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Social and Economic Implications of a Channel Islands Marine Reserve Network
From: Woods Hole Oceanographic Institution
| By:
Astrid Scholz |
EDITOR'S INTRODUCTION |
Economics is often used to argue both for and against establishing marine reserves. Commercial and recreational fishery groups will point to numbers that will show how much revenue will be lost if fishing grounds are placed off-limits, while environmental groups will draw on numbers that show increased gains in tourism and other sources of revenue. Astrid Scholz, an ecological economics consultant for Environmental Defense, uses the example of the Channel Islands National Marine Sanctuary to highlight several key economic principles that can be used to help decision-makers arrive at better conclusions when creating or designing reserves. Concepts like "insurance value" and "willingness to pay" might seem impractically abstract, but Scholz argues that they can yield concrete numbers that can avoid economic troubles or environmental catastrophe later on.
This is an edited version of a talk she gave at the Fisheries, Oceanography and Society symposium, "Marine Protected Areas: Design and Implementation for Conservation and Fisheries Restoration" at Woods Hole Oceanographic Institution on August 27, 2001. |
 want to present a fly-on-the-wall outline of the status of the Channel Islands National Marine Sanctuary, off the coast of California, where we are currently trying to implement a network of marine protected areas. There are very complex temporal and spatial aspects of designing marine protected areas, and it is challenging to get stakeholders and decision-makers to consider these very complicated aspects. I will propose that something we are calling "total economic value" is a good way to think about ecological time and space. |
My two main messages are that marine protected areas are a public investment into the health of our marine ecosystems and the various uses and activities they sustain, and that we can insert important temporal and spatial logic through this vehicle of considering all associated economic values when evaluating reserve designs. Just to be clear on the terminology, we're talking about fully protected marine protected areas, or no-take marine reserves in the waters of the Channel Islands National Marine Sanctuary. |
In August of 2001, the California Fish and Game Commission received what's called the preferred alternative, which sets aside roughly 25 percent of the current sanctuary area in a reserve network. This is the outcome of a two-year deliberative working group process with lots of public input. Depending on whom you listen to, it was either very fair and very proactive process, or it was terribly exclusionary and elitist and didn't really bring everybody to the table. |
Now just to zoom on the socio-economics of it, the projected immediate costs to consumptive users are roughly 50 percent in lost ex-vessel revenues, or about $4 million, and about 18 percent in lost recreational fishing and diving income, or about $9 million. In this preliminary analysis, which was done by economists at the National Oceanic & Atmospheric Administration's (NOAA) Special Projects Office, you're looking at all the activity that is going on--in this case the whole sanctuary area--and you're just counting it out fishing block by fishing block to come up with a count of the economic revenues currently generated in each area. Then you look at what happens when those fishing blocks are taken away. This they're calling maximum potential loss, but as an economist I have to tell you there was no optimization process and it's really just a "here today, gone tomorrow" kind of approach. From an intellectual standpoint, this kind of static comparison is really very unsatisfying because it only considers immediate effects, and does not account for mitigating effects over time. |
But bear those numbers in mind. They add up to about $13 million. By comparison, there are host of values associated with marine reserves, many of which only materialize over time. I reluctantly put some figures to these various values that will be presented, only to give ballpark estimates of the order of magnitude about what we might be talking about. That's because people usually want to hear dollar terms. I'm not proposing that we can in fact arrive at a complete enumeration of the total economic value, but bear in mind that the immediate costs right now are projected to be around $13 million from one year to the next. |
The discounting dilemma
Bioeconomics sounds like a good idea: combining population dynamics with models of economic activity, and those of us who studied it in great depth were optimistic that it might lead to better fisheries management. But really, what it comes down to is that you are comparing fish in the sea to money in the bank. A fish in the sea is like money in the bank because when it's extracted it generates revenues; you sell it on the market, you get money for it, you can support your livelihood and your business with it. That's a direct consumptive use, to use common jargon found in policy analyses. It is also like money in the bank in the sense that it generates interest. If you leave it out there to get bigger and to reproduce, in a sense you generate a stream of revenues that is available to further fishing activities. There is some debate as to how big the spillover might be, but to the extent that there is spillover, it's like a bank account generating interest. |
However, a fish is most certainly not like money in the bank when you consider that most organisms reproduce much slower than the interest rate. And that is in fact what the comparison comes down to. When you do these cost-benefit analyses it's not quite like comparing apples to oranges, but it is comparing the intrinsic rate of reproduction of organisms to the interest rate. And you can immediately see the problem here. Fishermen have to make payments on boats and make capital investments and so on--all that is driven by money markets. Therefore, in the short run, fishing--or indeed, overfishing--makes more economic sense than conservation. None of this should be very surprising. |
 What we have here is a schematic of the total economic value of marine reserves (see Figure 1). Usually, for the most part, we're way over there on the left side--we're mainly talking about direct use values from consumptive and non-consumptive activities. In the policy context, you get the fishermen coming up and they say "this is going to cost me x thousand dollars next year." So we're talking short-term direct use, and of course the consumptive uses we're looking at are the commercial and recreational fisheries. There are of course, non-consumptive uses that are associated, too, that have direct-use values and these are things like tourism, recreation, education, and research. |
Notice at the bottom of the graph that these values are progressively less meaningful or tangible to individuals. Now that's important. All it means is that you care about yourself and the present more than you do about other people and the future. No surprises there. However, it's exactly along that axis that some of the ecological--in fact, I would say, most of the ecological values and benefits--stand to be realized. So how do we shift that part of the axis more toward the left and get people thinking about them today as they make these decisions. That's where I want to start running through some of these values, using very preliminary data and thought experiments that we did in the Channels Islands' case. |
Non-consumptive uses and indirect values
In the non-consumptive and indirect use category that I've lumped together for the sake of conciseness, if you close up an area there are immediate gains to things like whale-watching, kayaking and diving--users benefit from having these areas to themselves and not competing with fishing boats for space. Interestingly, and there is a study out about this, whale-watching has a 10 percent annual growth rate globally. In the Channel Islands right now it constitutes the biggest non-consumptive activity. We did a very informal phone survey of the whale-watching operators in the area and they weren't expecting any positive or negative effects on their operations. That was a very interesting thing that I'd like to follow up on and see what actually happens after MPAs are implemented. |
There is the potential, of course, to enhance tourism and ecotourism, and eventually one might also expect--in this indirect use category--the spillover effects that we've been speculating about. The underlying logic is that the increased size and fecundity of marine life leads to spillovers in adjacent areas. We have been able to show this, provisionally, for yellow and black rockfish in the Channel Islands. We calculated the economic value, and ended up getting a single-species-value-per-area figure that was about two to three times larger than in the adjacent fishing area. This is a concept that we hope will gain more currency, this notion of value per area as a way to get the spatial component of this measure into deliberations about costs and benefits. |
Another interesting thing is that marine reserves might actually allow us to measure this elusive concept called revealed preferences. This is the notion that people, through their behavior, actually enact their values even though they don't necessarily put a price or figure on it. |
In increasingly more abstract terms of value, there are things like option and quasi-option values associated with marine reserves. These are benefits of keeping options open. That means preserving areas and spawning grounds, for example, so that in the future we can have fishing and other activities. But it also includes things like the insurance aspect, which involves avoiding more costly conservation measures that might become necessary as pervasive trends continue, in California and elsewhere, such as declining landings and value. Part of this value concept is that there are benefits from future information about the resource. These might be things we don't even know about yet, but that become important in the future. |
Option and replacement values
There are ways to conceptualize the insurance, or option, value. One way to think about a benefit is in terms of a cost avoided. That is sort of classic economic doublespeak, but one way that we can bring this home in California is by considering the costs associated with a listing under the Endangered Species Act. The Pacific Fisheries Management Council, for example, estimates that the 2001 ocean salmon regulations are going to cost the industry something like $35 million in lost revenues, compared to the pre-ESA average revenues. |
You impute proxy measures like the replacement value of a fishery, such as the money spent by the Canadian government for fisheries bail-out measures after the northern cod collapse, which amounted to something like $2 billion. You should have seen the Fish & Game Commission when I put that figure to them in testimony I gave in August 2001. Suddenly they seemed to say, "Whoa, I don't want to see that happening on my watch." That was a way to really bring this home the point that the decisions we're making today have these potentially very far-off consequences or, if you make the right decision, avoided costs. |
There are somewhat more obscure informatic biodiversity values associated with marine resources, such as chemical compounds for pharmaceutical uses. An example is Bryostatin, which is a chemical compound derived from marine organisms. It is currently in Phase II clinical trials as a cancer treatment, and there are plans to grow it in aquaculture off the coast of California, potentially generating a new kind of revenue. And then there's a face cream, Resilience, which contains a compound derived from a sea fan, that generates tens of millions of dollars for, in this case, a skin care product company. If you cast your mind back to the immediate cost associated with marine reserves, here you have something derived from marine resources that is generating millions of dollars in revenues, underscoring the benefits of keeping ecosystems intact and hopefully realizing some of these more obscure values. |
Public investment concept
As private individuals we constantly make difficult investment decisions about the future, such as saving for a house or for our children's college fund, and this is very much the same sort of logic that applies to marine resources and ecosystems and the stewardship that public agencies have over these resources. The bequest value is the value of leaving resources, ecosystems and a coastal way of life to future generations. This can be estimated in a variety of ways, notably by eliciting something called "the willingness to pay". As the name suggests, this is a measure of how much people are willing to pay for an ecosystem service. |
How do you measure willingness to pay, and isn't that very difficult? The answer is yes, it's difficult. Methods include contingent--valuation, travel costs, and hedonistic pricing--basically all techniques to derive prices for goods and services for which there are no markets. But some areas--especially marine reserves--might provide some of the best testing and experimental grounds for concepts like willingness to pay. This is because you can actually go in and interview divers, for example, and ask, "How much would you be willing to pay if you could see bigger fish or more fish?" It turns out that the answer to that in some Caribbean marine parks is that people would be willing to pay up to $10 more per dive trip to see bigger groupers and more groupers on a trip. We could conduct these diver surveys for other marine reserves, and with relatively little effort. |
The following is more a thought experiment rather than rigorous analysis, simply because of the lack of the time series of data that would be needed to do this properly, but it's important nonetheless. If you look at the commercial and recreational fishing contributions to the regional economy--on the order of $190 million in 1999--and assuming about half that is sustainable, which is really just pulling a figure out of a hat, at a 5 percent discount rate that translates into a capital value of about $2 billion. In other words, if that fishery were wiped out because you can't sustain it anymore and stocks collapse, then this is what you would the cost of not enacting management measures such as marine reserves. |
Again, I'm not suggesting that we can actually do all these measurements accurately and to proper academic satisfaction, but we can use these sorts of exercises to illustrate for decision-makers and stakeholders what is really involved in some of the policy processes that we're going through. |
Existence value
Finally, the existence value is the value of knowing something exists. You might never go to Yellowstone National Park, but you just want to know that it's still there. Maybe there's a lot of national identity wrapped into wilderness areas and the national park system. I don't know about this, I'm German and we don't have wilderness, but a lot of people associate with that concept in the United States. |
Ironically, it may be one of the easier values to quantify. That has been done in the Exxon Valdez aftermath, when a survey of US households, and their willingness to pay for undisturbed Alaskan wilderness, was used in the damages assessment of $5.3 billion. If we make a relatively conservative assumption that about 1 percent of the roughly 100 million US households would be willing to pay $10 to protect areas in the Channel Islands, then you get an existence value of about $10 million. |
Of course you can't compare the willingness to pay with the immediate costs of implementing the marine reserve; the proper comparison is to the consumer surplus currently derived from commercial and recreational activities, which turns out to be on the order of $8 million or so. So it's already getting up there. Already you have a comparable amount of pure existence value that usually doesn't get factored into decision-making processes. Of course it's a conservative consumption, because as we know from other studies about 8 percent of US households donate to environmental organizations such as Environmental Defense Fund, and a Seaweb poll in 2000 found that 76 percent of people surveyed support ocean-protected areas. So I think there is some support to this notion of using these values and trying to factor them into our decision-making deliberations as a way to capturing the broader societal values associated with marine protected areas. |
The total economic value is a useful way for getting temporal and spatial aspects of marine reserves into the decision-making process. Some of the longer-term effects, both on the temporal and on the spatial scales that are relevant from an ecosystem perspective, can be considered through the vehicles of bequest value, option value and existence value. |
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