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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)