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Overview of Economic Valuation of Coral Reefs Mt. Irvine, Tobago March 21-22, 2006 Lauretta Burke World Resources Institute (WRI) • 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 by World Resources Institute, in collaboration with ICLARM, WCMC and UNEP The Reefs at Risk Index Low Medium High • 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 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 Threat: Coastal Development • Dredging, land filling and reclamation • Mining of sand and coral • Runoff from construction • Sewage discharge • Impacts from tourism Coastal Development Analysis Method – Inferential Modeling • Proxy Indicators Reefs Classified – Cities – Ports – Airports – Dive tourism centers – Coastal Population density – Population Growth – Tourism Growth – Management Effectiveness of MPAs Reefs Threatened by Coastal Development Low Medium High Finding: COASTAL DEVOPMENT threatens an estimated one-third of Caribbean coral reefs. Estimated threat Low Medium High Regional Summary 100% 80% 60% 40% 20% 0% Coastal Sedimentation Marine-based development pollution Low Medium Overfishing High Integrated threat Very High Finding: INTEGRATED THREAT - nearly two-thirds of Caribbean coral reefs are threatened by human activities. Estimated threat Low Medium High Very High Finding: Degree of human pressure on coral reefs varies considerably across the region. 100% 80% 60% 40% 20% 0% Bahamian Low Greater Antilles Eastern Caribbean Southern Caribbean Medium Southw estern Caribbean Western Caribbean High Gulf of Mexico Florida 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.or g 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 Services Services provided by ecosystems Provisioning Services products obtained from ecosystems- Regulating Services Cultural Services Benefits obtained from regulation of ecosystem processes Nonmaterial benefits obtained from ecosystems Supporting Services -Services necessary for the production of all other ecosystem services- Ecosystem Services from Coral Reefs Provisioning Services Regulating Services -food – fish and shellfish - carbon storage / climate regulation -genetic resources -erosion control -natural medicines and pharmaceuticals -storm protection -ornamental resources Cultural Services -spiritual and religious values -knowledge systems / educational values -inspiration -aesthetic values -social traditions -sense of place - building matrials -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 decisionmaking. Economic Valuation Uses • Evaluate Values • Competing Demands • Tradeoffs • Externalities • Beneficiaries, costs and benefits Taking nature’s value into account: mangrove conversion $4000 Public Net Private NetPresent PresentValue Valueper per hectare Value (per hectare) Mangrove: $1,000 $91 to $3,600 Shrimp Farm: $-5,400 $2000 to $200 Coastal Protection (~$3,840) $2000 Net: $2,000 (Gross $17,900 less costs of $15,900) Fishery nursery ($70) Timber and Nontimber products ($90) 0 Source: Millennium Ecosystem Mangrove Less subsidies (-$1,700) Pollution Costs (-$230) Shrimp Farm Restoration (-$8,240) Total Economic Valuation Total Economic Value (TEV) Use Value Direct use value Indirect use value -consumptive -non-consumptive Non-use Value Option value -bequest value Existence 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.