Overview of Economic Valuation of Coral Reefs

Lauretta Burke

World Resources Institute (WRI)

Mt. Irvine, Tobago

March 21-22, 2006

• economics

Beautiful

Valuable

Valuable

Valuable

Valuable

Valuable

Valuable

Valuable

Threatened

• Coastal development

• Sewage

• Dredging

Threatened

• Coastal development

• Sewage

• Dredging

• Runoff from construction and agriculture

Threatened

• Coastal development

• Sewage

• Dredging

• Runoff from construction and agriculture

• Marine-based threats

Threatened

• Overfishing

Threatened

• Tourism pressure

Threatened

• Coral Bleaching

• Coral Disease

• Ocean Acidification

Threats to Coral Reefs from Land-based Sources

• Sediment

Threats to Coral Reefs from Land-based Sources

• Sediment

• Nutrients

Global Analysis released in 1998 byWorld Resources Institute,in collaboration with ICLARM, WCMC and UNEP

The Reefs at Risk Index

LowLow MediumMedium HighHigh

• Global Reefs at Risk successful at raising awareness.

• Relatively coarse-scale (4km.)

• Global Reefs at Risk successful at raising awareness.

• Relatively coarse-scale (4km.)

Regional Reefs at Risk series• Higher resolution analysis – valuable

for management• More integration and improvement of

data

Regional Reefs at Risk series• Higher resolution analysis – valuable

for management• More integration and improvement of

data

Reefs at Risk in the Caribbean

• Collaboration of over twenty international and regional partners

• Uses Geographical Information System (GIS) to evaluate threat to coral reefs

Threats Evaluated in Caribbean:

• Coastal Development

• Watershed-based sources of sediment and pollution

• Marine-based threat

• Overfishing

• Dredging, land filling and reclamation

• Mining of sand and coral

• Runoff from construction

• Sewage discharge

• Impacts from tourism

Threat:Threat: Coastal Development Coastal Development

Coastal Development Analysis Method – Inferential Modeling

• Proxy Indicators

– Cities

– Ports

– Airports

– Dive tourism centers

– Coastal Population density

– Population Growth

– Tourism Growth

– Management Effectiveness of MPAs Low

Medium

High

Reefs Threatenedby Coastal Development

Reefs Classified

Finding: COASTAL DEVOPMENTthreatens an estimated one-third of Caribbean coral reefs.

Low

Medium

High

Estimated threat

Regional Summary

0%

20%

40%

60%

80%

100%

Coastaldevelopment

Sedimentation Marine-basedpollution

Overfishing Integratedthreat

Low Medium High Very High

Finding: INTEGRATED THREAT - nearly two-thirds of Caribbean coral reefs are threatened by human activities.

Low

Medium

High

Very High

Estimated threat

Finding: Degree of human pressure on coral reefs varies considerably across

the region.

0%

20%

40%

60%

80%

100%

Bahamian GreaterAntilles

EasternCaribbean

SouthernCaribbean

Southw esternCaribbean

Western Caribbean

Gulf of Mexico Florida

Low Medium High Very High

Country Summaries

• Note: 1km resolution analysis is coarse scale for small islands in Eastern Caribbean. Higher resolution possible with local data.

Finding: If current trends in coral reef degradation continue, coastal communities and national economies are poised to sustain substantial economic losses.

Valuation: Coral reef-associated fisheries

• Net annual revenues of over $300 million in 2000.

• Fisheries could decline by 30-45% by 2015

• Estimated loss of net revenues between US$95 million to US$140 million per year by 2015.

Valuation: Dive Tourism

• Net annual revenues of over $2 billion in 2000.

• Coral degradation could results in a 2-5% reduction in revenues by 2015

• Estimated loss of net revenues between US$100 million to US$300 million per year by 2015.

Valuation: Shoreline Protection

• Over 20% of Caribbean coastline protected by coral reefs.

• Estimated value of this service is between $700 million and $2.2 billion.

• Reef degradation could result in losses estimated between US$140 million to US$420 million per year by 2050.

Policy Recommendations

• Create the Will for Change

– Consider long-term economic value in

decision-making

• Build Capacity for Change

• Improve Management

• International Action Reefs at Risk in the Caribbean

http://reefsatrisk.wri.org

Demand for EV

EV Project Characteristics

1. Produce detailed EV estimates for 2 pilot areas (Tobago and St. Lucia)

2. Result in estimates of likely economic loss due to coral reef degradation

3. Develop a method that is efficient, inexpensive and replicable

4. Rely predominantly on existing, available data

5. Produce a tool for application of Econ Valuation to policy questions.

Ecosystem Services

Ecosystem goods (such as food) and services (such as waste assimilation) represent the benefits human populations derive, directly or indirectly, from ecosystems.

Ecosystem ServicesServices provided by ecosystems

Provisioning Services

products obtained from ecosystems-

Regulating Services

Benefits obtained from regulation of

ecosystem processes

Cultural Services

Nonmaterial benefits obtained from ecosystems

Supporting Services

-Services necessary for the production of all other ecosystem services-

Source: adapted from MEA (2005)

Ecosystem Services from Coral Reefs

Provisioning Services

-food – fish and shellfish

-genetic resources

-natural medicines and pharmaceuticals

-ornamental resources

- building matrials

Regulating Services

- carbon storage / climate regulation

-erosion control

-storm protection

Cultural Services

-spiritual and religious values

-knowledge systems/ educational values

-inspiration-aesthetic values-social traditions

-sense of place

-recreation and ecotourism

Supporting Services-sand formation -primary production

Purpose of Economic Valuation of Ecosystem Goods and Services

• The purpose of economic valuation is to obtain reliable, objective information on the benefits and costs of conserving ecosystems so as to inform decision-making.

Economic Valuation Uses

• Evaluate Values

• Competing Demands

• Tradeoffs

• Externalities

• Beneficiaries, costs and benefits

Value (per hectare)

0

$2000

$4000

Mangrove Shrimp Farm

Coastal Protection (~$3,840)

Timber and Non-timber products ($90)

Fishery nursery ($70)

Net: $2,000 (Gross $17,900 less costs of $15,900)

Pollution Costs (-$230)

Less subsidies (-$1,700)

Restoration (-$8,240)

Private Net Present Value per hectare

Mangrove: $91

Shrimp Farm: $2000

Public Net Present Value per hectare

Mangrove: $1,000 to $3,600

Shrimp Farm: $-5,400 to $200

Source: Millennium Ecosystem Assessment; Sathirathai and Barbier 2001

Taking nature’s value into account: mangrove conversion

Total Economic Valuation

Total Economic Value (TEV)

Use Value Non-use Value

Direct usevalue

Indirect usevalue

Option value

Existence Value

-consumptive -non-consumptive

-bequest value

Economic Valuation Methods

• Effect on Productivity

• Travel Cost

• Hedonic Pricing

• Replacement Cost

• Avoided Damages

• Contingent Valuation

Other key terms

• Net Benefits

• Consumer Surplus

Categories of Economic Valuation

1. determine the value of the total flow of benefits from an ecosystem (e.g., TEV)

2. determine the net benefits of interventions that alter ecosystem conditions (e.g., evaluating the value of investing in an MPA)

3. examine how the costs and benefits of an ecosystem are distributed (e.g., identifying beneficiaries)

4. identify potential financing sources for conservation.