Economic Valuation of the Coral Reefs in the Caribbean

Herman Cesar (ARCADIS, CEEC, IVM)Pieter van Beukering (IVM, CEEC)

in collaboration with:Renata Goodridge (UWI)

Project under CPACC with World Bank funding

Presentation Nassau (Bahamas) August 12, 2002

Objectives and tasks

to assess the economic value of coral reefs and the economic costs of reef degradation in the Caribbean

Identify the economic benefits of coral reefs Develop an ecological-economic model (SCREEM) to

assess the interrelationships between bio-physical and socio-economic variables

Assign a monetary value to various types of reefs Evaluate costs and benefits of management and

policy Evaluate physical planning issues Apply model to 3 case sites (Grand Anse, Negril, Hol

Chan)

Specific tasks:

Content

Part I. Methodological framework Dynamic ecological economic simulation model

(SCREEM) Ecological valuation Economic valuationPart II. Case studies Grand Anse – Grenada (Sewerage; Climate Change) Negril – Jamaica (Tourism; Climate Change) Hol Chan – Belize (MPA & Fisheries, Climate

Change)

Role of Economic Valuation within MACC

adaptation costs

adaptation measures

economic damage costs

vulnerability assessment

sectors of concern

CPACC-7&8 CPACC-4

Economic Valuation

etc.

tourism

water resources

agriculture

Uses of the Model

PolicyManagement Physical planning

Structure of ecological-economic model

Step 4. Intervention

Coral reefmanagement

Total costs ofreef management

NutrientsSedimentationClimateChange

Fishing

Ecosystemmodule

Step 1.Threats

Step 2. Ecological

effects

Change economicbenefits of reef

Step 5. Aggregation

Benefit-cost ratio of management

interventions

Step 6. Evaluation

Coastal infra.module

State of the reef

Tourismmodule

Fisherymodule

Biodiversitymodule

Step 3. Economic

effects

Coral cover

Coral biodiversity

Algaecover

Fishstock

Fishbiodiversity

Ecological indicators

Ecologicalindicators

Resilience Coral

Reproductive Capacity

Turbidity

Structure of ecological sub-model

NutrientsSedimentationClimateChange

Fishing

Ecological threats

Ecological threats

Value functions

State of the reef

Ecological valuation

Ecological valuation

Coral cover

Algaecover

Resilience Coral

Resilience of coral reefsNutrients Sedimentation

ClimateChange

Gradual change in conditions such as human induced eutrophication and global warming may have little apparent effect on the state of coral reefs, but still alter the stability domain or resilience of current state and hence the likelihood that a shift to an alternative state occurs in response to natural or human induced fluctuations.

Environmental pressure

Cora

l co

ver

Ecological Valuation

Determine shape of ecological value function;

0

1

Valuescore

5025Coral cover

Measure current situation and apply value function to determine value score;

Coral cover 21% %⃗ Value score

0.75

ExampleSteps

Aggregate multiple scores by applying weight;

State of the reef indicator = 0.4 * coral

cover (0.75) + 0.5 * fish biodiversity

(0.45) +0.10 * visibility (0.25)

= 0.55

Composition of economic value

Total Economic Value (TEV)

Use values Non-use values

Direct use values

Outputs/services that can be consumed directly

Extractive (fisheries, etc.)Non-extractive (tourism, research, etc.)

Indirect use values

Functional benefits enjoyed indirectly

Biological supportCoastal protectionGlobal life-support

Bequest, option and existence values

Functions that value either the future use, expected new information and based on moral convictions

Endangered and charismatic species Threatened reef habitats Aesthetic reefscapes ‘Way of life’ and traditional use

Net benefitsfrom coastal

ecosystem

Time

Net benefitsfrom coastal

ecosystem

Time

Benefits of management

Benefitswith MPA

MPA implementation

The Economics of MPA management

Cost of MPA

Benefits without MPA

Costs ofmanagement

Preliminary outcome:Recreational survey in Grenada

On the basis of interviews at the airport and in dive shops, the following conclusions can be drawn:

12% of respondents snorkel, 14% were scuba divers;

Expenses are low (average around $28 and $104); Perceived cause of degradation (27% everyone;

24% sewage treatment; 18% fishermen; 12% developers);

Perceived problem solver (36% everyone; 27% gov’t);

WTP for experience (average $4); WTP for conservation (average $18 per year);

Climate Change in Grand Anse (Grenada)

Two impacts were modeled: Sea Surface Temperature (SST) Frequency of hurricanes

SST Coral bleaching & mortality Socio-economic impacts

Infrastructure damage Socio-ec. impacts

Hurricanes

Coral mortality Socio-economic impacts

Bleaching and Coral Cover (Grenada)

40%

30%

20%

10%

0%0 5 10 15 20 25 30 35 40 45 50

Time (Year)

coral cover : no bleaching and low resiliencecoral cover : no bleaching and medium resiliencecoral cover : bleaching and medium resiliencecoral cover : bleaching and low resilience

Cor

al C

over

(in

per

cent

age)

Bleaching and Tourism (Grenada)

50

200 M

160 M

120 M

80 M

40 M

0 5 10 15 20 25 30 35 40 45Time (Year)

recreational value : bleaching and high growthrecreational value : bleaching and low growthrecreational value : no bleaching and low growthrecreational value : no bleaching and high growth

Rec

reat

iona

l Val

ue (

in M

US

$)

Decrease in total benefit (US$)

200 M

150 M

100 M

50 M

0

0 5 10 15 20 25 30 35 40 45 50Time (Year)

total benefit : no hurricanetotal benefit : hurricane

Infrastructural damage (US$)

80 M

60 M

40 M

20 M

0

0 5 10 15 20 25 30 35 40 45 50Time (Year)

infrastructural damage : no hurricaneinfrastructural damage : hurricane

Hurricanes and their costs (Grenada)

Sewage Treatment in Grand Anse (Grenada)

Two impacts were modeled: Impact on corals and algae (inside coral reef model) Health and other impacts (outside coral reef model)

less algae socio-ec. impacts

Less nutrients & sediments

more coral socio-ec. impactsHealth impacts/cost savings/etc. socio-economic impacts

Improvement of sewage in Grand AnseDirect effects

Direct costs

Capital ≈ US$ 7,5 million

O&M costs ≈ US$ 100,000 /yr

Direct benefits

Health ≈ US$ 20,000 /yr

Sceptic saving ≈ US$ 150,000 /yr

One time property ≈ US$ 3 million

Direct tourism ≈ US$ 300,000 / yr

Amenity ≈ US$ 200,000 / yr

-

0.5

1.0

1.5

2.0

2.5

1 5 9 13 17 21 25 29 33 37 41 45 49

years after improvement

Dire

ct c

osts

and

ben

efits

(in m

illio

n U

S$)

Benefits independent of coral Costs of sewage improvement

Improvement of sewage in Grand AnseIndirect ecological effects

Ecological effects

Less algae

Less turbidity

Less diseases

Graph for algae cover

40

32.5

25

17.5

10

0 5 10 15 20 25 30 35 40 45 50Time (Year)

algae cover : WITHOUT sewage improvementalgae cover : WITH sewage improvement

Graph for state of reef indicator0.8

0.7

0.6

0.5

0.4

0 5 10 15 20 25 30 35 40 45 50Time (Year)

indicator : WITHOUT sewage improvementindicator : WITH sewage improvement

Improvement of sewage in Grand AnseIndirect economic effects (2)

Ecological effects

Indirect benefits

Better diving and snorkelling

Higher biodiversity value

Secured aquariumfisheries

Less beach erosion

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

1 5 9 13 17 21 25 29 33 37 41 45 49

years after improvement

Indi

rect

ben

efits

(in m

illio

n U

S$)

Net benefits via coral

Improvement of sewage in Grand AnseIndirect economic effects (3)

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

5% 10% 15% 20% 25% 30% 35%

Discount rate

Benefi

t co

st r

ati

o

Benefit Cost Ratio

Extended BenefitCost Ratio

X

initial

X

extended

Future activities

Fine-tuning the modelFinalizing Grenada case studyData collection NegrilData collection Hol ChanEconomic valuation Negril & Hol ChanMainstreaming activities (G. d.Romilly)Final report (November 2002)