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Economic Valuation of
the Coral Reefs in the Caribbean
Presentation Nassau (Bahamas) August 12, 2002
Herman Cesar (ARCADIS, CEEC, IVM)
Pieter van Beukering (IVM, CEEC)
in collaboration with:
Renata Goodridge (UWI)
Project under CPACC with World Bank funding
Objectives and tasks
to assess the economic value of coral reefs and the
economic costs of reef degradation in the Caribbean
Specific tasks:
 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)
Content
Part I. Methodological framework
 Dynamic ecological economic simulation model (SCREEM)
 Ecological valuation
 Economic valuation
Part 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
sectors
of concern
vulnerability
assessment
economic
damage costs
adaptation
measures
agriculture
water
resources
tourism
etc.
CPACC-7&8
CPACC-4
Economic Valuation
adaptation
costs
Uses of the Model
Policy
Management
Physical planning
Structure of ecological-economic model
Step 1.
Threats
Sedimentation
Climate
Change
Nutrients
Step 2.
Ecological
effects
Fishing
Ecosystem
module
State of the reef
Step 3.
Economic
effects
Coastal infra.
module
Tourism
module
Biodiversity
module
Coral reef
management
Step 4.
Intervention
Step 5.
Aggregation
Step 6.
Evaluation
Fishery
module
Change economic
benefits of reef
Total costs of
reef management
Benefit-cost ratio
of management
interventions
Structure of ecological sub-model
Ecological
threats
Sedimentation
Ecological
indicators
Climate
Change
Nutrients
Coral
biodiversity
Resilience
Coral
Turbidity
Fish
biodiversity
Coral
cover
Algae
cover
Ecological
valuation
Fishing
Ecological
threats
Ecological
indicators
Reproductive
Capacity
Fish
stock
Value functions
State of the reef
Ecological
valuation
Resilience of coral reefs
Nutrients
Climate
Change
Sedimentation
Resilience
Coral
Coral
cover
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.
Coral cover
Algae
cover
Environmental pressure
Ecological Valuation
Steps
 Determine shape of
ecological value
function;
 Measure current
situation and apply
value function to
determine value
score;
 Aggregate multiple
scores by applying
weight;
Example
1
Value
score
0
25
Coral cover
Coral cover 21%
⃗
50
Value score 0.75
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
Indirect use values
Bequest, option and existence values
Outputs/services that can
be consumed directly
Functional benefits enjoyed
indirectly
Functions that value either the future use, expected new
information and based on moral convictions
Extractive (fisheries,
etc.)
Non-extractive (tourism,
research, etc.)
Biological support
Coastal protection
Global life-support
 Endangered and charismatic species
 Threatened reef habitats
 Aesthetic reefscapes
 ‘Way of life’ and traditional use
The Economics of MPA management
MPA implementation
Benefits of
management
Net benefits
from coastal
ecosystem
Benefits
with MPA
Benefits
without MPA
Cost of MPA
Costs of
management
Time
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 $18 per year);
Climate Change in Grand Anse (Grenada)
Two impacts were modeled:
 Sea Surface Temperature (SST)
 Frequency of hurricanes
SST  Coral bleaching & mortality  Socio-economic impacts
Infrastructure damage  Socio-ec. impacts
Hurricanes 
Coral mortality  Socio-economic impacts
Bleaching and Coral Cover (Grenada)
Coral Cover (in percentage)
40%
30%
20%
10%
0%
0
5
10
15
20
coral cover : no bleaching and low resilience
coral cover : no bleaching and medium resilience
coral cover : bleaching and medium resilience
coral cover : bleaching and low resilience
25
30
Time (Year)
35
40
45
50
Recreational Value (in MUS$)
Bleaching and Tourism (Grenada)
200 M
160 M
120 M
80 M
40 M
0
5
10
15
20
recreational value : bleaching and high growth
recreational value : bleaching and low growth
recreational value : no bleaching and low growth
recreational value : no bleaching and high growth
25
30
Time (Year)
35
40
45
50
Hurricanes and their costs (Grenada)
Infrastructural damage (US$)
Decrease in total benefit (US$)
80 M
200 M
60 M
150 M
40 M
100 M
20 M
50 M
0
0
0
5 10 15 20 25 30 35 40 45 50
Time (Year)
infrastructural damage : no hurricane
infrastructural damage : hurricane
0
5 10 15 20 25 30 35 40 45 50
Time (Year)
total benefit : no hurricane
total benefit : hurricane
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. impacts
Health impacts/cost savings/etc.

socio-economic impacts
Improvement of sewage in Grand Anse
Direct effects
Direct costs
Direct tourism ≈
US$ 300,000 / yr
Amenity ≈
US$ 200,000 / yr
49
45
41
37
33
29
25
21
17
13
One time property ≈
US$ 3 million
0.5
9
Sceptic saving ≈
US$ 150,000 /yr
1.0
5
Health ≈
US$ 20,000 /yr
1.5
1
Direct benefits
2.0
(in million US$)
O&M costs ≈
US$ 100,000 /yr
Direct costs and benefits
Capital ≈
US$ 7,5 million
2.5
years after improvement
Benefits independent of coral
Costs of sewage improvement
Improvement of sewage in Grand Anse
Indirect ecological effects
Graph for algae cover
40
32.5
Ecological effects
25
17.5
Less algae
10
0
Less diseases
5
10
15
20
25
30
Time (Year)
algae cover : WITHOUT
sewage
Graph
forimprovement
state of reef
algae cover : WITH sewage improvement
0.8
35
40
45
50
35
40
45
50
indicator
Less turbidity
0.7
0.6
0.5
0.4
0
5
10
15
20
25
Time (Year)
30
indicator : WITHOUT sewage improvement
indicator : WITH sewage improvement
Improvement of sewage in Grand Anse
Indirect economic effects (2)
14.0
Ecological effects
Secured aquarium
fisheries
Less beach erosion
6.0
4.0
2.0
years after improvement
Net benefits via coral
49
45
41
37
33
29
25
21
17
13
9
(in million US$)
8.0
5
Higher
biodiversity value
10.0
1
Better diving
and snorkelling
Indirect benefits
Indirect benefits
12.0
Improvement of sewage in Grand Anse
Indirect economic effects (3)
8.0
7.0
Benefit Cost Ratio
Benefit cost ratio
6.0
Extended Benefit
Cost Ratio
5.0
4.0
3.0
2.0
1.0
0.0
5%
10%
15%
20%
X initial
Discount rate
25%
30%
X extended
35%
Future activities
 Fine-tuning the model
 Finalizing Grenada case study
 Data collection Negril
 Data collection Hol Chan
 Economic valuation Negril & Hol Chan
 Mainstreaming activities (G. d.Romilly)
 Final report (November 2002)
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