valuing coral reefs overview of proposed methodology daniel prager and lauretta burke world...

Valuing Coral ReefsValuing Coral ReefsOverview of Proposed Overview of Proposed

MethodologyMethodologyDaniel Prager and

Lauretta Burke

World Resources Institute


Project Overview

Valuing Reef Goods and Services

Project designed to value Coral Reef (and reef related) Goods and Services

--Pilot studies in St. Lucia and Tobago--Estimate Economic Value --Focus on three main areas

– Fisheries– Tourism– Shoreline Protection


Project Overview

Tenants of Our Methodology• Based largely off of existing data

• No expensive surveys used

• Replicable results

• Cross-country comparisons

• Be spatially explicit as possible

• Not measuring non-use values


Project Overview

Main Components

Fisheries Method: Revenues minus Costs

Tourism Method: Revenues minus Costs

Shoreline ProtectionMethod: “Avoided Damages”

approach


Project Overview

Economic Value Fisheries Tourism Shoreline Protection--Commercial --Accommodations “Avoided Damages

Fisheries --Reef Approach”

--Fish Recreation --Routine Erosion

Processing --Local Use --1 in 10 year storms

--Subsistence --Cruise Ships --1 in 25-year storms

Fishing Effects

--Economy-wide --Economy-wide

Effects Effects


Fisheries

Known Gaps in FisheriesCapturing:

--Value of commercial fisheries--Value of consumed fish--Multiplier effects --”Enjoyment Factor” of Time spent fishing

Not Capturing--Cultural Value of Fishing


Fisheries

Fish Species• Families of Holocentridae, Lutjanidae,

Scaridae, and Serranidae (Squirrelfishes, soldierfishes, snapper, parrotfishes, grouper, sea bass)

• Lobster• Sea urchin• No pelagics


Fisheries

Commercial Fishing

• Good data on fisheries production

• Measuring costs will be harder due to difficulties obtaining reliable data

• Will need to interview fisherfolk for subsistence fishing data


Fisheries

Commercial Fishing

Revenue minus Costs

• Price of fish

• Amount of reef-related fish harvested


Fisheries

Commercial FishingRevenue minus Costs

• Cost estimates per boat/outing

• Time spent fishing

• Wage paid to employees

• Boat maintenance and equipment cost


Fisheries

Fish Processing

• Some fishers sell to processing plants

• How much fish processing in Tobago?

• Volume is variable depending on season

• Fish and Lobster processed


Fisheries

Fish Processing

Revenues minus Costs.

-Volume of fish processed

-Volume of shellfish/lobster processed

-Price per unit volume


Fisheries

Fish Processing Revenues minus Costs.

-Capital costs

-Equipment costs

-Cost of inputs (fish, shellfish, preservatives)

-Labor costs


Fisheries

Local Fishing

• Hardest to measure

• Not sure how significant it is in Tobago

• How to capture “enjoyment” of fishing?

• Local fishing by commercial fisherman


Fisheries

Local Fishing Value of fish caught

-minus-

Cost of fishing

(time spent fishing,

cost of equipment)


Fisheries

Economy-wide effects

• Value of employment

• Multiplier – boat builders/fixers

• Multiplier – general expenditures by fishers

• Social value – community building


Fisheries

Questions for Breakout Groups• What fisheries goods and services are we missing?

• Does the methodology need to differentiate between different parts of the island?

• How much fishing is for “enjoyment purposes”

• Is subsistence consumption significant in Tobago?

• In general, what data sources should be used as inputs for the fisheries component of our methodology?

• What subsidies are given to the fisheries sector? What are the applicable taxes or charges on the fisheries sector?


Tourism

Value of Tourism to Tobago

1. Value of reef-associated accommodations

2. Value of diving, snorkeling, and reef-associated recreation (from visitors)

3. Cruise ship expenditures

4. Local Reef Recreation

5. Multiplier effect on economy


Tourism

Accommodations

• Revenue minus Costs

• Foreign- vs. Local-

owned (“Leakage”)

• Only reef-related stays


Tobago Accommodation Value

• Assumptions– Occupancy rates: peak=85%, high=50%, low=50%, ave=65% – Only used advertised rates—no special room rates– Room rates based on double occupancy of predominant room

type– Assumed taxes/charges included if not stipulated on website– Assume 1.5 hotel employees/hotel room, 1 employee if < 2

rooms– Average wage rate used—TT$10/hr for 40 hour week

• Sensitivity analysis– Percent of accommodation values attributed to the reef– % of revenue going to operating costs


Data Issues: Accommodation Value

• Only 70% of hotels had accessible information

• Occupancy rates are expert opinion

• Possibility of double counting with villas

• Room rates, number of rooms, inclusion of taxes and charges for some hotels uncertain

• Local vs foreign room rates and proportion of rooms at local rates


Estimated Accommodation Values--Tobago

All Values in US$ Millions and Annual

Notes:Income tax/green levy not deductedDirect Impact multiplier not included

Operating Costs

(50% of Revenue)

Operating Costs

(75% of Revenue)Revenue Value

Added

Costs Net

Benefits

Costs Net Benefits

Assume 30% of Values Attributed to the Reef

29.3 5.1 21.3 8 27.4 1.9

Assume 60% of Values Attributed to the Reef

58.7 10.1 42.7 16 54.8 3.9


Estimated Accommodation Net Benefits


0

2

4

6

8

10

12

14

16

18

50% Operating Costs 75% Operating Costs

Net

Ben

efit

s (U

S$

mil

l/y

r)

30% of Net Benefits Attributed to Reef 60% of Net Benefits Attibuted to Reef


Known Omissions: Accommodation Value

• Income tax deductions

• Green levy deductions

• Direct economic multiplier for local suppliers, e.g., laundry, etc.

• Indirect economic multiplier for general expenditures by hotel employees


Tourism

(Visitors) Reef Recreation

Revenue minus costs in various sectors--Snorkeling--Diving--Glass-bottom boats--Fish charter--Beaches


Tourism

(Visitors) Reef Recreation

• How best to collect data from dive operators?

• How to capture snorkeling?

• Cost structures hard to measure

• No MPA fees in Tobago


Tourism

(Visitors) Reef Recreation Revenues include:

Payments by touristsFees paid by cruise lines

Costs include:Equipment costs, labor costs, capital costs, taxes paid (recouped by state), referring fees, import duties, others?


Tourism

(Local) Reef Recreation

Value to locals captured by:-Number of visits-Hours per visit-Population -Average wage rate

Aggregated to total Local Reef Recreation


Tobago Diving Value

• Assumptions– Number of tourists– Number of tourists that dive (10%)***– Number of dives/diver (80% 6+ dives, 20% 2 dives)– There is no renting of dive equipment– Average wage expenditure/operation– All divers pay by credit card– All divers are tourists (not residents)– Consumer surplus based on Hawaii study (not perfect)

• Sensitivity analysis– Level of consumer surplus– % of revenue going to operating costs


Estimated Dive Values--Tobago

Total Revenue

Total Costs

Value added

CS1*

9.5%

CS2*

19%

CS5*

28.5%

Assume 50% Operating Cost

5.2 3.7 0.8 0.5 1 1.5

Assume 75% Operating Cost

5.2 5 0.8 0.5 1 1.5

All values in US$ millions and Annual


* Sensitivity analysis around consumer surplus


Estimated Net Benefits for Diving

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

CS 1 CS 2 CS 3 CS 4 CS 5

Consumer Surplus Sensitivity

Ann

ual N

et B

enef

its (U

S$ m

illio

n)

50% operating costs 75% operating costs



Known Omissions from Dive Value

• Income tax deductions

• Green levy deductions

• Direct economic multiplier for local suppliers of fuel, etc.

• Indirect economic multiplier for general expenditures by dive operator employees

• 2004 tourist numbers used with 2006 prices (need price adjustment)


Tourism

Cruise Ships

Revenue minus Costs to the Island--Number of ships per year--Docking fee (attributable to reefs)--Spending on island --MPA user fees--Snorkeling/Diving captured under that

component (no double counting)


Tourism

Cruise Ships

Revenue minus Costs to the Island

--Maintaining ports

--Environmental damages

--Additional use of roads, etc.


Tourism

Multipliers

• Additional value not captured elsewhere

• Restaurants/shopping, etc.

• May need to take from literature review


Tourism

Questions for Breakout Groups• How do we make sure not to undervalue local use of reefs?• How do cruise ship lines decide which islands to visit?• How can we expand the proposed methodology to capture

the use of reefs by yachts?• In general, what data sources should be used as inputs for

the tourism component of our methodology?• What are the applicable tourist/recreation subsidies? What

are the applicable taxes or charges for the tourism/recreation sector?

• Effective way to estimate % of accommodation benefits attributed to the presence of a coral reef


Shoreline Protection Services

• Likely to be very high value services

• As there are many factors, there is a good deal of uncertainty around these estimates

• We will focus on “avoided damages”


Shoreline Protection Services- Underlying Questions

1. How much “protection” is afforded to a shoreline by a coral reef?




– Protection from routine erosion due to waves?– Protection from winter storms?– Protection from major storm events (10, 20,

50, 100 yr storms?)




2. What is at risk?




2. What is at risk?

- Natural habitats / biodiversity- Valuable beaches- Real estate- (in extreme cases) Lives


Physical Factors

Physical factors affecting the protection afforded by a coral reef:

• orientation of the coast (windward / leeward; high energy or low energy coast)

• bathymetry / shoreline profile

• shoreline shape (bay, headland)

• depth of the reef / geology (type of reef)

• distance the reef is from land


Risk Factors

• Storm categories and frequency– Associated wave height

• Elevation

• Coastal Vegetation (mitigation)

• Value of land and property in “at risk” areas– Homes, hotels, beach faciliites, etc.


Difficult Analysis

Work with coastal geologists / coastal scientists to:

• Define typology (categories /

characteristics of reef / coastline settings)

• Develop rules for how much protection this reef affords this coastline situation.


Evaluate Risk

Value of Protection provided by coral reef =

storm event probability (prob) x

protection rule (rule) for that category x

property at risk (prop)


Evaluate Risk

Value of Protection provided by coral reef =storm event probability (prob) xprotection rule (rule) for that category xproperty at risk (prop)

** Must be evaluated for each- storm category- shoreline category- elevation range

And for different coral health scenarios


Evaluate Value of Protection

Hypothetical example for:

- 25 year storm event (prob is .04)

- Shoreline typology and elevation where reef provide 50% protection (rule = .5)

- Real estate in that coastal segment is worth $2 million (prop = $2 million)

CR_prot (a) = prob x rule x prop

$40,000 = .04 x .5 x $2,000,000


Tobago Setting

Current map suggests approx. 3000 ha. (30 km2) of coral reefs around Tobago.

Note: coral reef mapping is a composite and needs validation


Tobago Setting

Over 55% of Tobago’s shoreline is “protected” by coral reef.

Note: Shoreline within 100 m of mapped reef classed as protected. Very sensitive to coral

reef map used.


Tobago Setting

Of the coastline “protected” by coral reef, 25% is classified as beach.

COAST_TYPE

Beach 25%

Cliff 5%

Shore 56%

Unknown 14%


Tobago Setting

In southern Tobago, “protected coastline” at low elevation wasidentified.

Note: Current elevation data are at 25’ intervals.


Tobago Setting

Population Density and Real Estateprices could beexamined alonglow-lying “protected” coastal areas.


Questions for Breakout groups

1. Will it be possible to define categories / characteristics of reef / coastline settings with different shoreline protection properties?

2. Will it be possible to develop rules for how much protection reefs afford in each coastline situation.

3. Are required data available?

4. Is avoided damages the right approach?

valuing coral reefs overview of proposed methodology daniel prager and lauretta burke world...

Documents

value of commercial

subsistence fishing

fishing time spent fishing

pelagics slide

volume of fish

costs price of fish

enjoyment of fishing

commercial fisherman