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SUMMARY – Reviving Melanesia’s Ocean Economy: The Case for Action │ page 1
EMBARGOED 18 OCTOBER 2016, Time 00:01 CEST
METHODOLOGY
INT
REVIVING MELANESIA'S OCEAN ECONOMY:The case for action
BCG ECONOMIC VALUATION:METHODOLOGY AND SOURCES
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Front cover A child from Tavewa Island, Fiji, holds a recently caught fish. Depleted coastal fisheries could seriously constrain opportunities for Melanesia's children. © Shiri Ram / WWF
TheBostonConsultingGroup(BCG)isaglobalmanagementconsultingfirmandtheworld’sleadingadvisoronbusinessstrategy.Wepartnerwithclientsfromtheprivate,public,andnot-for-profitsectorsinallregionstoidentifytheirhighest-valueopportunities,addresstheirmostcriticalchallenges,andtransformtheirenterprises.Ourcustomizedapproachcombinesdeepinsightintothedynamicsofcompaniesandmarketswithclosecollaborationatalllevelsoftheclientorganization.Thisensuresthatourclientsachievesustainablecompetitiveadvantage,buildmorecapableorganizations,andsecurelastingresults.Foundedin1963,BCGisaprivatecompanywith85officesin48countries.Formoreinformation,pleasevisitbcg.com
WWFisoneoftheworld’slargestandmostexperiencedindependentconservationorganizations,withover5millionsupportersandaglobalnetworkactiveinmorethan100countries.
WWF’smissionistostopthedegradationoftheplanet’snaturalenvironmentandtobuildafutureinwhichhumansliveinharmonywithnature,byconservingtheworld’sbiologicaldiversity,ensuringthattheuseofrenewablenaturalresourcesissustainable,andpromotingthereductionofpollutionandwastefulconsumption.
ISBN978-2-940529-50-6
Citationofthismethodologydocument:WWF.2016.BCGEconomicValuation:MethodologyandSources.RevivingMelanesia’sOceanEconomy:Thecaseforaction.WWFInternational,Gland,Switzerland.26pp.
TheBostonConsultingGroup:MartySmits,TazChaudhry,JamieKo,DouglasBeal,CamilleAstier
Leadauthorsofthemainreport:ProfessorOveHoegh-GuldbergandDrTyroneRidgway,GlobalChangeInstitute,TheUniversityofQueensland,St.Lucia4072,Australia
Editors-in-chief:JohnTanzerandKesaiaTabunakawai
Managingeditor:PaulGamblin
Contributingeditors:SianOwen,AimeeGonzales,SallyBailey,JackieThomas,SeemaDeo
Design/layout:StefaneMauris Additionaldata:WethanktheMarineandCoastalBiodiversityManagementinPacificIslandCountriesproject(MACBIO)forkindlysharingtheirpre-publicationmarineecosystemservicevaluationreportsforFiji,SolomonIslandsandVanuatu.
AWWFInternationalproduction
Thedesignationofgeographicalentitiesinthisreport,andthepresentationofthematerial,donotimplytheexpressionofanyopinionwhatsoeveronthepartofWWFconcerningthelegalstatusofanycountry,territory,orarea,orofitsauthorities,orconcerningthedelimitationofitsfrontiersorboundaries.
PublishedinOctober2016byWWF–WorldWideFundForNature(FormerlyWorldWildlifeFund),Gland,Switzerland.Anyreproductioninfullorinpartmustmentionthetitle,theleadauthor,andcredittheabove-mentionedpublisherasthecopyrightowner.
©Text2016WWF.Allrightsreserved
Thisreportisavailableat:ocean.panda.org
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Contents
Oceanannualincomeandasset-valuationmethodology&sources.................................................... 4Terminology ................................................................................................................................................................. 5TotalMelanesianregion“sharedwealthfund”byassetcategories..................................................... 6AnnualValueGeneratedfromMelanesia’sOceanEconomy.................................................................14Oceanrelatedactivitiesgroupinto4primarycategories ......................................................................16Directoutputoftheocean................................................................................................................................17Directservicesenabledbyoftheocean.....................................................................................................19Adjacentbenefitsoftheocean .......................................................................................................................23
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Oceanannualincomeandasset-valuationmethodology&sources
ThismethodologydocumentproducedbytheBostonConsultingGroup(BCG)providessupplementalinformationtothediscussionsofeconomicvalueinpart1ofthereportRevivingtheMelanesianOceanEconomy:Thecaseforaction,andillustratedbyFigure1ofthesamereport(seepp.16-17).Theassumptions,analysisanddatasourcesthatinformtheMelanesianregion’sannualcontribution(‘grossmarineproduct’)andasset-valuation(“sharedwealthfund”)areoutlinedinthismethodologydocument.BCG’sintentwastotriangulateacrossandrefineexistingprimaryresearchinordertodeterminethevaluesataregionalscale,basedonthemethodologyusedintheglobalreport,RevivingtheOceanEconomy:Thecaseforaction–2015,publishedbyWWFInternational.Thefullreportcanbefoundatocean.panda.org.TheanalysesarepartlybasedoninformationthathasnotbeengeneratedbyBCGandhasnot,therefore,beenfullyverified.Theinformation,opinionsandanalysescontainedhereinarebasedonsourcesbelievedtobereliableandcomprehensivebutnorepresentation,expressedorimplied,ismadeastotheaccuracy,completenessorcorrectnessoftheoriginalmethodsusedtogathertheprimarydata.Furthermore,theanalysesandconclusionscontainedinthisdocumentarebasedonvariousassumptionsthatBCGhasdevelopedregardingeconomicgrowth,andthecurrentandfuturestateoftheocean(baseduponfactorsandeventsthataresubjecttouncertainty).Ofcourse,futureresultsornetpresentvalues(NPV)derivedfromforecastresultscouldthusbemateriallydifferent.
Wewelcomeconstructivecommentsandcontributions(e.g.publishedregionaleconomicvaluationpapers)tohelpimprovetheeconomicanalysisfurther.Wecanalsosharethespreadsheetwhichcontainsourcalculations,uponrequest.
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Terminology
Whatisthe“grossmarineproduct”andhowdoesitrelatetogrossdomesticproduct?Followingthesameapproachastheglobalreport,thisregionalreportintroducesthemeasurement“grossmarineproduct”(GMP)toallowcomparisontothenationaleconomiesintheMelanesiaregion.Asgrossdomesticproduct(GDP)measuresthetotaldollarvalueofgoodsandservicesproducedbyacountryinayear,GMPisthevalueoftheannualeconomicoutputoftheoceanintheMelanesianregion.BCG’seconomicanalysisoffersaconservativeestimateofUS$5.4billionforMelanesia’sGMP.TheGDPofacountrycomprisesofthesumofvalueaddedbyeachindustry,wherebyoutputisadjustedforintermediateinputsfromotherindustries.GMPdirectlycalculatestheoutputofmarinerelatedindustries.Whatisanocean“sharedwealthfund”?Theocean“sharedwealthfund”leveragestheanalogymadeintheRevivingtheOceanEconomy:Thecaseforaction–2015report.The“sharedwealthfund”isanattempttocalculatethetotalassetbaseoftheoceaninMelanesia,from whichannualeconomicproduction(i.e.theGMP)isdrawn.ForthemarineassetsofMelanesia,thishasbeenconservativelyestimatedatUS$548billion.
Whatisthedifferencebetweentheocean“sharedwealthfund"andthe"grossmarineproduct"?
Theocean“sharedwealthfund"istheoverallassetvalueoftheoceanintheMelanesianregion,basedonmarketvalueofassets(formarinefisheries)oronnetpresentvalue(NPV)ofasset'scashflows(forallotherelementsofocean“sharedwealthfund”),whereastheGMPistheoutputofeconomicactivitiesgeneratedbytheseassetseveryyear.
IUCNMACBIOReports
WethanktheMarineandCoastalBiodiversityManagementinPacificIslandCountriesproject(MACBIO)forsharingtheirpre-publicationmarineecosystemservicevaluationreportsforFiji,SolomonIslandsandVanuatu.TheIUCNMACBIOstudyillustratesthewayecosystemservicesbenefitpeoplebyquantifyinganddescribingdatausingthe‘TheEconomicsofEcosystemsandBiodiversity’(TEEB)approach.Thestudycontainsseveralusefuldatasourcesandinputswhichprovedavaluablesourceofreferencefortheanalysis.TherewereseveralassetcategoriesinthisreportthatheavilydrawreferencetoorwerebasedontheMACBIOstudy.Thesecategoriesare:
1. Carbonsequestration:carbonsequestrationratesandsocialcostofcarbonwasalignedwithMACBIOapproach
2. Coastalprotection:coastalprotectionvaluewasbasedonstudiesconductedfortheMACBIOstudy.
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TotalMelanesianregion“sharedwealthfund”byassetcategoriesValuedatUS$548.0billion
Six primary 'value-generating' asset categories
Marine Fisheries
Mangroves
Coral Reefs
Seagrass
Productive Coastline
Carbon Absorption
Asset (US$ billion)
Primary Assets of the
Melanesia ocean region
Adjacent Assets
124.1
109.6
145.7
151.4
14.3
2.9
“Shared Wealth Fund” asset base
~548.0
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ThetotalassetvalueofUS$548billionisanaggregateofthemostreadilymeasuredoceanassetswithinMelanesia.FourofthesixassetsaremarineecosystemsthatgenerateservicesthatcanbeconsumeddirectlyfromtheoceanandarevaluedatUS$530.8 billion.Theremainingtwoareadjacentassets,whichprovidefunctionalbenefitsthatareutilizedindirectly.TheyarevaluedatUS$17.2billionandincludeproductivecoastlines(focusedontourism)andcarbonabsorption.Alloftheseassetsaredependentontheecologicalfunctionandwellbeingoftheoceantogeneratevalue.Thecalculationsforarrivingatthesesumsareavailableuponrequest.Theseassetcategoriesarenotacollectivelyexhaustivelist,butaimtotacklemaincomponentswhereprimaryanalysisexists(e.g.therewasinsufficientdataontidalsaltmarshes).Methodology:Inordertovalueeachassetclasstwodifferentmethodswereutilized:
1. MarketBased:Derivedassetvaluelookingatquantityofaresourcepricedatitscurrentmarketvalue.
2. ValueBased:Impliedassetvalueascertainedbyidentifyingannualvaluegeneration
oftheasset,andconductingaNPVoffutureyears.Forseveraloftheassetcategories,ahybridormodifiedversionofthetwoabovemethodswasemployedtobetterestimateandtriangulatetotalassetvalue.• NetPresentValueCalculations ForallcalculationsutilizingtheNPVmethod,certainassumptionswereestablishedtoensureconsistencyandaccuracy.InordertoappropriatelycalculatetheNPVofourassetclasses,weneededtodetermineanappropriateregionalrisk-freerateandregionalriskpremiumtoutilize.WeleveragedWorldBankdata:risk-freetreasurybillrate(lendingrateminusriskpremiumonlending)andriskpremiumonlending.Basedonthesedata,wecalculatedthearithmeticmeanacrosstheMelanesiancountriesforwhich201datawereavailable(Fiji,PapuaNewGuineaandSolomonIslands)todeterminetheregionalriskfreerate(1.8percent)andregionalriskpremium(6.9percent)forourNPVcalculations.(Source:http://data.worldbank.org/indicator/)Definitions:Anetpresentvaluerequiresspecificationofthenumberoffutureyearsbeingconsidered(e.g.10years,50years,infinity)andadiscountrate,whichisthesumoftheriskfreerateandriskpremiumtorepresentthefactthatsocietyplacesagreatervalueoncurrentbenefitsthanfuturebenefits.Arisk-freeinterestrateisthetheoreticalrateofreturnofaninvestmentwithnoriskoffinancialloss.Oneinterpretationisthattherisk-freeraterepresentstheinterestthataninvestorwouldexpectfromanabsolutelyrisk-freeinvestmentoveragivenperiodoftime.
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Ariskpremiumisthereturninexcessoftherisk-freerateofreturnaninvestmentisexpectedtoyield;anasset'sriskpremiumisaformofcompensationforinvestorswhotoleratetheextrarisk,comparedtothatofarisk-freeasset,inagiveninvestment.Foreachassetcategory,completemethodologyandsourcesareprovided:• MarineFisheries
TypeofValuation:MarketBasedCalculation:Totalproductivefishbiomass(intons)multipliedbyanimpliedmarketportsidepricefor1tonoffishmultipliedbytheMelanesiancountries’totalexclusiveeconomiczone(EEZ)shareoftotalglobaloceanareaConsiderations:Thisvaluationbuildsonthemethodologyappliedintheglobalreport.Itdoesnottakeintoaccountsupplyanddemandelasticity,recognizingthatthelargerthesupplybecomes,lowerpricesareexpected.Additionally,thisfiguredoesnotdistinguishbetweenreadilycatchableandcommonfishvarieties,andthosefishcategoriesthatmaynotbeinhighmarketdemand,orthataretoodifficulttofeasiblycatch(e.g.deep-seavarieties).Duetolackofreadilyavailablequantitativeregionaldata(e.g.lackofcatchtimeseriesdata,exceptfortuna),wewereunabletomakeadjustmentstoaccountforregionspecificinformation(e.g.impactofclimatechangeonfishdistribution).Shouldmoregranulardataorregion-specificdatabecomeavailable,amoreprecisevaluationcouldbeperformed.
• MangrovesTypeofValuation:ValueBased(usingsomemarketassumptions–i.e.quantityofresource)Calculation:NPVofallfuturemangrovevaluesbasedonthefollowingassumptions:A. TotalMangroves:571,869hectares
B. DegradationofMangrovesat-0.4percentyearly
Primary Sources: • Total Fish:
Wilson RW, Millero FJ, Taylor JR, Walsh PJ, Christensen V, Jennings S and Grosell M (2009)"Contribution of Fish to the Marine Inorganic Carbon Cycle" Science, 323 (5912) 359-362.
• Market Value of fish:
OECD-FAO Agricultural Outlook (Fisheries) 2015-2024: http://stats.oecd.org/
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C. ValuederivedfromMangroves=4,185USDperhectare(appliedforeachyear,notadjustedforforecastedinflationaswewantNPVincurrentdollars)
D. Discountrate:Averageregionalrisk-freerate
E. Noriskpremium–decisionmadenottoapplyriskpremiumtonaturalassets(only
onassetsdirectlyconnectedtoindustrial/marketoutput)
• CoralReefsTypeofValuation:ValueBased(usingsomemarketassumptions–i.e.quantityofresource)Calculation:NPVofallfuturecoralreefvaluesrelatedtocoastalprotection,tourism/recreationandbiodiversityvaluesbasedonthefollowingassumptions:A. TotalCoral:7,051,587hectaresB. Degradationofcoralat-2.5percentyearlyC. Valuederivedfromcoral=US$849perhectare(appliedforeachyear,notadjusted
forforecastedinflationaswewantNPVincurrentdollars)Note:Valuederivedtakingintoaccountonlyrelevantbenefits(coastal,tourism/recreation,andbiodiversity)toavoiddoublecountingwithother“sharedwealthfund”assets
Primary Sources: • Total Mangroves:
SPC Vulnerability of Tropical Pacific Fisheries & Aquaculture due to Climate Change – Country Chapters (2011) Hamilton, S. E., Casey, D. (2016), Creation of a high spatio-temporal resolution global database of continuous mangrove forest cover for the 21st century (CGMFC-21). Global Ecology and Biogeography, 25: 729–738. doi: 10.1111/geb.12449
• Value generation: Brander, Luke M., et al.. "Ecosystem Service Values for Mangroves in Southeast Asia: A Meta-analysis and Value Transfer Application." Ecosystem Services 1.1 (2012): 62-69.
• Asset degradation: SPC Vulnerability of Tropical Pacific Fisheries & Aquaculture due to Climate Change – Country Chapters (2011)
10
• Totalvalueofbenefitsfromcoralreefsintheworld:US$29,081millionperyearonaglobalcoralareaof284,000km2,thusatotalbenefitvalueofUS$1,050perhectare.
• Relevantbenefitsvalue:81percentoftotalbenefitvalue,henceavalueofcoralreefbenefitsofUS$849perhectare.
D. Discountrate:Averageregionalrisk-freerateE. Noriskpremium–decisionmadenottoapplyriskpremiumtonaturalassets
(followingthemethodologyappliedinglobalreport:riskpremiumappliedonlyonassetsdirectlyconnectedtoindustrial/marketoutput)
• SeagrassTypeofValuation:Valuebased(usingsomemarketassumptions–i.e.quantityofresource)Calculation:NPVofallfutureseagrassvaluesbasedonthefollowingassumptions:A. Totalseagrass:113,417hectaresB. Degradationofseagrass:-0.21percentto-0.55percentyearly(variesacross
countries)C. ValuederivedfromSeaGrass=US$26,479perhectare(appliedforeachyear,not
adjustedforforecastedinflationaswewantNPVincurrentdollars)
Primary Sources: • Total Coral Reefs:
SPC Vulnerability of Tropical Pacific Fisheries & Aquaculture due to Climate Change – Country Chapters
• Value generation: Cesar, Herman; Burke, Lauretta; Pet-Soede, Lida. "The Economics of Worldwide Coral Reef Degradation" Published by: Cesar Environmental Economics Consulting (CEEC) WWF – Netherlands NOTE: Identifying the correct value estimation for 1 hectare of coral reef proved challenging as many widely varying values are reported. We selected Cesar et al as the most applicable source for this calculation as it provided a breakdown of direct benefits. We only included values for coastal, tourism / recreation, and biodiversity value to avoid double-counting with other “shared wealth fund” assets (e.g. fisheries)
• Asset degradation: SPC Vulnerability of Tropical Pacific Fisheries & Aquaculture due to Climate Change – Country Chapters (2011)
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D. Discountrate:AverageregionalriskfreerateE. Noriskpremium–decisionmadenottoapplyriskpremiumtonaturalassets(only
onassetsdirectlyconnectedtoindustrial/marketoutput)Consideration:Benefitsfromprovisioningservicesfromseagrasshavebeenexcludedinordertoavoiddoublecounting(e.g.withmarinefisheries).
• Productive/DestinationCoastlines
Note:ProductivecoastlineassetvalueiscalculatedastheNPVofcoastaltourismactivity.Coastaltourismincludesconsumptiveandnon-consumptiveactivitiesincoastalzones.Consumptiveactivitiesincludefishing,shellfishing,etc.,whereasnon-consumptiveactivitiesincludeswimming,diving,boating,surfing,wind-surfing,jetskiing,birdwatchingandsnorkelling.
TypeofValuation:ValueBasedCalculation:NPVofallfuturecoastalproduction(tourism-based)valuesbasedonthefollowingassumptions:A. Totalvalueproducedannually:US$10.4billion(takenfromyearlycalculation)
B. Perpetualgrowthrate:1percent(basedonglobalreportmethodology)
Primary Sources: • Total Sea Grass:
SPC Vulnerability of Tropical Pacific Fisheries & Aquaculture due to Climate Change – Country Chapters; MACBIO Economic Assessment and Valuation of Marine Ecosystem Services: Vanuatu
• Value generation: • De Groot, Rudolf et al. "Global estimates of the value of ecosystems and their services
in monetary units" (2012) 55 • Costanza, Robert et al. "Changes in the global value of ecosystem services". Global
Environmental Change 26 (2014) 152-158
• Note: Seagrass seems to have attracted relatively little research attention in terms of economic valuation studies. Whilst there are recent valuation studies, none provided a breakdown of direct benefits that would prevent double counting, particularly on carbon sequestration.
• Asset degradation: • SPC Vulnerability of Tropical Pacific Fisheries & Aquaculture due to Climate Change –
Country Chapters (2011)
• Asset degradation: SPC Vulnerability of Tropical Pacific Fisheries & Aquaculture due to Climate Change – Country Chapters
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Note:BCG’sanalysisconcludesthatonly27percentofpotentialcoastlinesareutilizedbyhumandevelopment.Itislikelythiswillcontinuetoriseinthecomingdecades,howeverthisalsomaydiminishvalueofthisandotherconnectedassets–thusaconservativeperpetualgrowthof1percentwasused)
C. Discountrate:Averageregionalrisk-freerate+averageregionalriskpremium
D. Riskpremium–decisionmadetoapplyriskpremiumtoallassetsderivingvalue
fromindustrial/marketbasedsources,basedonthemethodologyappliedintheglobalreport.
Consideration:Potentialdoublecountingmightexistbetweenproductivecoastlineassetvalueandmangroves/coralreefsassetvaluesbutitcannotbeavoidedduetolackofdatawhichprovidesbreakdownofbenefitsinsomeecosystemslikemangrovesandseagrassand/orthelackofvaluationstudiesoncoastalprotectionperse.
Primary Sources: • Coastal tourism value
Coastal Value annual assessment – see below sections for methodology. Secondary Sources: • World Wildlife Fund. Marine Problems: Tourism and Coastal development
http://wwf.panda.org/about_our_earth/blue_planet/problems/tourism/ • http://www.prb.org/Publications/Reports/2003/RippleEffectsPopulationandCoastalRegions.aspx • http://worldoceanreview.com/en/wor-1/coasts/living-in-coastal-areas/ • http://www.oceansatlas.org/servlet/CDSServlet?status=ND0xODc3JjY9ZW4mMzM9KiYzNz1rb3
M~ • http://www.rockefeller.edu/labheads/cohenje/PDFs/256Cohensmall.htm • UNWTO. Tourism Highlights. 2014 Edition • World Wildlife Fund – Blue Plan: Coasts
http://wwf.panda.org/about_our_earth/blue_planet/coasts/ • Sustainable Development of Tourism – UN World Tourism Organization. Coast Project.
http://sdt.unwto.org/en/content/coast-project • World Ocean Review. Coasts
http://worldoceanreview.com/en/wor-1/coasts/living-in-coastal-areas/2/ • Intergovernmental panel on Climate Change. "Increasing human utilization of the coastal zone"
http://www.ipcc.ch/publications_and_data/ar4/wg2/en/ch6s6-2-2.html • NOAA – State of the Coast
http://stateofthecoast.noaa.gov/population/welcome.html • UN Atlas of the Oceans
http://www.oceansatlas.org/servlet/CDSServlet?status=ND0xODc3JjY9ZW4mMzM9KiYzNz1rb3M~
• Estimates of Coastal Populations http://www.rockefeller.edu/labheads/cohenje/PDFs/256Cohensmall.htm
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• CarbonAbsorption
Carbonsequestrationrateswereappliedtoareaofnaturalassetsthatsequestercarbon(mangroves,seagrass)andthetotalweightofcarbonmultipliedbythecostofcarbonTypeofValuation:ValueandmarketbasedPrimaryCalculation:NPVoffutureexpectedcarbonsequestrationfrommangrovesandseagrass,multipliedbymarketpriceofcarbonA.Totalcarbonsequesteredannually:4,113,246tCO2(takenfromyearlycalculation)B.Growthperyear:-0.2percentto-0.6percent(variesbasedonassettype:seagrassvsmangrovesandcountry)C.Socialcostofcarbon:US$61D.Discountrate:averageregionalriskfreerate+AverageregionalriskpremiumE.Riskpremium–decisionmadetoapplyriskpremiumtoallassetsderivingvaluefromindustrial/marketbasedsources,basedonthemethodologyappliedintheglobalreport.
Primary Sources: • Area of asset (mangroves, sea grass)
SPC Vulnerability of Tropical Pacific Fisheries & Aquaculture due to Climate Change – Country Chapters; MACBIO Economic Assessment and Valuation of Marine Ecosystem Services: Vanuatu
• Asset degradation rate (mangroves, sea grass) SPC Vulnerability of Tropical Pacific Fisheries & Aquaculture due to Climate Change – Country Chapters
• Carbon sequestration rate
Murray BC, Jenkins WA, Sifleet S, Pendleton L, Baldera A (2010) Payments for blue carbon: potential for protecting threatened coastal habitats. Policy Brief, Nicholas Institute for Environmental Policy Solutions, Duke University. 12pp (Cited in MACBIO Economic Assessment and Valuation of Marine Ecosystem Services: Fiji)
• Social cost of carbon US EPA (2015) (Cited in MACBIO Economic Assessment and Valuation of Marine Ecosystem Services: Fiji) Note from the MACBIO report: The social cost of carbon (SCC) is an estimate of economic damage associated with a marginal increase in carbon dioxide emissions (US$/tCO2/year) and also represents the value of damage avoided for a small emission reduction (i.e. the benefit of a CO2 reduction) (US EPA 2015). We use the SCC value of the US EPA (2015) of US$61/tCO2/year (reflecting a 2.5 per cent social discount rate)
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AnnualValueGeneratedfromMelanesia’sOceanEconomy(GrossMarineProduct)
TheanalysisinFigure1ofthereportdemonstratestheannualeconomicvalueofocean-relatedactivitiesinMelanesia.Iftheoceaneconomywereitsowneconomy,itwouldbethethirdlargesteconomyintheregion,broadlyequivalenttothecombinedGDPsofFijiandSolomonIslands.
Wedeterminedtheannualeconomicvaluerangeusingbothatop-downandbottom-upanalysis.Ourtop-downanalysis(~US$4.8billion)wasconductedbysurveyingavailablepublicinformationfortheMelanesiannationsregardingtheannualeconomicvalueoftheoceantolocaleconomies.Ourbottom-upanalysis(~US$5.4billion)wasconductedbycategorizingandevaluatingtheannualeconomicvalueforocean-relatedgoodsandservicesinMelanesia.Top-downestimateWeconductedresearchonthefiveMelanesiancountriesandterritorytosourceforliteratureoneconomicvalueoftheocean.OurprimarysourceofreferencewastheIUCNEconomicValueofthePacificOceantothePacificIslandCountriesandTerritories2010report.• AlldatapointsusedfromthereportwereinUSdollars.• Thecategoriesofeconomicoutputusedfromthereportweretourismexpenditure,
offshorefishing(locally-based),offshorefishing(foreign-based),andfishingaccessfees,coastalcommercialfishing,mariculture,coastalsubsistencefishing,coralreefs,andmangroves.Aseachcategory’sdatawasforadifferentyear,theproportionoftheregion’sGDPwascalculatedbasedontheyearofthedata,andthepercentofGDPwasthenappliedtothelatestavailable2015nominalGDPnumbers.Where2015GDPdatawasnotavailable,anextrapolationbasedrecentcompoundannualgrowthrate(CAGR)andonlatestavailabledatawasdone.
• BelowisasummaryoftheGDPcategoriesthathelpustoarriveatthetotalannualeconomicvalueoftheMelanesiaoceanregion
Category Year %ofGDPTourism 2008 5Offshorefishing(locallybased) 2007 2Offshorefishing(foreignbased) 2007 3Accessfees 2007 0.1Coastalcommercial 2007 0.4Mariculture 2007 0.1Coastalsubsistence 2007 1TotalEconomicValuation(TEV)ofcoralreefs 2008 2TEVofmangroves 2008 1Totaltop-downGMP 14%
15
Primary Sources: • Ocean economic valuation
IUCN Economic value of the Pacific Ocean to the Pacific Island Countries and Territories (2010)
• GDP of countries IMF World Economic Outlook (2015) New Caledonia: Economist Intelligence Unit (2015)
16
Oceanrelatedactivitiesgroupinto4primarycategoriesAlldirectlydependentontheocean’secologicalfunctionsandwell-being
4categoriesofannualoceanactivities
CategoryTotalvalue(US$billion)
A)Directoutputoftheocean• Activitiesrelatedtothecontentsoftheocean
3.04
B)Servicesenabledbytheocean• Activitiesoccurringin/ontheocean 0.94
C)Adjacentbenefitsoftheocean• Quantifiablebenefitsenabledbytheocean
1.39
D)Otherintangiblebenefitsoftheocean• Allundefinableactivitiesattributedtothe
presenceoftheoceann/a
Totalvalue:~US$5.4billion
Theabovetabledemonstratesaclassificationofservicesthatrelyontheocean.Asonemovesdownthetable,thecorrelationtotheoceanbecomeslessdirect,movingfromdirectoutput,toservicesenabledbytheocean,adjacentbenefitsoftheocean,andotherintangiblebenefitsoftheocean.Categoriesincludethefollowingservices:A)fishingrelatedactivities,marinerenewableenergy,B)education&training,research&development,oceansurvey,cruiseindustry,marinetourism,security&control,C)directimpactofcoastaltourism,carbonsequestration,coastalprotection,andmarinebiotechnology,D)spiritual&culturalbenefits,climatechangebenefits,andoverallutility.Thelattercategory–intangiblebenefits–islikelytoincludehighlyvaluablebenefits,butwefounditdifficulttoascribeadollarvalue.BottomupestimateWeconductedacomplementary"bottom-up"analysistoestimatetheannualeconomicvaluegeneratedbymarinerelatedindustries.Marineindustrieswerebrokendownintofourprimarycategories,eachwithrespectiveservicesallocatedwithin.Thelistbelowisnotexhaustiveandonlytakesintoaccounttheprimaryactivitiesrelatedtotheocean.Thisanalysisisdecidedlyconservativeinitsapproach,andonlyvalueswhatwearecapableofassessingandquantifying.Thus,thetrueyearlyeconomicvalueoftheoceanintangibleandintangibletermsmaybemuchhigher.
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Onceallprimaryindustrieswereidentified,andplacedintothecategorizationframework,wecalculatedtheannualeconomicvaluegeneratedforeachsub-category.Datafortheregional/countryvalueforeachoftheindustriesisnotfullyavailableforsomeactivities,withsomedataestimatedfromthepast,orextrapolatedfromaglobalnumberusedintheglobalreport.Multiplepubliclyavailablesourceswereleveragedandusedfortriangulationtoarriveatafairandestimatedamountforeachrespectiveindustry.Forcertainindustrieswherepastinformationwasavailable,butnotmostrecentdata,historicalcompoundannualgrowthrate(CAGR)wascalculatedandusedtoestimatecurrenteconomicvalue.Additionally,oil&gasproductionrevenueandexpendituresarenotincludedinthisoverallanalysis.Thecontributionofyearlyoffshoreproduction,inconjunctionwithpotentialoffshorereservesandannualoil&gasexpendituressuchasoilrigs,liquidnaturalgascontainers,etc.,wouldinflatethetruevalueofanindustrythatwouldremainoperationalwithorwithouttheocean.Inaddition,shippingandmaritimetransportandinfrastructure,althoughdependentonthesurfaceoftheoceanlikepassageofships,isnotdependentontheecologicalfunctionandwell-beingoftheocean.Hencethesehavebeenexcludedintheanalysisaswell.TheexerciseaimsatsizingthevalueoftheoutputgeneratedbytheoceanintheMelanesiaregion,butdoesnottackletheshareofvaluecapturedlocallyversusexternally.Pleaseseebelowforthemethodologyleveragedtoarriveatmarketestimate(forsourceinformationpleaseseeprimarysourcecitation):
Directoutputoftheocean
Marinefisheries(Commercial)Comprisesmarinefisheries(offshore),marinefisheries(coastal),andaccessfeesMethodology• Weightoffishmultipliedbypriceoffishfortotalvalueofmarinefisheries,access
feesadded.• Weightoffishobtainedbyextrapolatingtotalregionalfishcatchin2010byapplying
historical2006-2009CAGR,2010dataexcludedforaconservativeestimateduetoaone-offspikeinPapuaNewGuinea(4percentforoffshore,4percentforcoastal)
• 2015priceoffishobtainedfromtheOECDFAOOutlookdatabase,WorldFishpriceused
• 2007/2014accessfeesuseddirectly
Primary Sources: • Marine fisheries (offshore) and marine fisheries (coastal) fish weight
UBC Sea Around Us database (Industrial, Artisanal) http://www.seaaroundus.org/data/#/eez • Price of fish:
OECD-FAO Agricultural Outlook (Fisheries) 2015-2024: http://stats.oecd.org/
• Access fees IUCN Economic value of the Pacific Ocean to the Pacific Island Countries and Territories 2010 Gillett, Robert. Fisheries in the Economies of the Pacific Island Countries and Territories. Asian Development Bank, 2009. Gillett, Robert, Fisheries in the Economies of the Pacific Island Countries and Territories, Pacific Community SPC, 2016 Personal communications with R. Gillett and Maurice Brownjohn, March- April 2016
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Marinefisheries(subsistence&recreational)
Comprisesmarinefisheries(subsistence)andmarinefisheries(recreational)Methodology• Weightoffishmultipliedbypriceoffishfortotalvalueofmarinefisheries• Weightoffishobtainedbyextrapolatingtotalregionfishcatchin2010byapplying
historical2006-2010CAGRexcludingSolomonIslands(1percent).SolomonIslandswasexcludedinthecalculationofCAGRduetoaone-offsignificantdip
• 2015priceoffishobtainedfromOECDFAOOutlookdatabase,WorldFishfromcapturefisheriesused.
Mariculture/aquaculture
Methodology• Weightoffishmultipliedbypriceoffishfortotalvalueofaquaculture• Weightoffishobtainedbyextrapolatingtotalregionfishcatchin2013byapplying
historical2009-2013CAGRexcludingSolomonIslands(16percent).SolomonIslandswasexcludedinthecalculationofCAGRforaconservativeestimateduetoasignificantlylargeincreasein2011to2012whichcouldpotentiallyskewgrowthrates
• 2015priceoffishobtainedfromOECDFAOOutlookdatabase,WorldFishfromaquaculturepriceused
Primary Sources: • Marine fisheries (subsistence) and marine fisheries (recreational) fish weight
UBC Sea Around Us database (Industrial, Artisanal) http://www.seaaroundus.org/data/#/eez
• Price of fish: OECD-FAO Agricultural Outlook (Fisheries) 2015-2024 http://stats.oecd.org/
Primary Sources: • Aquaculture fish weight
FAO aquaculture data http://www.fao.org/fishery/statistics/global-aquaculture-production/en
• Price of fish: OECD-FAO Agricultural Outlook (Fisheries) 2015-2024 http://stats.oecd.org/
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Marinerenewableenergy
Methodology• ScaleddownglobalmarinerenewableenergynumbertotheMelanesianregion
basedontop-downMelanesiaGMPestimateasapercentageofglobalGMP(0.2percent)
• Globalmarinerenewableenergyvaluewasbasedon2014expendituresonmarinerenewableenergy(e.g.tidalandwave)excludingoffshorewindexpendituresduetotheirdependenceonwind,andtheirlackofdependenceontheoceantoremainoperational.
Directservicesenabledbyoftheocean
Marinetourism
Methodology• Totalmarineandcoastaltourismwascalculatedbyapplyingpercentageoftourism
attributabletomarineecosystemstototaltourismreceipts• Totaltourismreceiptscompriseinternationaltourismreceiptsanddomestictourism
spending• Wherelatesttourismreceiptnumberswerenotavailable,historicalCAGRforeach
countrywasappliedtothelatestavailabledatapoint• Percentoftourismattributabletomarineecosystemsbasedondifferentstudies
doneforeachcountry• Marineandcoastaltourismsplitisbasedontheaverageof:
o Globalmarine&coastaltourismproportion(marinetourism–27percent,coastaltourism–73percent)
o MarinetourismvaluetriangulatedwithscaleddownglobalmarinetourismnumbertotheMelanesianregionbasedontop-downMelanesianGMPestimateasapercentageofglobalGMP(0.2percent)
Primary Sources: • Borderless. "Wave & tidal energy spend to hit US$1.2bn by 2015."
http://borderless.net/content/wave-and-tidal-energy-spend-hit-us12bn-2015
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CruiseindustryWeemployedtwomethodologiestodeterminethisvalueforMelanesia.ThefirstmethodologyyieldedavalueofUS$497million,whilethesecondprovidedavalueofUS$500million.ForthefinalGMPcalculation,weusedthesecondmethodologyforwhichthedatawasmorerecent.
Methodology#1• Cruiseindustryvaluecalculatedbymultiplyingnumberofcruisepassengerarrivals
byaveragepriceofcruiseperpassengerandanadjustmentfactorfordouble-counting(cruisesthatgotomultipledestinationsintheSouthPacific)
• Forcountrieswithoutcruisepassengerarrivals,percentofpassengerarrivalsbycruiseorthenumberofcruiseshiparrivalsmultipliedbyaveragenumberofpassengersonacruiseshipwasused
• Adjustmentfactorfordoublecountingwasassumedtobeaconservative50percent-onaverage,eachcruisepassengervisitstwoMelanesiancountriesonacruisetrip
Methodology#2• Forallthecountrieswecalculatedtheaveragecapacityofpassengerspercallbased
onthenumberofcallspershipcategory(e.g.largecontemporaryvs.mid-sizeetc.)andtheaveragecapacitiesforeachshiptypebasedonnumberofcruisesinMelanesiain2015.
• ThenumberofpassengerdayspercallinVanuatuis2,082percall.Inordertocalculatethenumberofpassengerdayspercallfortheremaining4countries,weusedtheaveragecapacitypercallasaratiotocalculatetheaveragenumberofpassengernightsspentpercall.
Primary Sources: • International tourism receipts
World Bank http://data.worldbank.org/indicator/ST.INT.RCPT.CD
• Domestic tourism spending WTTC http://www.wttc.org/datagateway/ New Caledonia: data not available, extrapolated a domestic tourism spending based on rest of Melanesian countries’ domestic tourism spending to international tourism receipts ratio
• Per cent tourism attributable to marine ecosystems Fiji: 2013: Economic Valuation of Tourism and Fisheries in the Vatu-i-Ra Seascape New Caledonia: Laurans et al 2013 Economic valuation of ecosystem services from coral reefs in the South Pacific (marine ecosystem related tourism value provided, per cent calculated by applying value to 2009 international tourism receipts and domestic tourism receipts) Papua New Guinea: State of the Coral Reefs of Papua New Guinea 2001 Solomon Islands: MACBIO Economic Assessment and Valuation of Marine Ecosystem Services: Solomon Islands Vanuatu: Papua New Guinea used as proxy
21
• Then,todeterminetheaveragerevenuesperpassengerdayforeachcountry,welookedatthepriceperdayofdifferentcruisesacrosstheMelanesianregion,forthreecabintypes:interior,outside,andbalcony(assumingeachcruiseshiphadanapproximate~25percent/11percent/64percentsplitbetweeneachtype).Wetooktheaveragepricepercountry,perday,perpassenger,foreachroomtypetoultimatelydeterminethetotalrevenues.
• Weaddedanadditional15percentmarkuptothisfinalnumber(10percentforonboardspendingand5percentforexpensivesuiterentalswhichweren'tincludedintheoverallanalysis),andtheJanuary2016AU$toUS$exchangerateof0.69.
Education&training
Methodology• Scaleddownglobaleducation&trainingnumbertoMelanesiabasedontop-down• GMPestimateasapercentageofglobalGMP(0.2percent)• Globaleducation&trainingvaluebasedonannualexpendituresderivedfrom
"Marineindustriesglobalmarketanalysisreportandgrownathistoric5yearCAGRrateof3percent.DatafoundinEurosandconvertedtoUS$at2014exchangerate
Primary Sources: • Cruise passengers
Fiji: Fiji Bureau of Statistics http://www.statsfiji.gov.fj/index.php/migration-a-tourism/10-migration-statistics/migration-a-tourism/115-visitor-arrivals-statistics New Caledonia: http://www.cybercruises.com/crlidrtogrnemar05.htm Papua New Guinea: http://www.businessadvantagepng.com/papua-new-guinea-buoyed-cruise-boom/, http://data.worldbank.org/indicator/ST.INT.ARVL Solomon Islands: http://www.radionz.co.nz/international/pacific-news/263962/cruise-ships-a-ray-of-light-for-solomon-islands Vanuatu: Assessment of the Economic Impact of Cruise Ships to Vanuatu Report http://www.ifc.org/wps/wcm/connect/545bc20045521e26a65aaec66d9c728b/Assessment+of+the+Economic+Impact+of+Cruise+Ships+to+Vanuatu+REPORT.pdf?MOD=AJPERES
• Average cruise prices http://www.mynrma.com.au/travel/cruises/south-pacific.htm
Primary Sources: • Marine Industries Global Market Analysis. Vol. 1. Douglas-Westwood Limited, Mar. 2005.
http://oar.marine.ie/bitstream/10793/559/1/Foresightper cent20Seriesper cent201per cent20Marineper cent20Industriesper cent20Globalper cent20Marketper cent20Analysis.pdf
Primary Sources: • Pacific Cruise Market Research and Intelligence Project (Final Report, March 2015) • Assessment of the Economic Impact of Cruise Ships to Vanuatu, August 2014 • Average cruise prices per destination from:
http://www.mynrma.com.au/travel/cruises/south-pacific.htm • Cabin-type breakdown: http://www.cruisecritic.com/
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Research&development
Methodology• BasedonthelatestavailableOECDOverseasDevelopmentAid(ODA)valuesdirected
intofishing-relatedcategories:fishingpolicyandadministrativemanagement,fishingdevelopment,fisheryeducation/training,fisheryresearch,fisheryservices
Oceansurvey
Methodology• ScaleddownglobaloceansurveynumbertotheMelanesianregionbasedontop-downMelanesianGMPestimateasapercentageofglobalGMP(0.2percent)
• GlobaloceansurveyvaluebasedonannualexpendituresderivedfromMarineindustriesglobalmarketanalysisreportandgrownathistoric5yearCAGRrateof3percent.DatafoundinEurosandconvertedtoUS$at2014exchangerate
Security&control
Methodology• Scaleddownglobalsecurity&controlnumbertoMelanesiabasedonMelanesia’s
GMPestimateasapercentageofglobalGMP(0.2percent)• Globalsecurity&controlvaluebasedonannualexpendituresderivedfromtotal
expendituresonmaritimerelatedsecurityfor2014.
http://www.esd.ornl.gov/benefits_conference/nature_paper.pdf
Primary Sources: • Marine Industries Global Market Analysis. Vol. 1. Douglas-Westwood Limited, Mar. 2005.
http://oar.marine.ie/bitstream/10793/559/1/Foresightper cent20Seriesper cent201per cent20Marineper cent20Industriesper cent20Globalper cent20Marketper cent20Analysis.pdf
• The Maritime Executive. "Growth forecasted for Maritime Security Market." http://www.maritime-executive.com/article/Growth-Forecasted-for-Maritime-Security-Market-2014-10-14
Primary Sources: • Marine Industries Global Market Analysis. Vol. 1. Douglas-Westwood Limited, Mar. 2005.
http://oar.marine.ie/bitstream/10793/559/1/Foresightper cent20Seriesper cent201per cent20Marineper cent20Industriesper cent20Globalper cent20Marketper cent20Analysis.pdf
Primary Sources: • OECD ODA database
https://stats.oecd.org/qwids/
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Adjacentbenefitsoftheocean
Coastaltourism
Methodology• Totalmarineandcoastaltourismcalculatedbyapplyingpercentageoftourism
attributabletomarineecosystemstototaltourismreceipts• Totaltourismreceiptscompriseinternationaltourismreceiptsanddomestictourism
spending• Wherelatesttourismreceiptnumberswerenotavailable,historicalCAGRforeach
countrywasappliedtothelatestavailabledatapoint• Percentoftourismattributabletomarineecosystemsbasedondifferentstudies
doneforeachMelanesiancountry• Marineandcoastaltourismsplitisbasedontheaverageof:
o Globalmarine&coastaltourismproportion(marinetourism–27percent,coastaltourism–73percent)
o MarinetourismvaluetriangulatedwithscaleddownglobalmarinetourismnumbertotheMelanesianregionbasedontop-downMelanesianGMPestimateasapercentageofglobalGMP(0.2percent)
Primary Sources: • International tourism receipts
World Bank http://data.worldbank.org/indicator/ST.INT.RCPT.CD
• Domestic tourism spending WTTC http://www.wttc.org/datagateway/ New Caledonia: data not available, extrapolated a domestic tourism spending based on rest of South Pacific countries’ domestic tourism spending to international tourism receipts ratio
• Per cent tourism attributable to marine ecosystems Fiji: 2013: Economic Valuation of Tourism and Fisheries in the Vatu-i-Ra Seascape New Caledonia: Laurans et al 2013 Economic valuation of ES from coral reefs in the South Pacific (marine ecosystem related tourism value provided, per cent calculated by applying value to 2009 international tourism receipts and domestic tourism receipts) Papua New Guinea: State of the Coral Reefs of Papua New Guinea 2001
Solomon Islands: MACBIO Economic Assessment and Valuation of Marine Ecosystem Services: Solomon Islands Vanuatu: Papua New Guinea used as proxy
24
CarbonsequestrationComprisescarbonsequestrationofmangrovesandseagrass
Methodology• Carbonsequestrationvaluecalculatedbymultiplyingrateofcarbonsequestration
foreachassettypebyareaofassettypeandcostofcarbon• Carbonsequestrationratesusedare:Mangroves–6.32tCO2/ha/year;Seagrass–4.4
tCO2/ha/year• Costofcarbonusedissocialcostofcarbon,US$61/tCO2
Coastalprotection
Methodology• Coastalprotectionvaluestakenfromvaluationsdonebystudycommissionedby
MACBIOteam• Approachusedisannualizedavoideddamagecostduetopresenceofcoralreefs
basedonfollowingformula:ADt=Pt*(1-CPIR)*(A*C*DF),where:o ADt=avoidedflooddamageinyeart,thankstothepresenceofcoralreefso Pt=probabilityofstormsurgeinyearto CPIR=coastalprotectionindexofcoralreefs(normalizedtovaluesbetween0
and1bydividedthesumofthefiveindexesoffactorsnon-relatedtoreefsbythemaximumtotalscore,i.e.35)
o A=assetsatrisk(e.g.numbersofhouses)o C=constructioncosts(e.g.costperhouse)o DF=damagefactor(flooddamageasapercentofconstructioncost)
• AboveapproachwasdonecomprehensivelyforFiji,NewCaledonia,SolomonIslands,andVanuatu,butnotforPapuaNewGuinea
Primary Sources: • Carbon sequestration rate
Murray BC, Jenkins WA, Sifleet S, Pendleton L, Baldera A (2010) Payments for blue carbon: potential for protecting threatened coastal habitats. Policy Brief, Nicholas Institute for Environmental Policy Solutions, Duke University. 12pp (Cited in MACBIO Economic Assessment and Valuation of Marine Ecosystem Services: Fiji)
• Area of assets (mangroves, seagrass): SPC Vulnerability of Tropical Pacific Fisheries & Aquaculture due to Climate Change – Country Chapters Vanuatu seagrass: MACBIO Economic Assessment and Valuation of Marine Ecosystem Services: Vanuatu
• Cost of carbon US EPA (2015) (referenced in MACBIO Economic Assessment and Valuation of Marine Ecosystem Services reports)
Primary Sources: • Pascal N (2015) Economic valuation of marine and coastal ecosystem services:
ecosystem service of coastal protection — Fiji, Kiribati, Tonga, Vanuatu and the Solomon Islands. Report to the MACBIO Project. GIZ/IUCN/SPREP, Suva.
• Pascal, N., 2010. Ecosystèmes coralliens de Nouvelle-Calédonie, valeur économique des services écosystémiques Partie I: Valeur financière. IFRECOR (Initiative Française pour les Récifs Coralliens) Nouvelle-Calédonie, Nouméa, Avril 2010, 155 pp. + 12 planches.
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Marinebiotechnology
Methodology• Marinebiotechnologymarketestimatedbyscalingdownglobalmarketformarine
biotechnologytotheMelanesianregionbasedontop-downMelanesianGMPestimateasapercentageofglobalGMP(0.2percent)
• Globalmarketformarinebiotechnologywasprovidedfor2018,andadjustedtogetto2015basedongrowthrateprovided(4percent)
Primary Sources: • Global marine biotechnology market
Global Industry Analysts Inc. (2013). Marine Biotechnology: A Global Strategic Business Report., http://www.strategyr.com/marine_biotechnology_market_report.asp
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60%
US$548 BN
3-4X3RD
By 2030, 60% more fish will be required for domestic food consumption than in 2010.
Coastal areas in the Melanesian region are experiencing rates of sea level rise three to four times the global average. The economic output of
the ocean in Melanesia makes it the third largest economy in this region.
The overall value of ocean assets in Melanesia is more than US$548 billion.
Melanesia’s ocean in numbers
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