CEIS - CENTRE FOR ECONOMICS AND INTERNATIONAL STUDIES

Rapid Assessment of Pollution Hotspots for the Adriatic Sea.

A World Bank - CEIS (University of Rome “Tor Vergata”) joint research project

Scientific coordinator: Pasquale Lucio Scandizzo

Background

The Adriatic sea it is a semi-enclosed, narrow sea area solely connected to the rest of the Mediterranean through the Strait of Otranto, which is the narrowest part of the Adriatic Sea. Because of its position, its characteristics and its evolution in the centuries, it is a major natural resource of unique environmental, cultural and economic importance. A recent study sponsored by the World Bank considered 41 potential pollution hotspot sites and confirmed the existence of 27 hotspot pollution sites in the Adriatic Sea, out of which 6 at the eastern coast were identified as priority sites that require immediate actions to be taken in order to avoid the progressive degradation of the environment and pursue more desirable environmental conditions.
The consequences of the pollution emanating from these areas are manifold, in that they give raise to a series of external effects (eutrophication, destruction of natural habitats, landscape destruction, contamination of the water table) that contribute to the progressive loss of value of major environmental and economic common resource. Negative external effects are especially great on recreational values and tourism, with important negative impacts on the quality of life in the cities and the other population settlements along the coast. Any impact analysis, therefore, has to take into account the nature of the sea and its hinterland as a common resource, a natural habitat, an integrated coastal landscape and a complex bio and eco-system, as well as the high degree of interdependency characterizing all the aspects of the pollution problem.

Methodology for the Socio-Economic Analysis of the Adriatic Pollution Hot Spots

Various methods, which take into account the strong interdependencies among many critical economic activities in the Adriatic area, can be used to analyze the impact of pollution and abatement and decontamination strategies on tourism, on the local economy and the environment. Most of them are based on an extended concept of the value chain and on the analysis of structural interdependencies in the economy. Four major fields of methodologies can be identified: accounting of input-output flows, general equilibrium models, econometrics, and global commodity chain analysis. Accounting of flows includes different physical and monetary accounting frameworks providing the foundation for computable general equilibrium models. Econometric value chain analysis can be used to analyze the effects of standards (e.g. food, social, and environmental) as well as transaction costs on the income of households and trade volumes among regions and countries. Global commodity chain analysis aims to quantify the balance of power between the participating actors. The social accounting matrix can be used to integrate these methodologies in a consistent framework that allows the analysis of the impact of alternative scenarios on tourism and related economic policies on the economy and the environment.

Because of the threat of sea level rise, climate change and ecological scenarios play an important role in this framework, as a consequence of model simulations, stakeholders’ involvement, vision and narratives on climate changes and adaptation opportunities (including impact thresholds) for exercising the different options available. Real option evaluation will concern both aggregate policy options , assessed on the basis of aggregate data and focus group of experts and government officials, and firm (e.g. hotel, restaurant ) level options, assessed and estimated through specific field surveys. The option model used for simulation and measurement is an extension of Black and Scholes classical model (1973) , with estimates obtained by applying Monte Carlo methods and analytical techniques. Broadly speaking, it can be regarded as an extended cost benefit analysis of alternative strategies of investment in human and non human capital, that takes systematically into account the deep uncertainty characterizing climate change and its consequences, by incorporating volatilities and other parameters of change.

Objective of the study

The study is conducted to examine some causes and possible remedies to the degradation of the Adriatic Sea, and to analyze the main features of a possible investment program for the environment in the broad Adriatic region.

The project will aim to:

• Promote regional cooperation by strengthening collaboration amongst the World Bank and local institutions in order to learn from past and current initiatives, and identify relevant work done and the existing gaps
• Develop the Integrated Coastal Zone Management (ICZM)
• Based upon (the municipal or state) development plans and strategies, ecological zoning and planned infrastructure, identify the choice of options for use for the Real Option methodology
• Liaise and closely coordinate with the technical staff working on the Strategic Environmental Assessment on the impacts of pollution in the Adriatic Sea
• Whenever appropriate, liaise with State universities to create capacity and promote local ownership of the results