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Valuing Mangrove Conservation in Southern Thailand

Valuing Mangrove Conservation in Southern Thailand. Suthawan Sathirathai and Ed Barbier. Mangroves in southern Thailand. What’s the policy issue?. Mangroves in southern Thailand. What’s the policy issue? Rapid conversion of mangroves to shrimp farms: ~3.5%/yr

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Valuing Mangrove Conservation in Southern Thailand

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  1. Valuing Mangrove Conservation in Southern Thailand Suthawan Sathirathai and Ed Barbier

  2. Mangroves in southern Thailand • What’s the policy issue?

  3. Mangroves in southern Thailand • What’s the policy issue? • Rapid conversion of mangroves to shrimp farms: ~3.5%/yr • Is the conversion economically justified?

  4. Mangroves in southern Thailand • What’s the policy issue? • Rapid conversion of mangroves to shrimp farms: ~3.5%/yr • Is the conversion economically justified? • How are property rights connected to this issue?

  5. Mangroves in southern Thailand • What’s the policy issue? • Rapid conversion of mangroves to shrimp farms: ~3.5%/yr • Is the conversion economically justified? • How are property rights connected to this issue? • Mangroves: de jure state property, de facto open access • Free to shrimp-farm investors • Fisheries: de jure state property, de facto open access/community management • Any producer surplus in fishing?

  6. Components of study

  7. Components of study • Benefits provided by mangroves (= opportunity cost of shrimp farming)

  8. Components of study • Benefits provided by mangroves (= opportunity cost of shrimp farming) • Net benefits of shrimp farming • Financial (a.k.a. private) • Economic (a.ka. social)

  9. Direct use values Indirect use values Benefits of mangroves

  10. Direct use values Timber Fuelwood Crabs, shrimp, mollusks Honey Tourism Indirect use values Breeding grounds and nursery habitats for offshore fisheries Protecting coastline from erosion Control of flooding Carbon sequestration Benefits of mangroves

  11. Direct use values Timber Fuelwood Crabs, shrimp, mollusks Honey Tourism Indirect use values Breeding grounds and nursery habitats for offshore fisheries Protecting coastline from erosion Control of flooding Carbon sequestration Which benefits do S&B value?

  12. Is partial analysis a problem?

  13. Is partial analysis a problem? • Not if it implies that mangroves are more valuable than shrimp farms: mangroves “win” even though not all of their benefits are counted • Total economic value (TEV) is not always necessary for policy analysis

  14. Direct use values

  15. Direct use values • How did they collect data?

  16. Direct use values • How did they collect data? • 2 surveys in Tha Po Village (~ 652 villagers)

  17. Direct use values • How did they collect data? • 2 surveys in Tha Po Village (~ 652 villagers) • What valuation approach do they use?

  18. Direct use values • How did they collect data? • 2 surveys in Tha Po Village (~ 652 villagers) • What valuation approach do they use? • Net income = Gross income – Cost of extraction

  19. Direct use values • How did they collect data? • 2 surveys in Tha Po Village (~ 652 villagers) • What valuation approach do they use? • Net income = Gross income – Cost of extraction • How did they calculate gross income?

  20. Direct use values • How did they collect data? • 2 surveys in Tha Po Village (~ 652 villagers) • What valuation approach do they use? • Net income = Gross income – Cost of extraction • How did they calculate gross income? • If products sold: market prices • If products not sold: market prices for closest substitutes

  21. Direct use values • How did they collect data? • 2 surveys in Tha Po Village (~ 652 villagers) • What valuation approach do they use? • Net income = Gross income – Cost of extraction • How did they calculate gross income? • If products sold: market prices • If products not sold: market prices for closest substitutes • How did they calculate cost of extraction?

  22. Direct use values • How did they collect data? • 2 surveys in Tha Po Village (~ 652 villagers) • What valuation approach do they use? • Net income = Gross income – Cost of extraction • How did they calculate gross income? • If products sold: market prices • If products not sold: market prices for closest substitutes • How did they calculate cost of extraction? • Opportunity cost of time: leisure • One-third of daily wage rate

  23. Direct use values • How did they collect data? • 2 surveys in Tha Po Village (~ 652 villagers) • What valuation approach do they use? • Net income = Gross income – Cost of extraction • How did they calculate gross income? • If products sold: market prices • If products not sold: market prices for closest substitutes • How did they calculate cost of extraction? • Opportunity cost of time: leisure • One-third of daily wage rate • Calculation of per hectare value: $924/household  38 households / 400 ha = $88/ha

  24. See Table 1

  25. Protecting coastline from erosion

  26. Protecting coastline from erosion • What valuation approach do they use?

  27. Protecting coastline from erosion • What valuation approach do they use? • Replacement cost: constructing a breakwater • $875/m of coastline, or $12,263/ha of mangrove • Multiplied by 0.3 (30% of coastline is severely eroded): $3,679/ha

  28. Protecting coastline from erosion • What valuation approach do they use? • Replacement cost: constructing a breakwater • $875/m of coastline, or $12,263/ha of mangrove • Multiplied by 0.3 (30% of coastline is severely eroded): $3,679/ha • This method is invalid! Why?

  29. Protecting coastline from erosion • What valuation approach do they use? • Replacement cost: constructing a breakwater • $875/m of coastline, or $12,263/ha of mangrove • Multiplied by 0.3 (30% of coastline is severely eroded): $3,679/ha • This method is invalid! Why? • Cost  Benefit!

  30. Major flaw in S&B’s study • “… clearly the most important benefit, although … villagers indicated that they were most concerned about the threats from shrimp farming to the other two benefits of the remaining mangrove area.”

  31. Breeding grounds and nursery habitats

  32. Breeding grounds and nursery habitats • What valuation approach do they use?

  33. Breeding grounds and nursery habitats • What valuation approach do they use? • Productivity-change method: fish catch (X) is a function of not only effort (E) but also mangrove area (A) X = mEaAb • For given E, if A ↓, then X ↓, too

  34. Open access Managed fishery Property rights and  social surplus

  35. Open access Managed fishery Property rights and  social surplus $/kg P0 AC(A0) X Note: no producer surplus

  36. Open access Managed fishery Property rights and  social surplus $/kg P1 AC(A1) AC(A0) X Note: A0 > A1

  37. Open access Managed fishery Property rights and  social surplus $/kg AC(A1) AC(A0) X Note: only consumers lose

  38. Open access Managed fishery Property rights and  social surplus $/kg $/kg MC(A0) AC(A1) P0 AC(A0) X X Note: only consumers lose Note: both consumers and producer surplus

  39. Open access Managed fishery Property rights and  social surplus $/kg $/kg MC(A1) MC(A0) P1 AC(A1) AC(A0) X X Note: only consumers lose Note: A0 > A1

  40. Managed fishery Open access Property rights and  social surplus $/kg $/kg MC(A1) MC(A0) AC(A1) AC(A0) X X Note: only consumers lose Note: both consumers and producers lose

  41. Applying this model

  42. Applying this model • Use regression methods to determine m, a, and b in X = mEaAb

  43. Applying this model • Use regression methods to determine m, a, and b in X = mEaAb • Solve for E: E = m-1/aX1/aA-b/a

  44. Applying this model • Use regression methods to determine m, a, and b in X = mEaAb • Solve for E: E = m-1/aX1/aA-b/a • Multiply by c (unit cost) to get total cost: TC = cm-1/aX1/aA-b/a

  45. Applying this model • Use regression methods to determine m, a, and b in X = mEaAb • Solve for E: E = m-1/aX1/aA-b/a • Multiply by c (unit cost) to get total cost: TC = cm-1/aX1/aA-b/a • Divide TC by X to get average cost: AC = cm-1/aX(1-a)/aA-b/a

  46. Applying this model • Use regression methods to determine m, a, and b in X = mEaAb • Solve for E: E = m-1/aX1/aA-b/a • Multiply by c (unit cost) to get total cost: TC = cm-1/aX1/aA-b/a • Divide TC by X to get average cost: AC = cm-1/aX(1-a)/aA-b/a • Differentiate TC w.r.t. X to get marginal cost: MC = (c/a)m-1/aX(1-a)/aA-b/a

  47. Applying this model • Use regression methods to determine m, a, and b in X = mEaAb • Solve for E: E = m-1/aX1/aA-b/a • Multiply by c (unit cost) to get total cost: TC = cm-1/aX1/aA-b/a • Divide TC by X to get average cost: AC = cm-1/aX(1-a)/aA-b/a • Differentiate TC w.r.t. X to get marginal cost: MC = (c/a)m-1/aX(1-a)/aA-b/a • Assume isoelastic demand curve: X = DP-

  48. Applying this model • Use regression methods to determine m, a, and b in X = mEaAb • Solve for E: E = m-1/aX1/aA-b/a • Multiply by c (unit cost) to get total cost: TC = cm-1/aX1/aA-b/a • Divide TC by X to get average cost: AC = cm-1/aX(1-a)/aA-b/a • Differentiate TC w.r.t. X to get marginal cost: MC = (c/a)m-1/aX(1-a)/aA-b/a • Assume isoelastic demand curve: X = DP- • For given , can solve the 2 equations (AC or MC; demand) for the 2 unknowns (X, P) and the surpluses

  49. Marginal value of breeding ground and nursery habitat • See Table 2

  50. NPV of benefits per hectare (20 years) • See Table 3

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