Nat Cap Modeling for The Nature Conservancy and Dow Chemical Co. Robert Griffin*, Katie Arkema, Joey Bernhardt, Joe Faries, Greg Guannel, Anne Guerry, Jess Silver, Jodie Toft, Gregg Verutes, Spencer Wood naturalcapitalproject.org Natural Capital Project Annual Meeting, 2013

Overview Developing methods to assess “natural defenses” to protect Dow’s Freeport, TX facility from storms Dow - Chemical company - $40B Market Cap Dow Freeport - 5,000 acres on Gulf of Mexico - Half of U.S. production - 21% of global prod - Hurricane prone

Overview

TNC and Dow Collaborative Agreement - 3 Pilot Projects - Freeport, Texas - Santa Vitoria, Brazil - TBD - Freeport Project - Air Quality and Reforestation - Freshwater Supply - Coastal Hazard Mitigation

Research Questions Hypotheses/Questions General: Does marsh restoration reduce the inundation level and damage from storms? Dow: To what extent is marsh restoration a substitute for levees? Auxiliary Analysis Marsh restoration has spillover effects to public (direct and indirect) - Direct: Protect “public” properties - Indirect: Recreation, carbon sequestration, fisheries

Valuation Framework Net value of management options to Dow and Public Sea level rise Storms Coastal Development Scenarios -No restoration (status quo) -No restoration, build levees -Restoration -Opportunistic -Targeted Dow Cost Benefit Analysis Public Value of avoided Dow damages Value of avoided damages Affected Parties Valuation Local Forcings Value of co- benefits Action Costs to Dow Responses

Natural Defenses StormLand CoverFloodingInundationDamage

Physical Modeling 1. Estimate storm surge in response to different forcing conditions and SLR 2. Models changes in wave height in response to critical habitat 3. Surge + waves = inundation map Avoided Damages Model 1. Modeled property damages to Dow and Freeport 2. Uses tax assessment data (public) and AIR report (Dow) for property values 3. Translates inundation to damage via depth-damage curves from U.S. Army Corps of Engineers Natural Defenses

Recreation

Fisheries Fisheries model  species’ propensity to respond to changes in habitat – Qualitative assessment based on changes in critical habitat area – Returns population response as +/- and scaled (low-high on a 5 point scale)

Carbon Sequestration Landcover changes can sequester carbon Our blue carbon model outputs: – changes in carbon due to management action – social or private value of carbon

Results Developed assessment methods for natural defenses Assessment results (targeted restoration) – Salt marsh restoration does not significantly reduce damages in this area to Dow or Freeport – NPV of carbon sequestration is $1.2 million – Recreation expenditures increase $150 million – 12 fisheries benefit