Economic Valuation of Goods and Services Derived from Coral Reefs

Economic Valuation of Goods and Services Derived from Coral Reefs

Results from the Folkestone Park & Marine Reserve

Reeffix Exercise

Table of Contents

• Background– Project Background– Overview of Economic Valuation– Site Background

• Three Methodologies– Coral Reef Valuation: Fisheries– Coral Reef Valuation: Tourism & Recreation– Value Transfer Methodology

• Discussion & Way Forward

Project Background

• Inter-American Biodiversity Information Network (IABIN)– to promote sustainable development and the

conservation and sustainable use of biological diversity in the Americas

• ReefFix – an ICZM tool that trains participating countries in

ecosystem valuation methodologies and management techniques to conserve marine ecosystems and the associated watersheds through integrated park management

Background WRI Fisheries WRI Tourism Value Transfer Discussion

Overview of Economic Valuation Techniques

• Economic valuation assesses the goods and services provided by an ecosystem which contribute to the wellbeing of human life (financial, social, biophysical, etc)

• By attributing a dollar value to natural resources, the benefits of conservation and some of the unforeseen “costs” of mismanagement are realised



Coral Reefs

Provisioning Services

Food

Medicine & Pharmaceuticals

Ornamental Resources

Building Materials

Erosion Control

Shoreline Protection

Regulating Services

Cultural Services

Spiritual Values

Knowledge Systems and Educational

Values

Recreation & Ecotourism

Supporting ServicesSand Production

Primary Production WRI 2009



• Much of the Caribbean tourism plant exists due to the presence of coral reefs (and associated ecosystems)

• Thus the profitability of the tourism industry is impacted by coral reef health however this is not taken into account when major policy decisions occur

• By assessing the ecosystem services, the tangible benefits provided by coral reefs to sustain and improve human life can be quantified.



Total Economic Value

Non-Use Value

Existence Value

Future Use(option/bequest value)

Indirect Use(shoreline protection)

Direct Use

Non-Consumptive Use(tourism & recreation)

Consumptive Use(food)

Use Value

WRI 2009



Total Economic Value

Non-Use Value

Existence Value

Future Use(option/bequest value)

Indirect Use(shoreline protection)

Use Value

Direct Use




WRI 2009


Direct Use



Fishing


RecreationTourism

Site Background• Folkestone Park and Marine

Reserve • Reserve Area: 2.1km2

• 11% of West coastline• Established in 1981• No-take zone• Management under the National

Conservation Commission• Heavy recreational use:

>100,000 annual visitors• Coastal Habitat: mangroves and 3

types of reefs (patch, fringing, bank)


Nicholls 2008

Holetown Lagoon

Site Background

West Coast Reefs significantly impacted by:•Land Based Pollution•Coastal Development•Physical Damage•Overfishing•Disease


Site Background

Significant declines on all reefs along the coasts, pollution appears to be the main factor

• some Folkestone reefs lost more than half their coral cover in the past 20 years

•Doubling of algae cover (indicator of pollution)


(Brian Zane)Background WRI Fisheries WRI Tourism Value Transfer Discussion

Value Transfer: Spatial Distribution of Ecosystem Service Values

• Use available Satellite imagery (Google EarthTM)

• Identify, define and measure area of significant land cover types

• Using values from heavily researched study site, apply values to current site by unit area (hectares)


WRI Coral Reef Valuation Methods: Fisheries & Tourism

DATA COLLECTION• Utilised data available from:

• FPMR Staff• BHTA• Fisheries Division• Previous Studies• Expert Opinion

DATA INPUT• values inputted into tool – Estimate of Total

Economic Impact is generatedDATA VALIDATION• Values reviewed and adjusted with new data• Application of scenarios


Sensitivity Analysis

Percent of gross profit spent on non-labour expenses


Economic Valuation of Coral Reefs from Tourist Accomodation: Current and Projected Revenues

and Transfers

$10,816,364$6,203,651

$28,425,496

$28,425,496

$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

$40,000,000

$45,000,000

Current Average Projected Average

$US

TransfersWithin theEconomy

Net RevenueRemaining inCountry

25% 45%

World Resource Institute Coral Reef Valuation Tool

Fisheries Valuation

WRI Coral Reef Valuation- Fisheries

Total Estimated Landings (weight x price)- cost of fishing (wages, operating costs)

Commercial Fishing

Total Estimated Processing Revenue(processing, cleaning)- cost of operations (wages, operating costs)

Fish Processing

Local FishingFishing for (sale, enjoyment, consumption)


MultipliersAdditional expenditures (re-sale only)

TOTAL ECONOMIC IMPACT OF

FISHING


• Case study assumes Folkestone reefs provide supporting services to target species directly (habitat) or indirectly (prey habitat) – + 20% landings used

• Quality data was limited – Aggregated landings data from separate sources

(overlap, gaps unknown)– No data available on local fishing ([occasional] sale,

consumption, enjoyment)– Prices vary depending on many factors: seller,

customer, supply (average values used)


WRI Coral Reef Valuation- Commercial Fisheries Results


Flyingfish

Mahon et al. 2007



Category Low Value

(US Dollars) High Value

(US Dollars)

1. Commercial Fisheries

Gross Revenue $104,112 $156,168

Net Revenue $67,673 $101,509

Transfers to the economy (Wages) $26,028 $39,042

Total Commercial Fishing Value $93,701 $140,552

2. Fish Processing and Cleaning $8,135 $12,202

3. Local Fishing $151,829 $190,303

4. Multipliers $232,170 $348,256

TOTAL DIRECT ECONOMIC IMPACTS OF FISHING

$485,835 $691,313

World Resource Institute: Coral Reef Valuation Tool

Tourism & Recreation Valuation

WRI Coral Reef Valuation- Tourism & Recreation

Total Estimated Revenue (occupancy rates, room rates, # rooms, % visitors using reef)

- labour, operating costs, tax rates, service charges, leakages

Accommodation

Total Estimated Revenue (prices, # snorkelers, equipment rentals, # all inclusive trips)

- labour, operating costs, taxes, service charges

Snorkeling and Boating

Total Estimated Diving Revenue (prices, # divers, # certifications, equipment, all inclusive trips)

- labour, operating costs, taxes, service charges

Diving

TOTAL ECONOMIC IMPACT OF TOURISM &

RECREATION

Local UseBeach use, reef-associated use

MPA RevenueN/A

Other Revenuerentals, souvenirs


WRI Coral Reef Valuation- Tourism and Recreation

Quality data was limited– occupancy rates were rough estimates based on

averages of the class of accommodation (A-class, luxury, etc)

– No value of total beach use – Difficult to isolate benefits from certain recreational

user– No data available from number of resource users

from all-inclusive properties – other recreational activities not accounted for (e.g.

waterskiing)– No data on local use


WRI Coral Reef Valuation- Accommodation


Category Low Value


(US Dollars)

Percent of accommodation revenue that is reef-related 59% 85%

Reef-associated Gross Revenue $40,145,516 $89,803,161

Reef-associated Net Revenue (Gross minus costs) $17,993,176 $42,115,939

Net revenue remaining in the country (net revenue - leakages)

$6,657,475 $15,582,897

Transfers to the economy (taxes, via wages and service charges)

$19,141,427 $40,951,985

Total Accommodation Value $25,798,902 $56,534,883

WRI Coral Reef Valuation- Recreation


Category Low Value


(US Dollars)

Diving

Gross Revenue $765,000 $827,000

Net Revenue (Gross minus costs) $191,250 $206,750


$401,625 $434,175

Total Diving Value $592,875 $640,925

Snorkeling

Gross Revenue $3,482,500 $10,596,000

Net Revenue (Gross minus costs) $870,625 $2,649,000


$1,915,375 $5,827,800

Total Snorkeling Value $2,786,000 $8,476,800

WRI Coral Reef Valuation- Tourism and Recreation Totals


Category Low Value


(US Dollars)

1. Accommodation $25,798,902 $56,534,883

2. Diving $592,875 $640,925

3. Snorkeling and Boating $2,786,000 $8,476,800

4. Marine Parks - -

5. Other Direct Expenditures (Vending, food sales) - Total Value

$33,131 $33,131

TOTAL DIRECT AND INDIRECT IMPACTS $29,210,908 $65,685,739

Local Use of Coralline Beaches $112,050 $303,750

Local Use from reef recreation $5,603 $60,750

TOTAL ECONOMIC IMPACT OF REEF-RELATED TOURISM AND RECREATION

$29,328,561 $66,050,239

WRI Coral Reef Valuation- Government Revenue


Total ~ US$ 6 million

Accommodation

Recreation (Snorkelling &

Diving)

Other (FPMR rentals,

souvenirs,etc)

WRI Coral Reef Valuation- Results

$29,328,561

US$485,835 - US$691,313

Fishing

Tourism Recreation

US$29,328,561 – US66,050,239

WRI Coral Reef Valuation- Total

Accommodation85.7%

Snorkeling and Boating

9%

Fishing1.2%

Other (FPMR rentals,

souvenirs,etc)0.1%

Diving1.3%

WRI Coral Reef Valuation Hypothetical Reserve User Fee

www.geocaching.com/trackdetails.aspx?id=126781

DivingSnorkeling

US$34,000 – US$70,000

US$5.00 mandatory

fee

US$10.00 mandatory

fee

US$3.00 voluntary

fee(1 in 3)

US$5.00 voluntary

fee(1 in 2)

US$116,000 – US$883,000

US$150,000 – US$953,000

Value Transfer: Spatial Distribution of Ecosystem Service Values

Value Transfer Methodology

Identify Features

Import & Re-Project Features

Outline Features

Calculate Areas & Apply Conversion Factors for Associated Values

Land CoverAve.$/ha/

yrLower Bound

Upper Bound Area (ha)

Total ESV Flow (US Dollars)

Disturbed and Urban Beach $0Beach 88,000 77,000 99,000 8.71788699 $767,174Beach near dwelling 117000 140,000 94000 0 $0Coastal & Riperian Forest 1826 5542 13,000 0 $0Freshwater Stream 1595 1231 939 0 $0Freshwater Herbaceous Swamp 72,787 32000 96000 5.362221 $390,300Grassland/pasture 118 118 118 0 $0Near shore aquatic habitat 16,283 4630 27935 365.2 $5,946,552Coral Reef environ 100,000 1335.694061 $133,569,406Mangrove 37500 4.339961 $162,749Mangrove 500000 200000 900000 0 $0Mangrove restoration 225 216000 0 $0TOTAL $140,836,180




Ecosystem Type $/ha/yr Total

Hectares Total Contribution

(US Dollars)

Beach Near Dwelling $117,000 2.5 $295,980

Freshwater Herbaceous Swamp

$72,787 0.2 $17,115

Coral Reef Environ $100,000 32.3 $3,226,522

Mangrove $37,500 0.3 $11,396

TOTAL FPMR ECOSYSTEM SERVICE VALUE

$3,551,014

Results Comparison


$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

WRI Coral Reef ValuationTotal


Evaluation Methodology

US

Dol

lars

ValueTransfer

Fisheries

Tourism

WRI Coral Reef Valuation- Strengths • Facilities dynamic data (allows updating and expansion)• Detailed and allows for categorisation of results• When new data is added, outputs of results & corrections are generated instantaneously • Sensitivity analysis as response to potential errors in data

• Accounts for often overlooked value of local use • Some level of adaptability

– can be applied to sites where data availability is basic or exhaustive• More data improves applicability of results (site-specific output)• Potential for future development: inclusion of other values such as shoreline protection


WRI Coral Reef Valuation- Weaknesses

• Data gaps increases reliance on expert opinion• Requires full cooperation of relevant agencies

and is dependent on the quality of their data• Errors are magnified with some calculations (e.g.

fisher surveys)• Can encourage overconfidence in results if

warnings about data quality is ignored.• Currently no valuation of economic impact of

cruise ships and shoreline protection• Results are not visual and not as easy to

communicate as the Value Transfer method


Value Transfer Methodology Strengths

• Availability of data source (Google EarthTM)

• Rapid results• No extensive data collection

required from multiple agencies

• Results are visual (maps) and can be easily communicated

• Resulting dataset has wide applications for management (e.g. changes in forested area and associated value over time)


Value Transfer Methodology Weaknesses

• Results are static• Dependent on quality of

aerial/satellite data (if absent requires intensive ground-truthing)

• Requires knowledge of mapping software (not ubiquitous)

• Economic values not developed in the Caribbean

• Some values (e.g. coral reefs) vary greatly by site and use of recommended values can be misleading.


Other Case Study Sites

Value Transfer Methodology Pros• Produces both graphic and numeric results• Low dependence on external/hard to locate

data sourcesCons• Challenging to develop local values, which are

critical to the accuracy and validity of the tool• Some values developed in NE United States

Montego Bay Marine Park (Brian Zane)



WRI Coral Reef Valuation

Strengths• Highly detailed results• Triangulates ESV of coral reefs• Tools – MS Excel

Weaknesses• Data - Heavily dependent upon external data sources• Aspects not yet developed (Coastal Protection)• Dependencies/Assumptions (built into formulas)• Complexity reduces probability of widespread adoption

Montego Bay Marine Park (Brian Zane)




0

100

200

300

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600

700

800

900

1000

SVG Jamaica DRepublic

Bahamas Grenada Barbados St. Lucia

US$

Mill

ion

WRI Coral ReefValuation TotalValue TransferMethodology

Other Case Study Sites(excluding Grenada Value Transfer)


0

20

40

60

80

100

120

140

160

SVG Jamaica DRepublic

Bahamas Grenada Barbados St. Lucia

US$

Mill

ion

WRI Coral ReefValuation TotalValue TransferMethodology

Other Case Study SitesArea of Study Sites


0100002000030000400005000060000700008000090000

Hec

tare

s

Site Area

Further Research Options • Fill necessary data gaps to reduce errors from

assumption (e.g. local recreation use and local fishing) • More accurate values for snorkelling and diving usage • Quantification and inclusion of other major revenue

generating activities, namely waterskiing and jet ski rentals

• Assessment of spear fishing catch and effort• Assessment of coastal protection value• Quantifying reefs by type (fringing, bank reefs)• Expansion to West Coast or entire island• Compare resource value with cost of management• Willingness to pay study on user fees for the Folkestone

reserve


Conclusion • Folkestone coral reefs and

associated ecosystems likely contribute over US$29 - US$66 million annually to the economy of Barbados (based on current market values)

• Likely a gross undervaluation as most tourists use the beach and WRI values do not count shoreline protection (existence , bequest values not included but important)

• Shoreline protection may increase the value to hundreds of millions due to land and property values in the area


Conclusion • Many assumptions in fisheries model, however

variations not likely significant (pelagics ~ 20% of revenue)

• Comparison between methods: Large variation in the results between methods likely due to the low value assigned for coral reefs in the Value Transfer Methodology

• Comparison to other sites: low values likely due to size of study area

• Results not entirely comprehensive but reveals a portion of the value of coral reefs to the economy.

• Able to highlight the potential loss to the economy if the already threatened reefs not protected


Questions?

Economic Valuation of Goods and Services Derived from Coral Reefs

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