade through the port
• Port’s economic output could
be negatively affected by
impacts of climate change on
global economy
• Based on Stern Review, port
could see revenue losses:
– Mid-2030s - 4 million to 10
million MXN p.a.
– Mid-2040s - 6 million to 15
million MXN p.a.
• Climate change scenarios
suggest reductions of up to 4%
by 2020 in area of arable land
suitable for seasonal corn
crops in Mexico
– Without domestic adaptation,
Mexico may have to increase
imports
Estimated effects of world GDP losses due to climate
change (from Stern) on the port’s revenue (thousand
MXN) from 2035 to 2055.
(Source: Report authors)
Adapting to climate change impacts
on demand and trade
• Diversification of trading
partner countries
• Explore opportunities to
increase import of
agricultural commodities
with high domestic demand
in Mexico considering
climate change
– E.g. potential development of
corn trade through the port
Crop suitability index for corn (maize),
expressed as percent change in maize yield
by 2055 compared to 1961 – 1990 baseline.
Based on results from IIASA MAIZE model
simulation. (Source: World Bank)
Adaptation Plan
for the Port of
Manzanillo
Key principles for the
Adaptation Plan
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Address priority risks first (e.g. where
current vulnerability is high)
Avoid maladaptation (actions that make it
more difficult to cope with future climate
change)
Account for environmental services
Emphasize measures that perform well
under uncertainty:
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–
–
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•
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No regret
Low regret
‘Win-win’
Flexible or adaptive management options
Align with timing of Port Master Plans
Align with federal, state and municipal
climate change policy frameworks
Work in partnership with other stakeholders
to develop and implement adaptation
measures
Prioritization of adaptation measures
Does the measure address a priority risk?
Yes
Priority adaptation measure
Undertake no regret, low
regret, win-win and flexible
/ adaptive measures first
Undertake operational and
physical measures that are
cost-effective and have
other desired attributes
No
Medium & low adaptation measure
Implementing the Adaptation Plan
Thank you
[email protected]
www.acclimatise.uk.com