Economic valuation

Policy Brief

The Challenge
Healthy ecosystems such as coral reefs and mangroves are critical to Bonairean society. In the last decades, various local and global developments have resulted in serious threats to these fragile ecosystems of Bonaire, thereby jeopardizing the foundations of the island’s economy. Therefore, it is crucial to understand how nature contributes to Bonaire’s economy and its wellbeing in order to make well-founded decisions when managing the economy and nature of this beautiful tropical island. This research aims to determine the economic value of the main ecosystem services that are provided by the natural resources of Bonaire and their overall importance to society. The challenge of this project is to deliver sound scientific insights that will guide decision-making regarding the protection of Bonaire’s ecosystems and the management of the island’s economy.

The Approach
By assigning economic values to the main ecosystem services of Bonaire, this research draws attention to the economic benefits of biodiversity and highlights the growing costs of biodiversity loss and ecosystem degradation. The study addresses the most relevant ecosystems and ecosystem services for Bonaire and applies a range of economic valuation and evaluation tools. By surveying over 1,500 persons, including tourists, fishermen, local residents, and citizens of the Netherlands, this study estimated the willingness of individuals to pay for the protection of Bonairean nature, as well as mechanisms (e.g. user fees) through which such payments would be transferred. Furthermore, a scenario analysis is conducted to inform decision makers about the most effective strategies to protect the ecosystems of Bonaire. This study intensively involved stakeholders from the start to finish, which facilitated data collection while simultaneously building capacity in applying the concept of ecosystem services among the target audience. 

This study is part of the research project “What is St Eustatius Nature Worth?”, a project that is part of The Economics of Ecosystems and Biodiversity (TEEB) Caribbean Netherlands. Healthy ecosystems such as the coral reef patches and the forests on the hillsides of Boven and the Quill are critical to the society of St Eustatius. The St Eustatius Strategic Development Plan (SDP) acknowledges the importance of the natural environment as an important attraction and asset for the development of the tourism sector. In the last decades, various local and global developments have turned into serious threats to these fragile ecosystems, thereby jeopardizing the foundations of the island’s economy. It is crucial to understand how nature contributes to the economy and wellbeing to make well-founded decisions that affect the natural environment on this special tropical island.

This research aims to determine the economic value of the main ecosystem services that are provided by the natural resources of St Eustatius and their overall importance to society. The challenge of this project is to deliver insight that supports decision- makers in the long-term management of the island’s economy and natural environment. From the onset of the study, stakeholders participated by facilitating data and simultaneously giving support to the concept of valuing ecosystem services. They address the most relevant ecosystems and ecosystem services for St Eustatius. The study applies a range of economic valuation and evaluation tools. By surveying over a 1,000 people including tourists, local residents, and citizens of the mainland of the Netherlands, this study estimated the willingness of individuals to pay for the protection of nature on St Eustatius.

In total, 8 different ecosystem services have been valued in monetary terms. The total economic value (TEV) is the sum of these ecosystem services provided by the marine and terrestrial ecosystems of St Eustatius. It is calculated to be 25.2 million USD per year. This TEV and its underlying components can be used to build a strategy for effective conservation measures and sustainable development on St Eustatius.

Key findings for St Eustatius

• The current total economic value (TEV) of the natural environment on St Eustatius is 25.2 million USD annually and consists of de following 8 values: non-use, tourism, fisheries, research, carbon sequestration, medicinal plants, local value, and agriculture and livestock.
• The aggregated annual amount for the value for conserving the natural environment by residents of the Netherlands mainland is estimated at 17 million Euros (22 million USD).
• Expansion of the tourism sector to up to 40,000 tourists a year will increase the tourism value up to 6 million USD in the short run, but will lower the TEV from 25.2 million to 17.8 million USD per year. The tourists will impact the natural environment rather severely. Local residents will be left with the degraded nature, while tourists will spend their holiday somewhere else. Slowly expanding the tourism sector is suggested, while tracking the impacts on the environment by monitoring closely.
• With the current pressure on ecosystem services of St Eustatius and without any additional management, the TEV of the natural environment will decrease from 25.2 million USD today to around 20.2 million USD annually within 30 years.
• Roaming animals are seen as a nuisance, but not every Statian knows that they also have a negative impact on the terrestrial and marine environments. Management of these animals will improve the natural environment of St Eustatius in a cost efficient way and opens up the possibility to agricultural practices.
• When managing free roaming animals is combined with moderate expansion of tourism, nature will be more resilient and can withstand more tourists without degradation of the natural environment.
• With a well-considered growth of the tourism industry and the development of agriculture, the SDP can be realized. Statians will enjoy a higher level of prosperity by maximizing the benefits from ecosystem services while they experience a livable, natural environment. 

On the 21th and 22st of January 2015, a 2-day workshop was held on Curacao. The workshop was intended to build knowledge and share experiences between different stakeholders involved in policy, management and/or investments in nature conservation or from the private sector with regard to the economic valuation of nature on Curaçao. The workshop focussed on raising awareness about the mutual interdependency of nature and the economy as a result of socio-economic valuation studies and these studies provide a tool to mainstream nature management within all social, environmental and economic sectors on Curaçao. During the workshop the research steps for a total economic valuation (TEV) study for Curaçao were developed based on various practical exercises. In a TEV study, all the important ecosystems and ecosystem services are investigated.

“Increase the understanding about why a study on the socio-economic value of nature is useful for Curaçao, how to develop such an assessment, and which tools to use” The sub-objectives of the workshop were:

• Training on defining objectives, approaches and scope of economic valuation of ecosystem services based on The Economics of Ecosystems and Biodiversity (TEEB)1 .
• Identify and discuss policy issues that should be addressed by a total ecosystem services valuation study.
• Training on the available ecosystem valuation methods and techniques.
• Present experience and knowledge on valuation of ecosystem goods and services studies, the actual influence on nature conservation, management, investments and policies in the Caribbean. Factors that enable the effectiveness of a valuation study will also be discussed.
• Discuss recommendations to implement and communicate the outcome of the potential study to the relevant decision-makers and actors in the private sector.

The idea is to have several theoretical sessions combined with interactive discussions and exercises. Working groups are assigned to develop cases based on identified policy questions to which economic valuation research on Curaçao can be applied. Finally, the participants identify approaches and a strategy to communicate expected results

The ecosystems of the island of Bonaire support a range of activities that depend on the quality of the natural environment. Tourism is one of these activities and it represents an important source of income for the local economy. Tourism in Bonaire can be divided in stay-over tourism and cruise tourism. Whether further development of cruise tourism is desirable for Bonaire is constantly under discussion. It is thought that more cruise tourists will contribute to economic growth. But, at the same time, there is a fear that an increase in the number of cruise tourists and the investments in infrastructure and other facilities to facilitate this growth will put extra pressure on the ecosystems. And these are the same ecosystems that are vital in attracting not only cruise tourists, but also stay-over tourists.

This study aims at providing quantitative and qualitative information on the potential benefits and negative effects of an expansion of the cruise tourism industry on Bonaire. For this purpose, a socio-economic valuation was first conducted to understand the cruise tourism industry in Bonaire. This resulted in insights that include tourist’s expenditures, the different actors on the island that benefit from these expenditures, the dependency of certain sectors on tourism related revenues and the attitude of tourists towards certain social and environmental changes in the island. This information is derived from tourist surveys, a business survey and literature review.

Second, with the information gathered, and making use of an economic Input-Output model for Bonaire that is linked to an ecologic model, three different cruise tourism growth scenarios were analysed: a baseline scenario, a moderate growth scenario and a rapid growth scenario. This analysis resulted in the calculation of economic benefits that would result from an increase in the number of cruise tourists in each scenario. At the same time, using the ecologic module that is linked to the economic Input-Output model, the socio-environmental impact on a number of natural indicators was also assessed. Certain environmental effects of cruise tourism, like waste production, water consumption and the ecologic footprint of cruise ships, could not be included in the ecologic module and were, therefore, assessed separately from the model.

The surveys conducted amongst tourists have shown the importance of maintaining a healthy reef and the tranquillity on the island. Especially stay-over tourists indicated that they are not willing to return to a more crowded island or an island with a degraded coral reef. Both the survey and the scenario analysis indicate that sectors that benefit the most from the growth of the cruise industry are the transport, restaurant, ‘other services’ (which include tour operators) and trade sectors.

The scenario analysis further indicates that an increase in cruise tourism will generate a growth in GDP within the period of the analysis (until 2024). While the economy grows as a whole, more jobs will be generated. However, given the seasonal character of cruise tourism and the sectors that benefit the most from it, most of the jobs created appear to be in lower income categories. As a result of potential population growth to fill in these new jobs, household consumption and GDP per capita do not increase as much as the GDP growth might suggest. Household consumption at the end of the analysis period (2024) is only $234 higher in the rapid growth scenario compared to the baseline scenario.

The economic growth caused by cruise tourism expansion also results in socio-environmental impacts, as higher number of visitors will increase direct pressures on the ecosystems that are visited. The main impacts that have been analysed are change in land use, decrease in coral cover, water consumption and waste generation and the potential decrease of stay-over tourists as a result of coral reef degradation and more built-up land.

However, not all potential socio-environmental impacts could be included in the scenario analysis. If cruise tourism industry is to expand even further, Bonaire must expand its infrastructure. This means that investments need to be made to accommodate larger amounts of tourists. The scenario analysis does not take into account the impact of these potential infrastructure projects like additional port infrastructure, proper waste management system, water management, more roads and more ground transportation. It was also not possible to assess the effects on the environment and the return rate of stay-over tourists caused by crowding in specific areas and on peak moments.

The results of the study demonstrate that there are external effects related to the expansion of cruise tourism. For example, a decrease in stay-over tourists as a result of rapid growth of the cruise tourism industry may have significant implications for the hotel industry. To make decisions regarding cruise tourism expansion, such external effects should be taken into account. Furthermore, investing on an environmental friendly expansion and the enforcement of environmental regulations will also be of high importance to avoid endangering the ecosystems and, thereby, the tourism industry as a whole. More research on the local impacts of cruise tourism and the effects on the stay-over sector are necessary to draw conclusions on the desirability of the expansion of cruise tourism for the island.

Map (GIS) showing the economic values of marine ecosystems on St.Eustatius for:

• Carbon sequestration
• Cultural and local recreational value
• Fisheries
• Tourism

See this report for more information

For illustration, the excerpt below shows the total economic value:

Map (GIS) showing the economic values of terrestrial ecosystems on St. Eustatius for:

• Carbon sequestration
• Cultural and local recreational value
• Archeology

See this report for more info.

For illustration, the excerpt below shows the total economic value

Since 10 October 2010 Bonaire, Saba and Sint Eustatius (Statia) are part of the Netherlands. These three islands are referred to as the Caribbean Netherlands. The objective of this study is to assess the value that Dutch people as well as non-Dutch residents living in the Netherlands mainland assign to nature in the Caribbean Netherlands. This research applies two different stated preference techniques, the contingent valuation method (CVM) and choice experiments (CE), to determine the Willingness-To-Pay (WTP) of those living in the Netherlands for the conservation of ecosystem services and biodiversity in the Netherlands’ mainland and the Caribbean Netherlands.
Both methods provided new insights into the way people value the non-use values of nature in a national and local context. The surveys provided evidence for a nationalistic and community-based influence on valuation of nature. Both the CVM and the CE methods showed that locally-oriented Dutch citizens value nature in their own neighbourhood or country relatively higher than citizens with a global perspective or foreigners who live in the Netherlands and who place a lower value on improvement of nature in their own environment
Both surveys also showed that the values for nature both in and outside of the Netherlands depend heavily on the emotional mindset of the respondent. For example, individuals who are unconcerned about the state of nature in general value improvements of nature less than those who are concerned about nature. In the same fashion, consumer confidence proved to be a strong explanatory variable for value for nature protection: individuals with a high level of consumer confidence express a higher WTP for nature protection.
Finally, several methodological lessons were drawn from the surveys. These include the detection of ordering, anchoring and scoping effects, as well as the correlation between preference and payment uncertainty.
The estimated WTP amount for non-use values of nature in the Netherlands and the Caribbean Netherlands also allowed for the calculation of the aggregated values of both value domains. The non-adjusted aggregated annual amount of non-use value of nature in the Netherlands and the Caribbean Netherlands is estimated at €65 million and €34 million, respectively. However, by adjusting for preference and payment uncertainty of the respondent, the aggregated annual amount for the non-use value for nature improvements in the Netherlands is estimated at €34 million and for the Caribbean Netherlands at €18 million.

Abstract:

The St. Eustatius National Marine Park conducted an Economic Valuation of St. Eustatius’ coral reef ecosystems in the fall of 2009. This attempted to put a monetary estimate on the coral reefs surrounding Statia. Coral Reefs are one of the island’s most valuable resources; they provide a livelihood through dive tourism and fishery and provide protection from large, damaging waves caused by hurricanes. In order to properly manage the coral reef ecosystem, an economic valuation is a useful tool to determine what exactly the monetary value of a coral reef is. With an attached value, better management decisions can be made to adequately protect this most precious of resources.

In order to complete the study four questionnaires were distributed. Two dealt specifically with fisheries, one with hotel accommodations, and one with dive tourism. Data was also provided by the Statia Tourism Office. Coral reefs have direct and indirect influences on a wide range of economic factors, and the generation of data was crucial to the successful completion of this study. Data was inputted into a computer program created by the World Resource Institute and which was adjusted by STENAPA to reflect Statia’s unique ecological and economic situation.

The findings of this study have outlined that Statia’s coral reef resources provide important goods and services to the economy of the island. The revenue that the resource is able to generate through coral reef associated tourism and fishery is approximately USD $11,200,454. Although this number is high, and highlights the importance of coral reefs to the island, it also suggests that there is an increased need for conservation, so that the value does not diminish. It is therefore in the best interest of Statia to incoroporate environmental economic data to: (1) Enforce land-use and development regulations in the coastal zone, (2) Enforce strict usage of anchorage areas, (3) Incorporate economic valuation into EIAs, (4) Include economic impacts in assessing fines for damages to reefs from activities such as anchoring in the reserves, oil spills etc, (5) Weigh revenues from a growing tourism industry against long-term economic losses from environmental impacts, (6) Evaluate distributional effects (“winners” and “losers”) of proposed coastal development projects, (7) Invest in Scientific Research, (8) Increase support from the private and public sector in the Marine Park Management Authority, STENAPA. 

The St. Maarten Nature Foundation conducted an Economic Valuation of St. Maarten’s coral reef ecosystems in the fall of 2010. This attempted to put a monetary estimate on the coral reefs surrounding the island. Coral Reefs are one of the island’s most valuable resources; they provide a livelihood through dive tourism and fishery and provide protection from large, damaging waves caused by hurricanes. In order to properly manage the coral reef ecosystem, an economic valuation is a useful tool to determine what exactly the monetary value of a coral reef is. With an attached value, better management decisions can be made to adequately protect this most precious of resources.

In order to complete the study four questionnaires were distributed. Two dealt specifically with fisheries, one with hotel accommodations, and one with dive tourism. Data was also provided through independent research and stakeholder analysis. Coral reefs have direct and indirect influences on a wide range of economic factors, and the generation of data was crucial to the successful completion of this study. Data was inputted into a computer program created by the United Nations Environment Program and the World Resource Institute (WRI) and which was adjusted by the St. Maarten Nature Foundation to reflect St. Maarten’s unique ecological and economic situation.

The findings of this study have outlined that St. Maarten’s coral reef resources provide important goods and services to the economy of the island. The revenue that the resource is able to generate through coral reef associated tourism and fishery is approximately USD $57,586,976. Although this number is high, and highlights the importance of coral reefs to the island, it also suggests that there is an increased need for conservation in order for this value not to diminish. It is therefore in the best interest of St. Maarten to incorporate environmental economic data to: (1) Establish Marine Protected Area, (2) Incorporate economic valuation into EIAs, (3) Include economic impacts in assessing fines for damages to coral reefs from activities such as anchoring in the reserves, oil spills etc, (4) Weigh revenues from a growing tourism industry against long-term economic losses from environmental impacts, (5) Evaluate distributional effects (“winners” and “losers”) of proposed coastal development projects, (6) Invest in Scientific Research, (7) Increase support from the private and public sector in the proposed Marine Park Management Authority, St. Maarten Nature Foundation.