Proposed Economic Valuation Methodology for Belize Daniel Prager and Lauretta Burke World Resources Institute Economic Valuation of Coastal Ecosystems

Proposed Economic Proposed Economic Valuation Methodology for Valuation Methodology for

BelizeBelizeDaniel Prager and

Lauretta Burke

World Resources Institute

Economic Valuation of Coastal Ecosystems Workshop

Belize City

June 7, 2007


Method Overview

1. Background and Framework

2. Methods and Results Fisheries Local Use Survey Tourism

[Valuation Tool Demonstration] Shoreline Protection

3. Inclusion of mangrove ecosystems


Project Partners

Trinidad and Tobago

• T&T Institute of Marine Affairs (IMA)

• Buccoo Reef Trust

• Tobago House of Assembly (THA) / Policy Research Development Institute (PRDI)

• T&T Central Statistics Office (CSO)

• T&T Environmental Management Agency (EMA)

Saint Lucia

• Government of Saint Lucia

Regional Partners

• University of the West Indies (UWI) / Sustainable Economic Development Unit (SEDU)

• Caribbean Natural Resources Institute (CANARI)


Ecosystem Services from Coral Reefs

Millennium Ecosystem Assessment FrameworkProvisioning Services

-Food: Fish and Shellfish

-genetic resources

-natural medicines and pharmaceuticals

-ornamental resources

- building materials

Regulating Services

- carbon storage, climate regulation

-erosion control

-storm protection

Cultural Services

-spiritual and religious values

-knowledge systems, educational values

-inspiration-aesthetic values-social traditions

-sense of place

-Recreation

Supporting Services-sand formation -primary production

Direct Use ValuesIndirect Use Values

Non-use ValuesOption Values


Total Economic Value

Total Economic Value

Use Values Non-Use Values

Direct Use Values Indirect Use Values-Shoreline Protection

Consumptive/Extractive Uses-Fisheries capture

Non-Consumptive/Non-Extractive Uses-Tourism

Existence Value

Bequest Value


Tenets of Our Methodology

Based off of existing data (when possible) No expensive surveys used, local use

survey included fisheries, beach and reef use

Replicable results Cross-country comparisons Be spatially explicit as possible Not measuring non-use values


Avoiding Pitfalls

• Use net benefits rather than gross benefits

• Include opportunity cost, where necessary

• Only use benefits transfer (data from other studies) in right circumstances

• Don’t use estimates of small changes for large changes


Avoiding Pitfalls

• Be careful of double counting

• Only use national benefits when interested in national perspective

• Adjust price distortions

• Do a reality check


Project Overview

Main Components

Fisheries Method: Revenues minus Costs

Tourism Method: Revenues minus Costs

Shoreline ProtectionMethod: “Avoided Damages”

approach


Methodology Components

Fisheries1. Commercial

Fisheries

2. Fish Processing

3. Local and Subsistence Fishing

4. Economy-wide Effects

Tourism1. Accommodations

2. Reef Recreation

3. Local Use

4. Cruise Ships

5. Economy-wide Effects

Shoreline Protection

--Avoided Damages Approach

--Physical Vulnerability of shoreline with economic loss estimates


Non-Valued Services

Total Economic Value (TEV) would also include:Other Use Values:• Research Values

• Option Values (e.g. pharmaceutical)

Non-Use Values• Existence Value

• Bequest Value

Value estimates which are defensible and

policy relevant


Fisheries

Fish Species• Families of Holocentridae, Lutjanidae,

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

• Lobster• No pelagics• Not all species fully dependent on reefs

or mangroves


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

• Wage paid to employees

• Boat maintenance

• Other capital equipment costs (nets, fuel)


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 Value of time spent

fishing and fish caught

-minus-

Capital costs (nets, lines)


Fisheries

Economy-wide effects

• Value of employment

• Multiplier – boat builders/fixers

• Multiplier – general expenditures by fishers

• Social value – community building


Fisheries

Annual Value of St. Lucia

Reef Fisheries: US$ 821,000

Commercial Fishing Net Revenue: US$ 474,000

Fish Processing Net Revenue: US$ 46,000

Economy-wide multiplier: US$301,000

Local Use:

Additional Value (not yet calculated)


Local Reef Use Survey

• Commissioned a survey through the University of West Indies / Sustainable Economic Development Unit / Government of St. Lucia, Department of Statistics

• 600 people surveyed in 12 locations in St. Lucia and Tobago

• Designed to measure local use of beaches and reefs as well as recreational and subsistence fishing


Local Use Survey

St. Lucia

(2006)

Tobago

(2006)

Sample Size 300 300

Respondents who fish

73 of 300 (24%)

20 spear fishing

23 of 300 (8%)

7 spear fishing

Respondents who sell fish

13 (4.3%) 2 (.7%)

Fisheries


St. Lucia Local Fishing Estimate

Enjoyment Own Consumption

Informal Market

Fishing Trips 20 times / yr 28 Times / yr 52 times/ yr

Annual Value EC$ 700 EC$ 1,232 EC$ 9,512

Three Types of Local Fishing Use


Local Use Survey

Percent of Local Reef Visitors who Fish

0%10%20%30%40%50%60%70%

<1000 1000-1999 2000-3999 4000-4999

Monthly Income ($EC)

Pe

rce

nt


Survey Trends

Socio-Economic• Majority valued leisure time same or less valuable than

work time• Large proportion of respondents were unemployed

Beaches• Average of 75% (Tobago) and 90% (St. Lucia) of

respondents visited beaches• Swimming, BBQ and beach sports most frequent

activities


Survey Trends

Coral Reefs• Most respondents had not visited a coral

reef• Of respondents visiting reef, about half

noticed a change in reef quality and half did not

• Not all people making use of a coral reef were aware they were doing so


Very Rough Beach Tourism Estimate

• Ballpark beach value (per household)– ~125 hours/yr spent on beach (10.5 hrs/mth)– Annual wage ~ US$7,800/yr– ~ US$ 510/household– Based on average beach use, leisure time same

value as work time, average income, 40 hour work week


Tourism

Tourism Components

1. Reef-associated accommodations

2. Reef- and Mangrove-associated Recreation (snorkeling, diving, sport fishing)

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


Tourism

AccommodationsRevenues include:

– Hotels * Occupancy Rates * Room rates

OR– Guests * Guest Expenditure * Length of Stay

Costs include:– Hours worked * Wage rate

– Fixed Costs

– Operation and Maintenance Costs


Tourism

Reef and Mangrove Recreation

Revenue minus costs--Snorkeling--Diving--Glass-bottom boats--Fish charter--Sport Fishing


Tourism

Reef Recreation Revenues include:

– Snorkeling fees– Diving fees– Reef recreation– Fees paid by cruise lines

Costs include:– Equipment costs, labor costs, capital costs, taxes paid

(recouped by state), referring fees, import duties


Tourism

Cruise Ships

Revenue minus Costs --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

--Maintaining ports

--Environmental damages

--Additional use of roads, etc.


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


Tourism Values

• Components currently included– Accommodation– Reef Recreation – Diving– Reef Recreation – Snorkeling– Misc. Expenses (e.g., departure taxes, visitor expenditure)– Marine Park

• Components to be addressed– Cruise ships– Yachts– Indirect economic effects– Local Use


Estimated Reef Tourism Use ValuesSt. Lucia Tobago

Accommodation 48.3 17.1

Diving 4.5 2.1

Snorkeling 0.8 1.2

Marine Park 0.05 N/A

Expenditures and Departure Tax

20.8 0.87*

Total Use Value 74.4 21.3

CTO Expenditures 282.1 248.9**

Unit: Millions US$

*Departure taxes only**Trinidad and Tobago


Total Valuation Estimates

St. Lucia Tobago

Fisheries 0.82 (2002-2004) 0.2 to 1.0 (2006)

Tourism 74.4 (2006) 20.4 (2006)

Shoreline Protection

$100 over 25 years, $4 per annum

$135 over 25 years, $5.4 per annum

Total ~79 ~26

vs. GDP 619 (2000) 141 (2000)

Unit: Millions US$


Valuation Tool

Purpose: Guide the systematic, methodical estimation of the value of coral reefs

Guidebook + Calculator = Valuation Tool

How will this work?• Fisheries and Tourism components

• Microsoft Excel based

• Tiers of input data

• Assumptions supplied with tool (but they must be verified)

• Calculates each component discretely

Shoreline Protection Services

• Evaluate economic value of shoreline protection provided by coral reefs and mangroves

• Involves physical and economic modeling and assumptions

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

• Preliminary framework

• Valuation method - “avoided damages”

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.

Complex Analysis

Work with coastal geologists / coastal scientists at Institute of Marine Affairs (IMA) to:

• Define typology (categories / characteristics of reef / coastline settings)

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

Work with economists to derive economic estimates

Shoreline Stability Factors (from IMA)

1. Coastal Type / Geology (Resistance)

2. Wave Energy

3. Storm/Hurricane Events (Effects)

4. Grain Size / Gradient

5. Coral Reef (Type, Reef Distribution, Distance from shore)

6. Coastal Protection (headlands, etc.)

7. Coastal Vegetation (type and distribution)

8. Anthropogenic Activities

9. Elevation

Shoreline Stability Evaluation Framework (from IMA)

Factor Factor Weight

Very High(A = 4)

High(A = 3)

Medium(A = 2)

Low(A = 1)

None(A = 0)

Geology(Resistance)

3Cliffed coastline consisting

of igneous, metamorphic and volcanic rocks

Limestone cliffs Sedimentary Rocks along

coastlineBeaches N/A

Wave Energy 2 N/A < 50 cm 50 cm - 80 cm >80 cm N/A

Storm/Hurricane Events (Effects)

2Affected by 1-5 TS every

10 yearsAffected by at least 5 TS

every 10 yearsAffected by at least a

category 1 every 25 yearsAffected by at least a

category 3 every 25 yearsN/A

Reef Type 1 N/A Barrier Fringe Atoll No reef present

Reef Distribution 1 N/A N/A Continuous Discontinuous No reef present

Reef Distance 1 N/A <500 m 500m -1000 m > 1000m No reef present

Grain Size / Gradient

3 N/ACoarse grained/ steep

gradientMedium grained/Moderate

gradientFine-grained/gentle

gradientFlat

Coastal Protection 1Protected by 2 prominent

headlands, Seawalls, Riprap or Breakwaters

Protected by 2 prominent headlands

Seawalls, Riprap or Breakwaters

Protected by one or two small headlands

No protection by headlands or coastal protection

structures

Coastal Vegetation Type

1 Mangroves Coastal wetlands Thicket Runners No Vegetation

Coastal Vegetation Distribution

1 > 75 % length of coastline50% - 75 % length of

coastline25% - 50 % length of

coastline<25% length of coastline No Vegetation

Anthropogenic Activities

2 N/ANo sand mining, coastal development or Other

Activities

Either sand mining or coastal development

Sand mining and coastal development

N/A

Elevation 3 >3 m above msl 1-3 m 0-1 m = 0m < 0m

1. Identify shoreline protected by coral reefs and establish degree of

protection provided by reef

Reef Protection

0 Not protected by reef 51%

2 Within 100 m of fringing reef 45%

3 Protected by Barrier Reef 4%

Extensive protection by coral reef or mangrove

Source: Belize Coastal Threat Atlas

2. Identify land vulnerable to wave-induced storm damage

6% of Tobago’s land arearated “vulnerable.

3. Establish likely damage in vulnerable areas under current scenario & without reefs

1. Storm regime in area• Future storm scenarios

2. Historic data on storm damage along coast (wave and surge associated)

3. Property Values• Built structures• Land value• Loss of use

Net Protection Value in Tobago (over 25 years)

• Comparison of damage (loss) with and without reefs

• Avoided damages of US$135 million over 25 years– (about US$5 million per year)

• Net benefit from Buccoo reef alone is US$60 million over 25 years – (about $2.5 million per year)

Shoreline Protection Summary Tobago Belize

Land Area (sq km) 30,000 294,385

Vulnerable Land Area 1,900 6% ???

Vulnerable Area Protected by reefs 910 3% most

Shoreline length Protected by Reefs 49% most

Average Property Value (US$) $22

Property Damage over 25 yr period (US$ millions)

Loss with reefs 675

Loss without reefs 810

Avoided Damages (25 years) 135

Avoided Damages (annual average) 5.4

Plans on Shoreline Protection

Identify groups interested in collaborating– Government (NEMO, Hydromet, Forestry, Fisheries,

CZMAI)– NGOs– Insurance companies?

• Add Mangroves• Review Approach• Gather data to refine damage estimates• Implement analysis

Incorporating Mangrove Habitats

• Fisheries

• Tourism

• Shoreline Protection

• Other Goods and Services?

Seeking Partners to Collaborate on:

1. Shoreline Protection \ Vulnerability Analysis

2. National Coastal Fisheries Valuation

3. National Tourism Valuation

4. Partners for valuation of particular MPAs or atolls


Questions for Breakout Groups

1. Does the methodology as presented adequately capture the value of Fisheries/Tourism/Shoreline Protection in Belize?

2. How have these ecosystem services changed over the last decade? Are these services expected to improve or degrade?

3. Are there expected changes in the laws or regulations governing these ecosystem services?

4. What are important data sources for valuing these ecosystem services?


Questions for Climate Change Group

1. How will climate change affect the goods and services provided by coral reef and mangrove ecosystems in Belize?

2. What groups within Belize are currently working on reef related climate change issues? What role could they play in the project?

3. Do existing national or international laws ensure that the coral reefs are adequately protected from threats to climate change?

Documents

Proposed Economic Valuation Methodology for Belize Daniel Prager and Lauretta Burke World Resources Institute Economic Valuation of Coastal Ecosystems