Seawalls and Emerging Markets

July 2021

Built on beautiful Biscayne Bay, money has flowed from the sea to Miami – especially to its real estate developers — for centuries.  It is starting to flow back to the sea.

Last month, the US Corps of Engineers released a draft study for how best to protect the city of Miami from rising seas and recurring flooding.  The Engineers’ recommendation: a $6 billion, 6-mile long, and up to 20-foot-high seawall.  City and state politics are now mired in a high-profile back-and-forth on whether to proceed (see “A 20-Foot Sea Wall? Miami Faces the Hard Choices of Climate Change”).  Similar plans to build large and expensive seawalls are being debated in other American cities: Houston, San Francisco, Charleston, and Honolulu for a few, with New York City looking at the most grandiose plans of all, costing well over $100 billion.  A 2019 report noted that the cost of building the seawalls under debate in the US could run to $416 billion – the same cost as the build-out of the entire national interstate highway system.  Across the Atlantic Europe already has seawalls in a number of places: Venice, London, St Petersburg, the Netherlands.  A gargantuan project – nearly 400 miles long – is under discussion to protect European coastlines along the North Sea – at a preliminary cost estimate of half a trillion dollars.  Along the Pacific Singapore and Shanghai are among (the few and wealthy) Asian cities with seawalls.

There is still novelty around the idea.  Until the last decade, one would have been hard pressed to find “seawall” in anyone’s definition of infrastructure.  Ports have built jetties in many places to protect harbors, but these have been much smaller endeavors.  Yet the future where one can plausibly project seawalls becoming one of the 3 or 4 largest categories of infrastructure spending around the world, capturing hundreds of billions of dollars, has come quickly.  A future where seawalls will be the single largest ticket item in the budget of many coastal cities, at times dwarfing their combined spending on all other infrastructure combined.  This is another example of how disruptions have upended the once stable and fairly predictable world of infrastructure, whether disruptions from technology – such as wind turbines or batteries – or from other sources, like climate change.

Fear of rising sea levels from the melting of glaciers is galvanizing the newfound interest in seawall building.  Hundreds of millions of people live in coastal cities with low elevations and many, like those in Miami, are already seeing the increased flooding that will worsen in coming years.  As the World Economic Forum states, “Even if we collectively manage to keep global temperatures from rising to 2°C, by 2050 at least 570 million cities and some 800 million people will be exposed to rising seas and storm surges. And it is not just people and real estate that are at risk, but roads, railways, ports, underwater internet cables, farmland, sanitation and drinking water pipelines and reservoirs, and even mass transit systems.”  Estimates of the sea level rise itself, which may sound small or slow, tend to understate the problem.  Only about 1/3 of future coastal flooding risk is from rising sea levels that would permanently submerge low-lying areas, while 2/3 of the risk comes rather from the likely increase in extreme high tides, storm surges and breaking waves.  Cities are looking at a variety of ways to protect themselves, looking to better absorb and drain water faster, but attempting to keep water away is on nearly every wish list. 

New research (see “A Space Laser Shows How Catastrophic Sea Level Rise Will Be”) shows that for several of these coastal cities, the issues of rising seas and more severe storms will be made worse by yet another problem: sinking.  As populations in many of these urban areas have grown rapidly, over-extraction of ground water is causing the ground to subside.  Cities built on river deltas usually sit on several layers of clay, deposited over time as sediments by the river, with underlying aquifers.  When the aquifers get drained to provide water to the city’s population, the clay collapses into the space which had held water.  The more an urban center grows, the more people it needs to hydrate, which increases the rate and severity of subsidence.  Djakarta is the prime example of this effect, with subsidence having been a key factor in last year’s decision by the Indonesian government to move the capital to a different location (see Capital Punishment (or So Long, Djakarta ?)), but it is far from the only one.

The surge in interest in seawalls as the centerpiece of the solution for many cities will keep engineers occupied and planners preoccupied.  It is still very early days in the growth of what will likely be one of future infrastructure’s largest areas.  Today we’ll look at just a couple implications of this coming boom, especially as regards developing countries.

We’ll start with one safe assumption about this new type of infrastructure: if the seawalls get built, they’ll cost a lot more than the amounts now projected – even the $400+ billion estimated for the US.  Seawalls will fit squarely into the type of infrastructure prone to frequent and large cost overruns (think of tunneling projects, like Boston’s infamous “Big Dig,” or of large hydroelectric dams, with average overruns approaching 50%).  They will be highly politicized investments, with continued debate about every detail (whose property is disturbed, whose views are affected, which houses are outside the protection zone, what is the timeline – and especially, who pays), and debate about just how high the tidal or storm surges they’re built to prevent will be and how soon.  This means the construction of these barriers will be subject to frequent change orders, the perfect recipe for more cost overruns.  And they may become obsolete fairly quickly, depending on the pace of climate change and glacier melt in the coming decades.  It would not be a big stretch to see the US spend over $1 trillion on seawalls in the coming 20 years, nor would it be a big stretch to see global spending on such projects well over $5 trillion.  That’s a lot of infrastructure spending

A second safe assumption about seawalls?  You won’t find many in Emerging Markets any time soon. 

And that will become a big deal.

Cities in lower-income countries stand to be disproportionately affected by rising seas.  While all coastal cities will be affected by sea-level rises, some will be hit much harder than others. Asian cities will be particularly badly affected. About 4 out of every 5 people impacted by sea-level rise by 2050 will live in East or South East Asia – several hundreds of millions of people.  Africa is also highly threatened, due to rapid urbanization in coastal cities and the crowding of poor populations in informal settlements along the coast.  The list of most affected cities includes Mumbai, Kolkata, Dhaka, Guangzhou, Rangoon, Ho Chi Minh City, Manila, Dakar, Alexandria, Lagos, Abidjan, among many others.  Leaving aside China, most of these Emerging Markets cities and their national governments have one thing in common when looking at seawalls as part of their adaptation plans: a lack of capital. 

The list of Emerging Markets countries with cities affected by rising seas looks an awful lot like the list of Emerging Markets countries with large infrastructure deficits – already.  The capital requirements for building seawalls to protect their coastal cities from increased flooding will absorb a large share of their capital that is already needed for deficient infrastructure: for some smaller countries, the cost of seawalls may approach the size of their entire current infrastructure budgets.  It is no surprise, therefore, that a list of cities actively considering seawalls is 90%+ in developed markets (including China).  Djakarta – banking on financial support from the Netherlands – is the only city in a lower-income country with an advanced plan. 

While it is not surprising that attention to seawalls is almost entirely concentrated in more developed countries, the absence of such attention in Emerging Markets has some important implications worth noting.

1.         Flooding increases in coastal cities and the inability of those in low-income countries to engineer solutions (or at least what may appear to be solutions) to offset sea-level rise will lead to much larger-scale relocation of populations in the Emerging Markets than what we will see in the US, Europe and the richer Asian countries.  Some of that relocation may be organized, at least to an extent, along the model of Indonesia’s announced move of the country’s capital, and much of it is likely to be dis-organized, in the form of migration – in country where inland options may be available, and cross-border where those options are not available.  As the World Economic Forum states it, “The coming decades will be marked by the rise of ex-cities and climate migrants.”  To date much of this climate migration has been relatively “invisible,” contained within countries.  Don’t expect this to continue.  The cry we have seen in early 2021 for better equity in the distribution of COVID-19 vaccines may presage a louder cry in years to come for better equity in the building of seawalls.

2.         Given that the wealthy countries that dominate the Boards of International Financial Institutions will want to see as little large-scale cross-border migration as possible, and will have to devote plenty of capital to their own climate adaptation plans, we will undoubtedly see a big push for the IFIs to engage in helping Emerging Markets fund seawalls.  With the scale of the financing challenge, this will be the domain of the large global and regional multilateral development banks, and will stretch their balance sheets. Should a large-scale Climate Adaptation Fund emerge, as has been discussed for many years, and could safely assume that a large share of its capital would wind up going into this area.

3.         There will even greater interest in “innovative financial solutions” than there is for traditional forms of infrastructure.  Don’t be surprised to see mechanisms through which the local private sector in coastal cities (especially companies serving consumers in these cities, such as retail, telecommunications, and producers of consumer goods) “help finance” some kind of Public-Private Partnerships (it will sound better than to say they are being taxed) in order to preserve their own revenues.  And don’t be surprised to see some mechanism emerge whereby wealthy countries contribute to some kind of “Fund” to help finance seawalls in lower-income countries.  It would be the same kind of general principle which has been discussed now for decades for Climate Change adjustment funds, but would have the clear advantage, relative to current discussion, of going to concrete (pun intended) objectives.  In the US, we have seen the building of a wall to limit immigration generate considerable political momentum: one can imagine building of walls further away, with the same idea of limiting immigration in mind, will also generate plenty of political momentum in the future.

Seawalls: coming soon for infrastructure budgets – ready or not.

Index to previous Infrastructure Ideas columns about Climate Adaptation