Understanding the Economics of Ocean Acidification

Luke Brander

Institute for Environmental Studies, VU University Amsterdam;

Division of Environment, HKUST, Hong Kong

Third International Symposium on the Ocean in a High-CO2 World 26 September 2012

Outline • Economic view of ocean acidification

• Framework for economic assessment

• Economic damage estimates (with e.g. on coral reefs)

• Distribution and vulnerability

• Knowledge gaps and next steps

• Conclusions

Economic view of OA • Economics is the study of resource allocation and

human welfare

• OA is an “external cost” of using fossil fuels

• Polluters do not pay this cost and overuse fossil fuels

• Economic questions on OA:

– What are the human welfare impacts of OA (expressed in monetary terms)?

– Do the benefits of addressing OA (reduced damages) outweigh the costs of mitigation or adaptation?

– What is the expected distribution of damages to guide investments in adaptation?

Framework for assessment • Ecosystem Services (ES) approach to link bio-

physical impacts to human welfare

• ES are the benefits that humans derive from ecosystems

• ES impacted by OA:

– Fisheries

– Coastal protection

– Tourism/recreation

– Biodiversity

– Carbon storage

Impact pathway for OA

Socio-Economic Activity

CO2 Emissions

Ocean Acidification

• Food webs

• Fish stocks

Coral Reefs

Marine Ecosystems

• Fish Catch

• Aquaculture

• Tourism

• Coastal protection

• Biodiversity

Ecosystem Services

• Welfare

• Distribution

• Vulnerability

• Food Security

• Adaptation

• Population

• Income

Adapted from Moore (2011); Tyrell, Williamson and Turley (2011)

Socio-economic impacts

Valuation of impacts on coral reefs

• Corals provide multiple ecosystem services:

– Tourism/recreation

– Coastal protection

– Fisheries

– Biodiversity (existence values)

• Not traded directly in markets

• Coral reef values are “invisible” to decision makers

• “Non-market” valuation methods

Valuation of impacts on coral reefs

Source: Brander et al. (2012)

FUND Economy – Climate model

Population, Income

CO2

emissions

CO2 concentration in atmosphere

Ocean acidification and coral loss models

Loss of coral reef

Visitor model (HTM)

Meta-analytic value function

Economic impact of ocean acidification

on coral reefs

Tourist numbers

Meta-analysis of coral reefs values

Ecosystem Service Number of value estimates

Recreation/tourism 66

Fisheries 7

Coastal protection 2

Biodiversity 6

• 81 value observations • Standardised values: US$/km2/year

Location of valued coral reef sites

Category Variable Coefficient Standard deviation

Constant 0.216 5.298

Socio-economic GDP per capita (ln) 1.125* 0.573

Population density (ln) 0.516* 0.282

Visitors (ln) 0.675*** 0.129

Location USA -3.604** 1.457

South East Asia -4.606** 1.614

Australia -6.725** 2.779

Reef characteristics Area coral cover (ln) -0.524*** 0.092

Biodiversity index (ln) 2.475** 1.000

Services Snorkeling -0.605* 0.427

Other reef tourism 0.535* 0.466

Coastal protection -3.061* 1.757

Valuation method CVM -1.701* 1.649

Adj. R2 = 0.601 N = 81

Meta-regression / Value function

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Economic damage assessments Study Ecosystem Service Scale Damage cost (annual; US$

billions; 2010 price level)

Brander et al. (2012) Coral reef services Global 1,093

Cheung et al. (2011) Fish and invertebrates N-E Atlantic -

Cooley and Doney (2009) Mollusks United States 0.07

Cooley et al. (2012) Mollusks Global -

Finnoff (2010) Fisheries; non-use values Baring Sea -

Harrould-Kolieb et al. (2009) Coral reefs; fisheries Global -

Kite-Powell (2009) Coral reefs; fisheries Global -

Moore (2011) Mollusks United States 0.31

Narita et al. (2012) Mollusks Global 139

Sumaila et al. (2011) Capture fisheries Global -

Global damage costs

• Annual global damages in 2100; US$; 2010 price levels; SRES A1B

• Very few estimates; Very high uncertainties (1 order of magnitude)

• Sources: Tol (2009); Brander et al. (2012); Narita et al. (2012)

Climate Change Ocean Acidification

% of Gross World Product

US$ 14 trillion US$ 1.2 trillion

Coral Reefs Mollusks

Distribution and vulnerability • High localised impacts

• Vulnerability:

– Dependence on fish protein and coral reef ecosystem services

– Adaptive capacity to replace lost ecosystem services

Fish protein consumption Tropical coral reefs

Knowledge gaps and next steps

• Knowledge gaps:

– Links between bio-physical impacts and ecosystem services

– Few ecosystem services valued (only mollusk fisheries and coral reef recreation)

– Spatial convergence of impacts and vulnerability

• Next steps:

– Spatial analysis to understand the human impacts of Ocean Acidification (SESYNC – US Socio-Environmental Synthesis Centre)

Conclusions

• Economic damage estimates are few and highly uncertain

• OA adds substantially to the costs of CO2 (10%)

• Implications for CO2 mitigation policy:

– Changes the trade offs between GHGs

– Increases the urgency of CO2 mitigation

Thank you