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. 1.Benefits provided by mangroves (= opportunity cost of shrimp farming)

8. Components of study 1.Benefits provided by mangroves (= opportunity cost of shrimp farming) 2.Net benefits of shrimp farming a.Financial (a.k.a. private) b.Economic (a.ka. social)

9. Benefits of mangroves Direct use valuesIndirect use values

10. Benefits of mangroves 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

11. Which benefits do S&B value? 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

12. Is partial analysis a problem?

13. 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. 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. 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. 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 = mE a A b –For given E, if A ↓, then X ↓, too

34. Property rights and  social surplus Open accessManaged fishery

35. Property rights and  social surplus Open accessManaged fishery X $/kg AC(A 0 )P0P0 Note: no producer surplus

36. Property rights and  social surplus Open accessManaged fishery X $/kg Note: A 0 > A 1 AC(A 0 ) AC(A 1 ) P1P1

37. Property rights and  social surplus Open accessManaged fishery X $/kg AC(A 0 ) AC(A 1 ) Note: only consumers lose

38. Property rights and  social surplus Open accessManaged fishery X $/kg AC(A 0 ) AC(A 1 ) $/kg X MC(A 0 ) P0P0 Note: only consumers loseNote: both consumers and producer surplus

39. Property rights and  social surplus Open accessManaged fishery X $/kg AC(A 0 ) AC(A 1 ) $/kg X MC(A 0 ) MC(A 1 ) P1P1 Note: only consumers loseNote: A 0 > A 1

40. Property rights and  social surplus Managed fishery X $/kg AC(A 0 ) AC(A 1 ) $/kg X MC(A 0 ) MC(A 1 ) Note: both consumers and producers lose Note: only consumers lose Open access

41. Applying this model

42. 1.Use regression methods to determine m, a, and b in X = mE a A b

43. Applying this model 1.Use regression methods to determine m, a, and b in X = mE a A b 2.Solve for E:E = m -1/a X 1/a A -b/a

44. Applying this model 1.Use regression methods to determine m, a, and b in X = mE a A b 2.Solve for E:E = m -1/a X 1/a A -b/a 3.Multiply by c (unit cost) to get total cost: TC = cm -1/a X 1/a A -b/a

45. Applying this model 1.Use regression methods to determine m, a, and b in X = mE a A b 2.Solve for E:E = m -1/a X 1/a A -b/a 3.Multiply by c (unit cost) to get total cost: TC = cm -1/a X 1/a A -b/a 4.Divide TC by X to get average cost: AC = cm -1/a X (1-a)/a A -b/a

46. Applying this model 1.Use regression methods to determine m, a, and b in X = mE a A b 2.Solve for E:E = m -1/a X 1/a A -b/a 3.Multiply by c (unit cost) to get total cost: TC = cm -1/a X 1/a A -b/a 4.Divide TC by X to get average cost: AC = cm -1/a X (1-a)/a A -b/a 5.Differentiate TC w.r.t. X to get marginal cost: MC = (c/a)m -1/a X (1-a)/a A -b/a

47. Applying this model 1.Use regression methods to determine m, a, and b in X = mE a A b 2.Solve for E:E = m -1/a X 1/a A -b/a 3.Multiply by c (unit cost) to get total cost: TC = cm -1/a X 1/a A -b/a 4.Divide TC by X to get average cost: AC = cm -1/a X (1-a)/a A -b/a 5.Differentiate TC w.r.t. X to get marginal cost: MC = (c/a)m -1/a X (1-a)/a A -b/a 6.Assume isoelastic demand curve: X = DP - 

48. Applying this model 1.Use regression methods to determine m, a, and b in X = mE a A b 2.Solve for E:E = m -1/a X 1/a A -b/a 3.Multiply by c (unit cost) to get total cost: TC = cm -1/a X 1/a A -b/a 4.Divide TC by X to get average cost: AC = cm -1/a X (1-a)/a A -b/a 5.Differentiate TC w.r.t. X to get marginal cost: MC = (c/a)m -1/a X (1-a)/a A -b/a 6.Assume isoelastic demand curve: X = DP -  7.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

51. NPV of shrimp farming: financial See Table 4

52. NPV of shrimp farming: economic See Table 5

53. Conclusions

54. S&B: shrimp farming is financially viable, but it is economically less valuable than mangrove conservation –NPV for mangroves would have been even higher if analysis had included carbon sequestration, tourism, and other excluded benefits

55. Conclusions S&B: shrimp farming is financially viable, but it is economically less valuable than mangrove conservation –NPV for mangroves would have been even higher if analysis had included carbon sequestration, tourism, and other excluded benefits JRV: S&B’s estimate of the value of coastline protection accounts for 96-97% of total estimated benefits from mangroves, but it is likely biased upward –Are mangroves really economically more beneficial than shrimp farms?