Valuing Coral Reefs Overview of Proposed Methodology Daniel Prager and Lauretta Burke

1. World Resources Institute Valuing Coral Reefs Overview of Proposed Methodology Daniel Prager and Lauretta Burke

2. 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

3. 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

4. Project Overview Main Components Fisheries Method: Revenues minus Costs Tourism Method: Revenues minus Costs Shoreline Protection Method: “Avoided Damages” approach

5. 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

6. Fisheries Known Gaps in Fisheries Capturing: --Value of commercial fisheries --Value of consumed fish --Multiplier effects --”Enjoyment Factor” of Time spent fishing Not Capturing --Cultural Value of Fishing

7. Fisheries Fish Species • Families of Holocentridae, Lutjanidae, Scaridae, and Serranidae (Squirrelfishes, soldierfishes, snapper, parrotfishes, grouper, sea bass) • Lobster • Sea urchin • No pelagics

8. 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

9. Fisheries Commercial Fishing Revenue minus Costs • Price of fish • Amount of reef-related fish harvested

10. Fisheries Commercial Fishing Revenueminus Costs • Cost estimates per boat/outing • Time spent fishing • Wage paid to employees • Boat maintenance and equipment cost

11. 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

12. Fisheries Fish Processing Revenues minus Costs. -Volume of fish processed -Volume of shellfish/lobster processed -Price per unit volume

13. Fisheries Fish Processing Revenuesminus Costs. -Capital costs -Equipment costs -Cost of inputs (fish, shellfish, preservatives) -Labor costs

14. 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

15. Fisheries Local Fishing Value of fish caught -minus- Cost of fishing (time spent fishing, cost of equipment)

16. Fisheries Economy-wide effects • Value of employment • Multiplier – boat builders/fixers • Multiplier – general expenditures by fishers • Social value – community building

17. 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?

18. Tourism Value of Tourism to Tobago • Value of reef-associated accommodations • Value of diving, snorkeling, and reef-associated recreation (from visitors) • Cruise ship expenditures • Local Reef Recreation • Multiplier effect on economy

19. Tourism Accommodations • Revenue minus Costs • Foreign- vs. Local- owned (“Leakage”) • Only reef-related stays

20. 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

21. 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

22. Estimated Accommodation Values--Tobago All Values in US$ Millions and Annual Notes: Income tax/green levy not deducted Direct Impact multiplier not included

23. Estimated Accommodation Net Benefits Notes: Income tax/green levy not deducted Direct Impact multiplier not included

24. 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

25. Tourism (Visitors) Reef Recreation Revenue minus costs in various sectors --Snorkeling --Diving --Glass-bottom boats --Fish charter --Beaches

26. 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

27. Tourism (Visitors) Reef Recreation Revenues include: Payments by tourists Fees paid by cruise lines Costs include: Equipment costs, labor costs, capital costs, taxes paid (recouped by state), referring fees, import duties, others?

28. 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

29. 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

30. Estimated Dive Values--Tobago All values in US$ millions and Annual * Sensitivity analysis around consumer surplus Notes: Income tax/green levy not deducted Direct Impact multiplier not included

31. Estimated Net Benefits for Diving Notes: Income tax/green levy not deducted Direct Impact multiplier not included

32. 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)

33. 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)

34. Tourism Cruise Ships Revenueminus Coststo the Island --Maintaining ports --Environmental damages --Additional use of roads, etc.

35. Tourism Multipliers • Additional value not captured elsewhere • Restaurants/shopping, etc. • May need to take from literature review

36. 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

37. 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”

38. Shoreline Protection Services- Underlying Questions • How much “protection” is afforded to a shoreline by a coral reef?

39. Shoreline Protection Services- Underlying Questions • 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?)

40. Shoreline Protection Services- Underlying Questions • How much “protection” is afforded to a shoreline by a coral reef? • What is at risk?

41. Shoreline Protection Services- Underlying Questions • How much “protection” is afforded to a shoreline by a coral reef? • What is at risk? • Natural habitats / biodiversity • Valuable beaches • Real estate • (in extreme cases) Lives

42. 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

43. 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.

44. 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.

45. 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)

46. 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) ** Must be evaluated for each - storm category - shoreline category - elevation range And for different coral health scenarios

47. 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

48. 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

49. 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.

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