Valuation of Coral Reefs

Vina Ram-Bidesi School of Marine Studies 24 September 2007

Lecture Objectives

• Recognize the diverse range of stakeholders and “values”, the coral reef environment presents (non-marketed and unpriced resources) • Identification of benefits and threats • Describe some methods of quantification • Consider issues relating to valuation and the sustainable use

Introduction

• Coral Reefs are biologically one of the most productive and diverse ecosystems in the world. • Reef ecosystems provide habitat, food, its diverse and sheer beauty attracts tourism, research, etc • The issue of CRM has captured the attention of the diverse range of stakeholders because the reefs offer many diverse “values” and benefits

Use Values

• Direct use values – Outputs/ services that can be consumed directly: extractive and non-Extractive • Indirect Use Values • Global life –support – carbon store

Options Value

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Options Value

use – – Future direct and indirect • This can be seen as the current value of the potential future direct and indirect uses of the coral reef ecosystem – cure for cancer from biological substances from the reef, bioprospecting is a way of deriving money from the options value

Non-Uses Values

: • Existence Values - values from knowledge of continued existence • Bequest value – value of leaving use and non – use • Bequest value is related to preserving the natural heritage for generations to come where the value today is derived from knowing that the coral reef exists and can be used for future generations

Identification, quantification and measurement

• Values can be measured by two broad methods: revealed and stated preference •

Revealed Preference

– observable transactions – values are evaluated in terms of goods and services they provide eg. Income from fisheries, coral sand, rocks •

Stated preference

– this is where there is no observable market transaction – these have no effect on the consumption patterns that lead to observable changes in the price or quantity of the resource traded – tourism, recreation, intrinsic vales, options value, bequest value

• Revealed Preference – Where goods are traded in the market – the net producer surplus, or the net factor income method could be used. • Stated preference – non-market valuation can include : Travel cost, hedonic pricing, CVM

Varying Determinants and Concepts

• Consider a dive tourist and a subsistence fisher – placing a dollar value on the existence of coral reefs • Cultural differences between stakeholder groups may also affect the economic value placed on certain goods and services • diversity in the conceptualization and appreciation of the values provided by coral reefs • spatial scale of coral reef influence – local, national and international levels

Issues:

• Destructive impacts – destructive fishing practices, coral mining, pollution, sedimentation, coral bleaching, etc sometimes result because of externalities • Economics provides a valuable analytical framework • highlights the incentives, resources owners and users face – and the trade offs

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Total Environmental value = Total Economic Value (TEV) + Ecological Process Value (EPV) + Cultural Function Value (CFV)

Economic Reasons for Coral Reef Degradation

• Market failure – coral reefs pose major challenges in defining ownership and use rights – non- competitive, non-excludable and non-divisible and thus property rights have not evolved naturally • Government Failures – command and control- based regulatory strategies -do not provide the incentives for fishers to change their behaviour • Livelihood failures – MPAs have been used based on ecological reasons – top

The Role of Economic Valuation

• Economic valuation reveals the full cost of resource use internalizing external costs and efficient resource use • Use of valuation – to determine the costs and benefits of any decision • Cost benefits analysis, with and without scenarios