Economic Valuation of the Coral Reefs in the Caribbean Herman Cesar (ARCADIS, CEEC, IVM) Pieter van Beukering (IVM, CEEC) in collaboration with: Renata Goodridge (UWI) Project under CPACC with World Bank funding Presentation Nassau (Bahamas) August 12, 2002

Objectives and tasks to assess the economic value of coral reefs and the economic costs of reef degradation in the Caribbean  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) Specific tasks:

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 adaptation costs adaptation measures economic damage costs vulnerability assessment sectors of concern CPACC-7&8 CPACC-4 Economic Valuation etc. tourism water resources agriculture

Uses of the Model  Policy  Management  Physical planning

Structure of ecological-economic model Step 4. Intervention Coral reef management Total costs of reef management NutrientsSedimentation Climate Change Fishing Ecosystem module Step 1. Threats Step 2. Ecological effects Change economic benefits of reef Step 5. Aggregation Benefit-cost ratio of management interventions Step 6. Evaluation Coastal infra. module State of the reef Tourism module Fishery module Biodiversity module Step 3. Economic effects

Coral cover Coral biodiversity Algae cover Fish stock Fish biodiversity Ecological indicators Ecological indicators Resilience Coral Reproductive Capacity Turbidity Structure of ecological sub-model NutrientsSedimentation Climate Change Fishing Ecological threats Ecological threats Value functions State of the reef Ecological valuation Ecological valuation

Coral cover Algae cover Resilience Coral Resilience of coral reefs NutrientsSedimentation Climate Change 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. Environmental pressure Coral cover

Ecological Valuation  Determine shape of ecological value function; 0 1 Value score 5025 Coral cover  Measure current situation and apply value function to determine value score; Coral cover 21% ⃗ Value score 0.75 ExampleSteps  Aggregate multiple scores by applying weight; State of the reef indicator = 0.4 * coral cover (0.75) * fish biodiversity (0.45) * visibility (0.25) = 0.55

Composition of economic value Total Economic Value (TEV) Use valuesNon-use values Direct use values Outputs/services that can be consumed directly  Extractive (fisheries, etc.)  Non-extractive (tourism, research, etc.) Indirect use values Functional benefits enjoyed indirectly  Biological support  Coastal protection  Global life-support Bequest, option and existence values Functions that value either the future use, expected new information and based on moral convictions  Endangered and charismatic species  Threatened reef habitats  Aesthetic reefscapes  ‘Way of life’ and traditional use

Net benefits from coastal ecosystem Time Net benefits from coastal ecosystem Time Benefits of management Benefits with MPA MPA implementation The Economics of MPA management Cost of MPA Benefits without MPA Costs of management

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) 40% 30% 20% 10% 0%0% Time (Year) 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 Coral Cover (in percentage)

Bleaching and Tourism (Grenada) M 160 M 120 M 80 M 40 M Time (Year) 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 Recreational Value (in MUS$)

Decrease in total benefit (US$) 200 M 150 M 100 M 50 M Time (Year) total benefit : no hurricane total benefit : hurricane Infrastructural damage (US$) 80 M 60 M 40 M 20 M Time (Year) infrastructural damage : no hurricane infrastructural damage : hurricane Hurricanes and their costs (Grenada)

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 Capital ≈ US$ 7,5 million O&M costs ≈ US$ 100,000 /yr Direct benefits Health ≈ US$ 20,000 /yr Sceptic saving ≈ US$ 150,000 /yr One time property ≈ US$ 3 million Direct tourism ≈ US$ 300,000 / yr Amenity ≈ US$ 200,000 / yr

Improvement of sewage in Grand Anse Indirect ecological effects Ecological effects Less algae Less turbidity Less diseases Graph for state of reef indicator Time (Year) indicator : WITHOUT sewage improvement indicator : WITH sewage improvement

Improvement of sewage in Grand Anse Indirect economic effects (2) Ecological effects Indirect benefits Better diving and snorkelling Higher biodiversity value Secured aquarium fisheries Less beach erosion

Improvement of sewage in Grand Anse Indirect economic effects (3) %10%15%20%25%30%35% Discount rate Benefit cost ratio Benefit Cost Ratio Extended Benefit Cost Ratio X initial X extended

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)