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

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

World Resources Institute 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

World Resources Institute Project Overview Main Components Fisheries Method: Revenues minus Costs Tourism Method: Revenues minus Costs Shoreline Protection Method: “Avoided Damages” approach

World Resources Institute 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 EffectsEffects

World Resources Institute 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

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

World Resources Institute 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

World Resources Institute Fisheries Commercial Fishing Revenue minus Costs Price of fish Amount of reef-related fish harvested

World Resources Institute Fisheries Commercial Fishing Revenue minus Costs Cost estimates per boat/outing Time spent fishing Wage paid to employees Boat maintenance and equipment cost

World Resources Institute 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

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

World Resources Institute Fisheries Fish Processing Revenues minus Costs. -Capital costs -Equipment costs -Cost of inputs (fish, shellfish, preservatives) -Labor costs

World Resources Institute 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

World Resources Institute Fisheries Local Fishing Value of fish caught -minus- Cost of fishing (time spent fishing, cost of equipment)

World Resources Institute Fisheries Economy-wide effects Value of employment Multiplier – boat builders/fixers Multiplier – general expenditures by fishers Social value – community building

World Resources Institute 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?

World Resources Institute Tourism Value of Tourism to Tobago 1.Value of reef-associated accommodations 2.Value of diving, snorkeling, and reef- associated recreation (from visitors) 3.Cruise ship expenditures 4.Local Reef Recreation 5.Multiplier effect on economy

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

World Resources Institute 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

World Resources Institute 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

World Resources Institute Estimated Accommodation Values--Tobago All Values in US$ Millions and Annual Notes: Income tax/green levy not deducted Direct Impact multiplier not included Operating Costs (50% of Revenue) Operating Costs (75% of Revenue) RevenueValue Added CostsNet Benefits CostsNet Benefits Assume 30% of Values Attributed to the Reef Assume 60% of Values Attributed to the Reef

World Resources Institute Estimated Accommodation Net Benefits Notes: Income tax/green levy not deducted Direct Impact multiplier not included

World Resources Institute 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

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

World Resources Institute 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

World Resources Institute 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?

World Resources Institute 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

World Resources Institute 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

World Resources Institute Estimated Dive Values--Tobago Total Revenue Total Costs Value added CS1* 9.5% CS2* 19% CS5* 28.5% Assume 50% Operating Cost Assume 75% Operating Cost All values in US$ millions and Annual Notes: Income tax/green levy not deducted Direct Impact multiplier not included * Sensitivity analysis around consumer surplus

World Resources Institute Estimated Net Benefits for Diving Notes: Income tax/green levy not deducted Direct Impact multiplier not included

World Resources Institute 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)

World Resources Institute 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)

World Resources Institute Tourism Cruise Ships Revenue minus Costs to the Island --Maintaining ports --Environmental damages --Additional use of roads, etc.

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

World Resources Institute 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

World Resources Institute 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”

World Resources Institute Shoreline Protection Services- Underlying Questions 1.How much “protection” is afforded to a shoreline by a coral reef?

World Resources Institute Shoreline Protection Services- Underlying Questions 1.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?)

World Resources Institute Shoreline Protection Services- Underlying Questions 1.How much “protection” is afforded to a shoreline by a coral reef? 2.What is at risk?

World Resources Institute Shoreline Protection Services- Underlying Questions 1.How much “protection” is afforded to a shoreline by a coral reef? 2.What is at risk? -Natural habitats / biodiversity -Valuable beaches -Real estate -(in extreme cases) Lives

World Resources Institute 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

World Resources Institute 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.

World Resources Institute 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.

World Resources Institute 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)

World Resources Institute 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

World Resources Institute 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.5x$2,000,000

World Resources Institute Tobago Setting Current map suggests approx ha. (30 km2) of coral reefs around Tobago. Note: coral reef mapping is a composite and needs validation

World Resources Institute 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.

World Resources Institute Tobago Setting Of the coastline “protected” by coral reef, 25% is classified as beach. COAST_TYPE Beach25% Cliff5% Shore56% Unknown14%

World Resources Institute Tobago Setting In southern Tobago, “protected coastline” at low elevation was identified. Note: Current elevation data are at 25’ intervals.

World Resources Institute Tobago Setting Population Density and Real Estate prices could be examined along low-lying “protected” coastal areas.

World Resources Institute Questions for Breakout groups 1.Will it be possible to define categories / characteristics of reef / coastline settings with different shoreline protection properties? 2.Will it be possible to develop rules for how much protection reefs afford in each coastline situation. 3.Are required data available? 4.Is avoided damages the right approach?