TOTAL ECONOMIC VALUE OF BERMUDA’S CORAL REEFS: VALUATION OF ECOSYSTEM SERVICES

Project: Bermuda Coral Reef Economic Valuation 
Department: Environmental Economics
Period: 2008 - 2010

Background

This project was initiated and coordinated by the Department of Conservation Services (Government of Bermuda) in collaboration with environmental economists from the Joint Nature Conservation Committee (U.K.) and implemented by the Institute for Environmental Studies (IVM) of the VU University (Netherlands) and a Bermuda-based scientific team. It was funded by the Overseas Territories Environmental Programme (OTEP, U.K.), XL Foundation in Bermuda, and contributed to by the Bermuda government for initial framework development. The study’s progress was overseen by a Steering Committee composed of Bermuda government representatives (Department of Marine & Ports, Tourism, Finance, Environmental Protection, Forward Planning, Conservation Services, and Sustainable Development Unit), and well respected members of the community.
This environmental economic study seeks to address the lack of environmental consideration in current policy and decision-making for the marine environment, by providing a means of recognizing the value of the range of ecosystem services provided by Bermuda’s coral reefs.

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Bermuda is one of the most densely populated countries in the world, with an economy supported by international business and tourism; increasing coastal development places intense pressure on the island’s natural resources, namely on the marine environment and more specifically on the northernmost coral reef system in the world. The policy issues affecting Bermuda’s coral reefs involve the lack of formal procedure when “planning” or “developing” in the marine environment, and the absence of a mechanism for integrating environmental values into those decisions.

Bermuda currently supports what is considered one of the “healthiest” coral reef systems of the Wider Caribbean Region. Coral cover- or coral density- varies among the different reef types, ranging from 22% to 70%. This creates habitats for an array of reef fish and invertebrates. As noted in the Biodiversity Strategy and Action Plan, Bermuda’s reefs are of global importance, being the northernmost reef system due to its proximity to the Gulf Stream. The northerly latitude of Bermuda’s reefs has benefited the health of the reefs by mitigating certain climate change impacts, such as increased “bleaching” events.

The immediate threats faced by Bermuda’s coral reefs relate to the increasing maritime traffic associated with the import of goods to the island, and to the changing tourism industry. The developments necessary to accommodate larger ships have potential direct and indirect impact on the reef system. This may in turn lead to the loss of ecosystem goods and services provided by coral reefs to Bermuda’s community.

Coral reefs provide both commercial and non-commercial goods and services. Estimating the economic value of coral reefs is complex. This value can be divided into use and non-use values; the latter are difficult to measure quantitatively and have the greatest uncertainty attached to them. In this study, the approach used to determine the Total Economic Value (TEV) focuses on 6 key ecosystem goods and services: 1) Coral reef-associated tourism 2) Reef-associated fisheries, 3) Amenity or reef-associated surplus value on real estate, 4) Physical coastal protection, 5) Reef-associated recreational and cultural values and 6) Research and educational values. Each of these six values is quantified using specific valuation techniques, the sum of all providing the TEV.

Total Economic Value

The value of the sum of compatible uses of the above goods and services constitutes the ‘Total Economic Value’ (TEV) of coral reef ecosystems. It is worth noting that although TEV is known as ‘Total’ Economic Value, this analysis has not included all goods and services provided by Bermuda’s coral reefs and that some aspects of coral reefs may be ‘invaluable’ i.e. they have intrinsic value, beyond any benefits provided to people. Hence, the TEV estimated here is likely to under-estimate the true ‘total’ value of Bermuda’s coral reefs.

Table 1 outlines the value in USD for each ecosystem service provided by Bermuda’s coral reefs, the resulting Total Economic Value of the reef system in Bermuda, and the contribution of each ecosystem service to the overall TEV. Please note that the values given are annual values, based on 2007 data and prices.

Ecosystem ServiceAverage value (million USD)Contribution to TEV
Tourism405.956%
Coastal protection265.937%
Recreation & Cultural36.55%
Amenity6.81%
Fishery (commercial & recreational)4.90.7%
Research & Education2.30.3%
Total annual value (TEV)722.4100%


The average annual value of the coral reef ecosystem amounts to $722 million. This high number certainly suggests that this ecosystem is highly valuable and worth conserving from an ecological, social and economic perspective. Lower and upper bound estimates were determined for each ecosystem service recognizing the uncertainty surrounding the economic analysis, resulting in a TEV ranging from $488 million per year to $1.1 billion per year. The contribution of ecosystem services to this value are in order of importance: 1) Tourism (56% of TEV), 2) Coastal Protection (37%), 3) Recreational and Cultural (5%), 4) Amenity (1%), 5) Fishery (0.7%), and 6) Research and education (0.3%).

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The TEV of coral reefs of Bermuda depends on the ecological integrity of the coral reefs (which affects the level of service provision), and socio-economic conditions. Degradation of the reefs is likely to lead to a loss of ecosystem service provision and a reduction in the TEV. Using a discount rate of 4% for a 25-year period, it is evident that preserving the coral reefs (or delaying their degradation) in Bermuda pays off in economic terms. To place the TEV of coral reefs in context of the economy of Bermuda: in 2007, the Gross Domestic Product (GDP) of Bermuda amounted to US$5.85 billion in 2007 (Government of Bermuda 2008). The TEV of coral reefs constitutes 12% of Bermuda’s GDP.

Recommendations: Policy applications

Environmental valuation provides a tool to assist policy and decision-makers in incorporating environmental considerations in future marine and/or coastal developments. Several policy recommendations were provided on the basis of the findings of this study.
• Recommendation 1: Make use of the cultural importance residents place on marine ecosystems to improve coral reef management.
• Recommendation 2: Actively involve the tourism industry in the development of sustainable coral reef management.
• Recommendation 3: Limit the commercial consumptive use of coral reefs by prioritizing stronger enforcement and protection of marine protected areas in Bermuda.
• Recommendation 4: Prioritize potential policy interventions in an economically sound manner.

Contact person at IVM

For more information about the study, please contact Pieter van Beukering (beukering@ivm.vu.nl)

Publications

Please download the following outputs of the study:
 
• Final report
• Executive summary
• Policy brief