Economic Valuation of Coastal Resources in Latin America and the Caribbean Lee G. Anderson George R. Parsons University of Delaware

Contents Introduction: Why do them? Basic Economic Principles Description of Valuation Techniques Case Studies Data Needs Bibliography

The Relevance of Economic Valuation for Coastal and Marine Environmental Resources. Why Do Them???

These resources directly or indirectly help produce valuable goods and services. Some of these are produced in formal markets others are not. It is necessary to have information on the relationship between the amount and value of these goods and services and the environmental resources when making policy choices. For example, Where to locate a water treatment plant Fill in a portion of an estuary in order to build an aquaculture pond.

Just as a road system can be an important part of the economy, so are many coastal and marine resources. The difference is that instead of policy decisions to “build” such resources, for the most part the critical issue is to maintain them.

Often there is a clear tie to the economy as when a fish stock provides the basis for a fishing industry. Sometimes the link is somewhat less clear as when a mangrove forest provides for a nursery ground for a fishery, or when it provides a barrier to protect coastal regions from storm damages.

Market Valuation Studies Fish can be sold on the market. The destruction of estuary can lead to a reduction in fish production or an increase in the expected value of property damage due to a storm.

Non-market Goods and Services Sometimes there is no tie to a good or service that is produced on the market. For example, a barrier reef can provide the opportunity for citizens to participate in recreational diving activities. Maintaining the reef will keep the divers coming which can sometimes help support a lucrative tourist industry based on providing hotel accommodations and diving tour operators.

The reefs might also just provide diving services to locals who may not require much more than a few diving clubs. While the diving services which are provided may not leave an much of an imprint on the market, the value to local consumers of a very high quality experience is still an important part of economic value.

“Revealed Preference” approaches estimate values using information from a market related to the environmental good of interest. For example, by examining how far and where people travel on recreation trips, economists have designed techniques to estimate the value of recreation sites (eg. a beach) and characteristics of recreation sites (eg. width or cleanliness of a beach).

“Stated preference” approaches estimate values using surveys in which people are asked to report their willingness to pay for environmental goods. Using statistical analysis of the responses can allow for estimates of, for example, individual willingness to pay for a day of diving or catching a blue marlin; or aggregate recreational value provide by a specific site.

The values provided by these techniques are directly comparable to market based values and can be compared also to costs of resource protection or restoration.

For example, the results could show that maintaining a reef can support local diving activities that are worth $500,000 per year. This value is generated though the $500,000 will not show up in GNP or on any tax rolls. Now if developing the area for a port will provide $300,000 worth of shipping services per year, there is some concrete information to determine how the reef area should be used.

These valuation studies can have other practical uses if there are foreign visitors taking advantage of the reefs. For example, assume the studies show the current 400,000 visitors value the diving experience at $750,000 per year. Assume also that a $1.00 tax would reduce the number of visitors would be reduced to 375,000. The government then knows that it can raise $375,000 per year in revenues to help monitor the park with very little effect on the number of visitors.

What data to collect depends upon the answers to the following questions. 1.What types of environmental policy issues or questions are on the horizon? 2. Which techniques are best suited to address the issues, taking into account the types of data that are already available? 3. What data are necessary to successfully implement the needed valuation studies?

The purpose of the measurements is for policy analysis. Not necessary to measure the benefits and costs to the last penny. In many cases it is only necessary to know which one is bigger. For this reason, it may be useful to compare studies of similar issues in other areas or countries to get an idea of the relative sizes of benefits and costs. Only do a new primary study, if the answer is not available from reviewing old one. New studies cost money which may be better spent elsewhere.

There are some basic data that will depend upon the particular natural resource. For example, with fisheries it is useful to have data on: Landings by species, location, and time Boats by size, location, crew size, HP, and trips by location and time. It is also useful to have cost and earnings studies on the different types of boats. There are analogous lists for other resources.

It is also important to develop a consistent way to record and store the data and to do so in a way that it can be easily accessed displayed in various ways.

Summary Why are environmental valuation studies important? The short answer is that it will allow for more informed policy analysis and decision-making.