The Ocean Economy in Mauritius: Making it happen, making it last Volume 2 – Appendices Unedited draft, November 2017 Appendix 1: The Economy-Wide Model ........................................................................ 7 The Base Model ...................................................................................................................... 7 Disaggregating the Ocean Economy Sectors .......................................................................... 8 The Non-Economic Sectors .................................................................................................... 9 The Complete Model ............................................................................................................ 10 The Multipliers ..................................................................................................................... 11 Sources of the Data and the Methodology ............................................................................ 15 The CGE Model .................................................................................................................... 16 Key Features of the Dynamic Model .................................................................................... 17 Calibrating and Testing the Dynamic Model ........................................................................ 19 Investing in the Ocean Economy .......................................................................................... 21 Sensitivity Analysis .............................................................................................................. 27 The CGE Model: a three-step procedure .............................................................................. 30 CGE Model Based on SAM Evolution ................................................................................. 33 Appendix 2: Fisheries: Supplemental Information ..................................................... 42 Provisional 2016 Fisheries Data ........................................................................................... 42 Fisheries Sector GDP ............................................................................................................ 44 Legal Framework and Violations of Fisheries and Environmental Rules ............................ 44 State of the Lagoons and Coastal Marine Ecosystem ........................................................... 45 Coastal Artisanal Fisheries ................................................................................................... 46 The Banks Fisheries .............................................................................................................. 48 Aquaculture........................................................................................................................... 51 The Seafood Hub .................................................................................................................. 54 Institutional Arrangements and Challenges .......................................................................... 56 Baselines and Investment Scenarios ..................................................................................... 58 Appendix 3: Energy Modeling ....................................................................................... 59 LCOE Calculation................................................................................................................. 59 Detailed Scenario Results ..................................................................................................... 59 Job Creation Data Summary ................................................................................................. 64 References............................................................................................................................. 65 Appendix 4: Marine Spatial Planning, Supplemental Information ........................... 66 MSP Mini-Workshop Participant List, September 2016 ...................................................... 66 UNESCO Guiding Principles for Marine Spatial Planning .................................................. 67 Summary of Discussions with Key Stakeholders ................................................................. 67 2 MSP Sample Work Plan for Option 2................................................................................... 71 Marine Protected Area Designations in Mauritius................................................................ 73 Legal Instruments of Relevance for an MSP Process in Mauritius ...................................... 74 Appendix 5: Climate Change Modeling ........................................................................ 78 Description of Methods for Cyclone Event Set Modeling .................................................... 78 In-Depth Description of Synthetic Methods ......................................................................... 78 Dynamic CGE Simulations of Climate Change Economic Impact Scenarios ...................... 95 References........................................................................................................................... 109 Appendix 6: Ocean Governance: The International Experience ............................. 112 Comprehensive Assessment Approach ............................................................................... 112 A Clearly Strategy, Communicated with Strong National Blue Economy Goals ............... 113 Engagement of All Stakeholders, with Dedicated Government Structures ........................ 114 Regulatory Framework ....................................................................................................... 114 Seed Funding and Investment Support ............................................................................... 115 Business Follow-Through ................................................................................................... 117 Long-term Sustainability .................................................................................................... 118 Conclusions......................................................................................................................... 119 List of Figures Figure 1A.1. Value added multiplier ............................................................................................. 12 Figure 1A.2. Green value added multipliers.................................................................................. 13 Figure 1A.3. Institutions multipliers ............................................................................................. 14 Figure 1A.4. Natural institutions’ multipliers ............................................................................... 14 Figure 1A.5. Investment multiplier ............................................................................................... 15 Figure 1A.6. GDP growth in Mauritius 2006–2014 ...................................................................... 20 Figure 1A.7. Trend of value added ................................................................................................ 20 Figure 1A.8. Household consumption ........................................................................................... 21 Figure 1A.9. Better education and training boosts value added .................................................... 26 Figure 1A.10. Poor benefits more with doubling of ocean economy ............................................ 27 Figure 2A.1. Increasing violations of fisheries and environmental laws ...................................... 45 Figure 2A.2. Recorded numbers of coastal fishing vessels (Mauritius island only) ..................... 47 Figure 2A.3. Apparent trends in catch and effort in the lagoon and offshore fisheries ................. 48 Figure 2A.4. Most of the Bank’s catch comes from the Saya de Malha Bank .............................. 50 Figure 2A.5. Images of the Banks (left to right): bathymetry, shallow-water areas, primary productivity ................................................................................................................................... 51 Figure 2A.6. Potential aquaculture sites around Mauritius island ................................................. 54 3 Figure 2A.7. Most purse seining is outside Mauritius waters, most longlining inside .................. 56 Figure 3A.1. Generation, capacity, and investment in the reference land based RET .................. 59 Figure 5A.1. Example of a probability distribution generated using the random seeding genesis method ........................................................................................................................................... 81 Figure 5A.2. Example of random time series generated using (2) and (3) .................................... 82 Figure 5A.3. 1000 randomly selected tracks generated using statistics from the ERA40 reanalysis ....................................................................................................................................................... 84 Figure 5A.4. Comparison of 6-hour west-east (a) and south-north (b) North Atlantic track displacements between HURDAT (blue) and synthetic (red) tracks. ............................................ 85 Figure 5A.5. Annual exceedance frequencies of lifetime maximum wind speeds of 355 HURDAT events (blue) and 7064 synthetic events (red), during the period 1980–2010 ............................... 88 Figure 5A.6. Track (a) of the most intense storm among the random sample of 7064 Atlantic tropical cyclones, together with the evolution (b) of maximum wind speed (blue), potential intensity (red), translation speed (green) and 250–850 hPa wind shear magnitude (aqua) ........... 89 Figure 5A.7. Number of hurricane tracks per 2.5 degree latitude-longitude box for (a) nearly 3000 synthetic tracks, (b) 399 HURDAT tracks from 1970 to 2005, and (c) for a random sample of 399 synthetic tracks .............................................................................................................................. 89 Figure 5A.8. Annual exceedance frequencies of lifetime maximum wind speeds of 52 HURDAT events (blue) and 20048 synthetic events (red), passing within 500 km of Pointe-á-Pitre, Guadeloupe, during the period 1980–2010 ................................................................................... 91 Figure 5A.9. Track of the event that produces the highest wind speed at Pointe-á-Pitre, Guadeloupe, among the 20,048 events, as displayed in Google Earth .......................................... 91 Figure 5A.10. Return periods (inverse annual exceedance probabilities) of peak wind experienced within 150 km of New York City according to a set of 5022 events, compared to those estimated from 22 HURDAT events in the period 1900–2010 ..................................................................... 92 Figure 5A.11. Track of the synthetic event that produces the strongest peak wind in downtown New York ...................................................................................................................................... 93 Figure 5A.12. Contours of the peak wind experienced at every point, associated with the event illustrated in Figure 5A.16............................................................................................................. 93 Figure 5A.13. Contours of the accumulated rainfall (mm) associated with the event illustrated in Figure 5A.16 and Figure 5A.12 ..................................................................................................... 94 Figure 5A.14. Return periods of peak storm surge depths at the Battery (lower Manhattan) for the climate of the late 20th century (black) and for the late 21st century under IPCC emissions scenario A1b, with 1 m of mean sea level rise included (red and blue), as downscaled from four global climate models, CNRM, ECHAM, GFDL, and MIROC ................................................... 95 Figure 5A.15. Characteristics of projected tropical cyclones under high and low climate change scenarios, normalized to historical conditions ............................................................................. 102 Figure 5A.16. Projected annual direct damage from tropical cyclones, normalized to historical conditions .................................................................................................................................... 103 Figure 5A.17. Projected present value effect of tropical cyclones on GDP ................................ 104 Figure 5A.18. Increase in VAR ................................................................................................... 105 4 Figure 5A.19. Losses in GDP ...................................................................................................... 106 Figure 5A.20. GDP time paths .................................................................................................... 107 Figure 5A.21. Expected losses in GDP growth in the high impact scenario ............................... 107 Figure 5A.22. Expected losses in GDP in the high impact scenario ........................................... 108 Figure 5A.23. Hurricane frequency in the high impact scenario ................................................. 108 List of Tables Table 1A.1. Mauritius ocean economy activities ............................................................................ 8 Table 1A.2. Value added multipliers ............................................................................................. 12 Table 1A.3. Green value-added multipliers .................................................................................. 12 Table 1A.4. Institutions multipliers ............................................................................................... 13 Table 1A.5. Natural institutions’ multipliers ................................................................................. 14 Table 1A.6. Gross fixed capital formation at current prices by type and use, 2006–2016, million MR ................................................................................................................................................. 19 Table 1A.7. Doubling ocean economy can boost GDP ................................................................. 23 Table 1A.8. Larger Ocean economy gives small boost to fiscal picture ....................................... 24 Table 1A.9. Bigger ocean economy helps most old and new sub-sectors ..................................... 24 Table 1A.10. Doubling ocean economy offers more value added ................................................ 24 Table 1A.11. Doubling ocean economy offers more job creation................................................. 25 Table 1A.12. Bigger ocean economy reduces income inequality ................................................. 26 Table 1A.13. Higher interest and equity rates would pose problems ............................................ 28 Table 1A.14. Skills mismatch could undercut OE’s potential ...................................................... 29 Table 1A.15. Natural resource constraint could undercut bigger OE gains .................................. 29 Table 1A.16. Bigger ocean economy holds its own even in tougher times................................... 29 Table 2A.1. Fisheries data update for 2016 ................................................................................... 42 Table 2A.2. Overview of fisheries production 2006–2015 ........................................................... 43 Table 2A.3. Contribution of the seafood sector to Mauritius GDP for 2007 to 2014 (%) ............ 44 Table 2A.4. Recorded catches in small-scale fisheries in selected years (tons) ............................ 46 Table 2A.5. Catches (tons), numbers of fishers and fishing vessels - Rodrigues island ............... 48 Table 2A.6. The large-scale freezer-vessels dominated the Banks fishery in 2015 ...................... 50 Table 2A.7. Production of cultured seafood products (tons) ......................................................... 53 Table 2A.8. Fisheries traffic at Port Louis (2007–14) ................................................................... 56 Table 2A.9. Baseline - no government investment (business as usual)......................................... 58 Table 2A.10. Existing sector development plans .......................................................................... 58 Table 2A.11. Scenarios for additional development options......................................................... 58 Table 3A.1. Investment in the Baseline scenario .......................................................................... 60 5 Table 3A.2. Installed capacity in the Baseline scenario ................................................................ 60 Table 3A.3. Electricity generation in the Baseline scenario.......................................................... 61 Table 3A.4. Investment in the EDP scenario................................................................................. 61 Table 3A.5. Installed capacity in the EDP scenario ...................................................................... 62 Table 3A.6. Electricity generation in the EDP scenario ................................................................ 62 Table 3A.7. Investment in the ADO scenario ............................................................................... 63 Table 3A.8. Installed capacity in the ADO scenario ..................................................................... 63 Table 3A.9. Electricity generation in the ADO scenario ............................................................... 64 Table 3A.10. Investment and operation cost breakdown by technology ....................................... 64 Table 3A.11. Direct employment by technology during construction and operation.................... 65 Table 4A.1. Guiding principles identified by stakeholders ........................................................... 68 Table 5A.1. Summary of statistics for tropical cyclones, hurricane proportions and eastern North Atlantic Ocean Sea Surface Temperature (NATL SST) anomaly ................................................. 96 Table 5A.2. Descriptive statistics for compound Poisson model of adjusted damage (1995 US$ billion) from North Atlantic hurricanes, 1925–1995 ..................................................................... 96 Table 5A.3. Overview of future loss sensitivity studies ................................................................ 97 Table 5A.4. Summary for Mauritius by decade of consequence database for tropical cyclones, floods, and related secondary hazards ........................................................................................... 98 Table 5A.5. Distribution of damages .......................................................................................... 103 List of Boxes Box 1A.1. Productivity increases in the Dynamic CGE Model .................................................... 17 Box 1A.2 Optimality in the dynamic CGE ................................................................................... 18 Box 1A.3. Crowding out and counterfactuals ............................................................................... 22 Box 1A.4. Estimating environmental loss in the CGE Model....................................................... 23 Box 2A.1. Selected fisheries and marine environmental legislation ............................................. 44 Box 2A.2. Declining catches in the Banks fisheries ..................................................................... 48 Box 2A.3. Recovery of the Rodrigues octopus fishery ................................................................. 52 Box 2A.4. Government’s strategic objectives for the Seafood Hub ............................................. 55 Box 2A.5. Linkages between the fisheries sector and the broader ocean Economy .................... 57 6 Appendix 1: The Economy-Wide Model The Base Model The Mauritius Social Accounting Matrix (SAM) used in the computable general equilibrium (CGE) model was estimated, taking as a point of reference the National SAM estimated by Statistics Mauritius (under the aegis of the Ministry of Finance & Economic Development) and published for year 2007, applying a maximum entropy algorithm according to the methodology outlined in Scandizzo and Ferrarese (2015). The model is disaggregated in various blocks of accounts as follows:  Goods and Services Accounts refer to the total supply of goods and services.18 products (goods and services) have been identified: o Sugar cane o Live animals and fishing o Other agriculture o Ores and minerals o Sugar milling o Textile manufacturing o Other manufacturing o Construction o Wholesale and retail trade o Lodging, food and beverage serving services o Transport and communication o Electricity and water distribution services o Public administration o Financial intermediation o Real estate and business services o Education o Health and social services o Other services  The Production Activities show the costs of the production processes. They include intermediate consumption of the different product groups, factor income generated, and taxes on production paid to government.  The Factor Income Accounts provide for an interface in the mapping of income generated in production to the institutions, including households. The factor accounts have been disaggregated as follows: o Employees – primary education level o Employees – secondary education, lower than the School Certificate level o Employees – secondary education, with the School Certificate level or higher o Employees – tertiary education 7 o Own account o Employers o Operating surplus  Institutions Current Accounts contain the outlays and incomes of households, corporate, and government. They include final consumption expenditure, property income, and transfers. In these accounts, households have been split into four groups using the monthly household income per adult equivalent on the basis of the results of the latest Household Budget Survey (2014).  Other accounts represent the combined capital and the rest of the world accounts. The combined capital accounts include investment, changes in stocks, and capital transfers. The rest of the world accounts capture transactions with the rest of the world. The model in base version is estimated at 2015 values, using national account historical series made by Statistics Mauritius, and disaggregated by a 2007 Input-Output classification for 30 economic sectors. Disaggregating the Ocean Economy Sectors To represent the ocean economy sectors in the model, we identified both current and potential developing sectors based on the direct and indirect use of the ocean, drawing on the classification of the Mauritius Office of Statistics (Table 1A.1). Table 1A.1. Mauritius ocean economy activities Contribution to GDP (%) 2012 2013 2014 2012 2013 2014 GDP at basic prices (Million MR) 302,617 322,937 342,179 Activities/organisation Salt Production 12 11 10 0.00 0.00 0.00 Seafood fishing and processing 4,314 4,833 4,687 1.43 1.50 1.37 of which: Aquaculture 28 30 37 0.01 0.01 0.01 Fishing other than aquaculture 281 398 754 0.09 0.12 0.22 Fish processing 4,005 4,405 3,896 1.32 1.36 1.14 Ship building and maintenance 292 433 471 0.10 0.13 0.14 Storage 689 698 753 0.23 0.22 0.22 Sea transport 141 152 132 0.05 0.05 0.04 Services allied to transport 4,776 5,007 5,473 1.58 1.55 1.60 Hotels and restaurants 16,181 14,773 16,134 5.35 4.57 4.72 Leisure boat activities 3,442 3,801 4,174 1.14 1.18 1.22 Ship store and bunkering 920 842 717 0.30 0.26 0.21 Freeport activities 1,596 1,735 1,884 0.53 0.54 0.55 Shipping division (of Ministry of Land 16 19 20 0.01 0.01 0.01 transport and Shipping) 8 Contribution to GDP (%) 2012 2013 2014 2012 2013 2014 Mauritius Oceanography institute 17.4 31.6 20.7 0.01 0.01 0.01 External communications division 6.1 7.7 8.5 0.00 0.00 0.00 Ministry of Fisheries 120.1 140.8 149.2 0.04 0.04 0.04 Tourism Authority 23.6 42.9 45.1 0.01 0.01 0.01 Beach Authority 14.6 18.5 19.3 0.00 0.01 0.01 Fisherman Welfare fund 2.2 3.9 4.2 0.00 0.00 0.00 National Coast Guard 323.6 389.2 419.1 0.11 0.12 0.12 Total 32,887 32,939 35,122 10.9 10.2 10.3 Source: Mauritius Office of Statistics. In our model, we include the following ocean sector:  Fish and other fishing products  Aquaculture  Seaweed culture  Seabed exploitation of hydrocarbon and minerals  Seafood processing  Water bottling  Ship building and repairs  Bunkering and energy trading  Freeport zone  Coastal Hotel and Restaurant  Sea transport  Deep water application  Ocean renewable energy  Marine and port finance  Marine insurance  Telemarketing services for cruise lines  Application of big data  Vocational and tertiary education in maritime/ocean  Yacht services marine leisure-big game fishing The Statistical Mauritius office also provided a disaggregated Ocean Input-Output table produced in June 2016. The Non-Economic Sectors To close the model and include the environmental sectors we use FAO statistics on water. The environmental sectors, which are modeled as factors of production, include: ocean, green water, blue water, and wetland, and, as a form of recipients (that is, “institutions�) of rents from environmental capital, water resources, natural capital, and emissions. The contribution of these variables to value added (as a form of non-remunerated environmental costs) and in the 9 distribution of rents are estimated through a combination of the maximum entropy and the Wolsky disaggregation algorithm (Scandizzo and Ferrarese, 2015). The Complete Model The CGE model is based on a 118-sector SAM and simulates an economy disaggregated in the following blocks:  Goods and services accounts: o 6 agriculture sectors (products of agriculture, horticulture and market gardening, forestry and logging products, sugar cane, live animals and animal products, fish and other fishing products, aquaculture, and seaweed culture). o 11 industry sectors (ores and minerals, seabed exploitation of hydrocarbon and minerals, meat, fruit, vegetables, oils and fats, grain mill products, starches and starch products and beverages, seafood processing, sugar, yarn and thread; woven and tufted textile fabrics, knitted or crocheted fabrics; wearing apparel, other manufactured goods, manufacturing cosmetics and pharmaceuticals, agrochemicals, water bottling, and ship building and repairs); o Construction and construction services. o 30 services sectors (wholesale and retail trade services, bunkering and energy trading, Freeport zone, lodging; food and beverage serving services, coastal hotel and restaurant, land, air, supporting and auxiliary transport services, sea transport, services allied to transport, electricity distribution services; gas and water distribution services through mains, deep water application, ocean renewable energy, financial intermediation, insurance, and auxiliary services, marine and port finance, marine insurance, real estate services, telecommunications services; information retrieval and supply services, telemarketing services for cruise lines, application of big data, other business services, legaland accounting services, scientific research and development, public administration and other services to the community as a whole; compulsory social security services, education services, vocational and tertiary education in maritime/ocean, health and social services, sewage and refuse disposal, sanitation and other environmental protection services, services of membership organizations, recreational, cultural, and sporting services, yacht Services and marine leisure-big game fishing, and other services).  Production activities include the intermediate consumption of the different product groups, factor income generated, and taxes on production paid to the government for the same disaggregated accounts of goods and services.  The factor income accounts include: o Primary education 10 o Secondary education