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Content
International Conference on Estuaries and Coasts November 9-11, 2003, Hangzhou, China
STUDY ON COASTAL RESOURCE EVALUATION THEORIES AND METHODS
Jianjun JIN, Zhishi WANG Faculty of Science and Technology, University of Macao, China Tel: (853)8939370; Fax: (853) 838314 E-mail: [email protected]; [email protected] Shenghong RAN Institute of Geographical Sciences and Natural Resources Research, Chinese Academy of Sciences, Beijing, China Caixing YUN State Key Laboratory of Estuarine and Coastal Research, East China Normal University, Shanghai, China
Abstract: Coastal resources are important components of natural resources and they are also the important material fortunes of national economy and society development. However, a series of problems emerged from exploiting and utilizing coastal resources forced people to scan their own management and utilization styles in a new way. In terms of protecting and utilizing coastal resources rationally, the unanimous attitude is to manage coastal resources as assets and to carry paying system into execution. Economic evaluation of coastal resources is the prerequisite and key of capitalization management and the execution of paying system. At present, in China, economic evaluation of coastal resources has just been drafted out and there are no mature theories and models. This paper synthesizes evaluation conceptual framework of coastal resources based on the basic theories of value rule, rent theory, investment economics and ecology economics. It will be helpful to protect and utilize coastal resources rationally and to advance the course of utilizing coastal resources paid and the course of incorporation of coastal resources accounting into natural resource. This evaluation conceptual framework of coastal resources will add a new content in the study system of resource pricing research.
Key words: Coastal resources; Capitalization management; Resource evaluation
1. INTRODUCTION Coastal resources refer to the natural resources found in coastal areas, which is useful for human today or in the coming future, including land, forests, coastal waters and wetlands, sand minerals, hydrocarbons, and living coastal organisms (Walters, 1998; Jin, 2002). Living coastal resources include fish, shellfish, marine mammals, seabirds and other marine organisms (seaweed, coral reefs). Coastal resources also generally include other important resources such as those with archaeological, historic, sacred, or gender-specific significance (Walters, 1998). Coastal resources are crucial and important to support life on our planet. The benefits that can be derived from coastal resources are well known and widely recognized. Coastal resources are sources of primary and secondary production, and biodiversity. The importance of the coast in global material and energy cycles is now beginning to be better appreciated. Recent estimates of the economic value of the marketed and non-marketed ecosystem services
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of the coastal system indicate a huge contribution to human welfare from the functions mentioned above plus raw materials, recreational, and cultural services (Costanza, 1997). The inherent economic value of coastal resources leads to utilization by a broad spectrum of resource uses (DNER, Philippines, 2001). Coastal zones throughout the world are attractive and important areas for socio-economic development. However, the coastal zone’s increasingly becoming the favorite site of human activities has disastrous consequences on coastal resources (Jean, 2002). Nowadays, the development of industrial and tourism as well as the increase in the urban population has generally been highly concentrated in the coastal zone. The rich coastal resources are under severe stress form the combined impacts of human overexploitation, physical disturbance, pollution, sedimentation and so on (White, 1998). Moreover, traditionally, coastal resources are open access (Costanza, 1999). In most countries coastal waters and their resources are considered ‘commons’; that is, they are not owned by any person or agency but are common property available equally to all citizens, with the government as ‘trustee’ (Clark, 1997). Their common property nature makes it impossible to exclude those who do not pay for enjoying or using them. As a result there is no incentive to conserve such resources and overuse and even exhaustion can occur when utilization or harvest rates exceed the population growth rates of species [10]. If we don’t change these situation and utilizations styles, in the future, we will have much less resource left and its net natural productivity will be significantly reduced or there will be nothing left and ultimately deprive future generation of their rightful heritage (White, 1998). Fortunately, recognition of the need to protect coastal resources is increasing. There have been growing calls for coastal resources to be valued in economic terms by economists and ecologists (Pearce, 1988; Oliver, 1995; Ledoux, 2002). This development stems from a belief that unless the value of coastal resource is expressed in monetary units it will continue to be destroyed (Oliver, 1995). If we can portray the economic values of coastal resources, we may place more importance on their management and long-term protection and control our abuse of coastal resources (White, 1998). 2. THEORY AND METHODS OF COASTAL RESOURCE VALUATION 2.1 COASTAL RESOURCE VALUE COMPONENTS The values the society places on the coastal resources originate due to different uses and services the coastal resources provide. The mainstream economic approach to valuation takes an instrumental (usage-based) approach and seeks to combine various components of value into an aggregate measure of resource value lableled total economic value (White, 1998). The components of Total Economic Value (TEV) of a costal resource are illustrated in Fig. 1. TEV of coastal resources consists of use and non-use values. Use value means many goods and services provided by coastal resources, which could be consumed or used directly or indirectly (Geard, 1999). Use value consists of direct use values, indirect use values and option values. Direct use value can be classified as “good”, which measures the consumptive value of tangible coastal resources such as fish, timber, and coastal water. Indirect use values, which can be classified as “services”, measures non-consumptive ecological and recreational uses of coastal resources such as diving, swimming, boating, and picnicking (White, 1998). Option value (which could be direct or indirect) is the willingness to pay to maintain the coastal resource weighted by the probability that the resource will be used at some future date (Oliver, 1995). Non-use values are those values, which are independent of an individual’s present or future direct or indirect use (Geard, 1999). Traditionally these components have not been quantified in monetary terms, which has led to coastal resources being undervalued (Oliver, 1995). The willingness to pay for conservation and preservation of coastal resources, to avoid irreversible changes specifically for the benefit of future generations is known as the bequest value.
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Besides the bequest value, people may gain satisfaction from the knowledge that certain coastal resources exist and therefore may be willing to pay for their continued existence. This is known as the existence value (Gerard, 1999). Existence value arises from the notion that individuals who make no use of a particular coastal resource may gain utility from the mere existence of the resource, even if there is no intention to use the resource in the future (Oliver, 1995). In summary, the total economic value of a coastal resource is the sum of use and non-use values. However, identification is only the first step in assisting public policy, and what is required is some means of quantifying each element in monetary terms (Oliver, 1995).
Total economic
Use value Non-use value
Direct use value (“goods”)
Indirect use value (“services)
Option value
Bequest value
Existence or preservation value Value from knowledge of continued existence or preservation
Outputs/services that can be consumed Functional benefits enjoyed indirectly directly
Future direct and indirect use
Value of leaving use and nonuse values to offspring • Biodiversity • Habitats • Irreversible
• Food • Biomass • Recreation
• Ecological functions • Flood control
• Biodiversity • Conserved habitats
• Biodiversity • Habitats • Endangered
• Decreasing “tangibility” of value to individual • Increasing difficulty of measuring accurate values
Fig. 1 Total Economic Value of Coastal Resources
2.2 COASTAL RESOURCE VALUATION METHODS Resource valuation is the process of assigning a numeric value, usually monetary, to a particular resource, product or activity. The coastal resource valuation process uses a number of monetary valuation methods to account for use and non-use values of coastal resource systems (Lipton, 1995). The valuation of coastal resources is not the same as the valuation of ordinary goods and services. The value or worth of a particular good is equivalent to the price determined by the market based on supply and demand conditions. Some coastal resources such as mangrove forest can also be priced according to the market goods they produce. However, this value can only reflect the partial value of the resource because coastal resources provide other and oftentimes, more significant values, on top of those already priced in the market (White, 1998). For example, coral reefs provide habitats for fish. Traditionally coral reefs are valued according to the quantity of fish caught. This is convenient because only fish are bought and sold in the market. But other aspects of the value of coral reefs, such as recreational services and biodiversity conservation as well as protecting from coastal erosion, do not show up
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completely in markets. These functions are often given too little weight in policy decisions (Costanza, 1997). However, this neglect may ultimately compromise the sustainability of humans in the biosphere (Costanza, 1997; White, 1998). Therefore, coastal resource valuation should take full account of all value components of coastal resources. We must begin to give the natural capital stock that produces these services adequate weight in the decision-making process, otherwise current and continued future human welfare may drastically suffer (Costanza, 1997). 2.2.1 Market-based valuation methods Market-based valuation methods use actual market prices as a surrogate for the value of coastal goods and services. These methods have the advantage of easy applicability as well as simplicity in methodology (Gerard, 1999). They are used when changes in production or productive capacity of a certain good or service can be measured. Here, willingness-to-pay (WTP) is taken to be equal to market price (White, 1998). Economists often use the concepts of consumer surplus and producer surplus to approximate the net WTP (Lipton, 1995). Fig. 2 shows conventional supply (marginal cost) and demand (marginal benefit) curves for a typical market good or service diagrammatically. The value that would show up in gross national product (GNP) is the market price p times the quantity q. The cost of production is the area under the supply curve, cbq. The ‘producer surplus’ or ‘net rent’ for a resource is the area between the market price and the supply curve, pbc. The ‘consumer surplus’ or the amount of welfare the consumer receives over and above the price paid in the market is the area between the demand curve and the market price, abp. The total economic value of coastal resource is the sum of the producer and consumer surplus, or the area abc on the diagram (Costanza, 1997).
Pric Demand curve Equilibri um price
Supply curve
The equilibrium price is the price for each individual unit of good Producer surplus Quantit y Equilibrium Quantity Demanded
Fig. 2 Consumer and Producer Surplus
Many methods have been developed and used to estimate the market value of coastal resources (Lipton, 1995; White, 1998; Gerard, 1999; Ledoux, 2002). Here, we synthesized previous studies on a wide variety of methods. • Cost effectiveness analysis—assesses the impact of different options in physical terms, and compare these to the costs of the different options to determine which option, or mix of options, achieves the target at least cost (Ledoux, 2002). • Cost–benefit analysis—values all costs and benefits in monetary terms to establish a stream of costs and benefits associated with a particular policy over time and compare these (Ledoux, 2002). Cost-benefit analysis is the major tool for conducting economic evaluation of public programs in coastal resource management (Lipton, 1995).
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Change in productivity—estimates changes in production arising from a particular intervention or coastal resource state. We need “before” and “after” or “management versus no management” production estimates with the same parameters and assumptions used to measure the changes (White, 1998). If a certain coastal resource is harmed, production goes down. The market price of the lost production reflects the economic value of the coastal resource. Most case studies on coral reef and mangrove valuation involving fisheries and wood production use this technique. • Actual defensive or preventive expenditures—measure the value people are prepared to spend on preventing damage to them or to the environment. Examples are expenses incurred to avoid or reduce unwanted environmental impacts such as coastal erosion or water pollution. This approach provides only a minimum estimate of the value of coastal resource, since it cannot be higher than an individual’s ability and WTP, which is usually constrained in developing countries (White, 1998). • Shadow Projects Approach—is simply taking the replacement cost approach one step further. In this method, the complete cost of replacing a range of coastal resource is estimated. This method is more suitable in cases where it is difficult to value individual items in an ecosystem and/or when most services and functions are unknown (Gerard, 1999).
•
2.2.2 Non-market based methods Some goods and services, such as free public beaches or parks, recreational fishing, and wildlife viewing, are not traded in the market. Nonetheless, individuals benefit from their use and loss of access to these “non-market” goods may cause significant welfare losses to individuals. There is a gap between market valuation and the economic value of coastal resources. To fill these gaps, the non-market values must first be identified (Oliver, 1995; Ledoux, 2002). Recently, resource economists have expanded the border of markets by estimating coastal resource functions and indirect economic goods using surrogate prices and by “constructing” hypothetical markets (White, 1998). Three of the techniques: travel cost, hedonic methods and contingent valuation methods have been used to indirectly determine what a market might reveal in value if it did exist (Lipton, 1995). • Travel cost—is, in general, employed to determine the recreation value of coastal resource by the willingness–to-pay of visitors (White, 1998; Lipton, 1995). It quantifies the total value of a site by calculating transportation costs, entrance fees, food, hotel as well as opportunity cost of travel time which considers lost time at work and foregone income. • Hedonic Methods—is another technique to determine coastal resource value. It can be used to estimate the effect of certain disamenities, such as air pollution and noise, on the price of a house or other property. By comparing the market value of two properties, the implicit price of that amenity (or its cost when undesirable) can be obtained by observing the behavior of buyers and sellers (Lipton, 1995). • Contingent valuation methods (CVM) —involves the construction of hypothetical markets in which coastal resources are traded to obtain willingness to pay, or willingness to accept bids. The CVM is essentially based on the direct elicitation of values from individuals via carefully designed and administered sample surveys. CVM are conducted as face-to-face interviews, telephone interviews or mail surveys. It is, in fact, the only method currently available for estimating non-use values. CVM has proved particularly flexible in valuing environmental commodities (Carson, 1989; Lipton, 1995).
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3. DISCUSSION 3.1 DIFFICULTIES OF COASTAL RESOURCE VALUATION The practical challenge in conducting resource valuations is the derivation of credible estimates of the value of coastal resources in contexts where there are either no apparent markets or very imperfect markets (Brown, 2001). Some benefits derived from coastal resources relatively concrete, such as watershed protection benefits; however, others, such as existence value, are quite abstract. Dixon and Sherman (1990) note that coastal resources have five characteristics, which make valuation difficult (Dixon, 1990): • Nonrivalry: if there is no competition in the consumption of a coastal resource’s services, the market price for such services will be inaccurate. • Nonexcludability: open access resources will often have a market price of close to zero, even when the actual value is quite large. • Off-site effects: reflecting the above two characteristics, the benefits of coastal resources often flow to other communities, provinces, or countries, skewing the market price of these services well below the actual value. • Uncertainty: market failure occurs because of incomplete or incorrect information on the scarcity of resources within coastal area. • Irreversibility: if a certain coastal resource is destroyed, it may take centuries to return the area to its original state. In effect, the supply of environmental goods and services is very inelastic, making the actual value difficult to determine. 3.2 SOME CHALLENGING ISSUES OF COASTAL RESOURCE VALUATION Although there are many difficulties existed in coastal resource valuation, it is still a very important and useful task for an efficient economic allocation of coastal resources (Cicchelti, 1973; Costanza, 1999; Costanza, 1997). There has been a multiplicity of recent valuation studies on coastal and ocean resources. However, coastal resource valuation is still a new field. A series of distinct and challenging issues are still existing. First is how to determine an appropriate discount rate and temporal scale. Temporal scale, in combination with the rate of discount applied, will influence the value assigned to coastal resources. It is frequently necessary within cost–benefit analysis (Ledoux, 2002). Discount rates enable one to determine the present value of the benefits and costs associated with the future use and enjoyment of coastal resources (Ulibarri, 1997). The choice of discount rate can have a significant influence on coastal resources. A higher rate of discount is more likely to encourage more rapid depletion of non-renewable coastal resources and overexploitation of renewable coastal resources, thereby reducing the inheritance of natural capital for future generations. However, lower rates of discount will tend to encourage investments in nonenvironmentally beneficial projects that might not otherwise have been viable and could conceivably result in more rapid depletion of resources (Ledoux, 2002). Therefore, whether a pertinent discount rate chosen or not is essential. Second is something about scaling of temporal, spatial and cultural specificity problems. The specificity problem (relative scarcity basis of value) is generic and serves to constrain the transfer of site-based coastal resources economic values across time and geographical and cultural space. Many value estimates will not be amenable to legitimate aggregation beyond local to ‘regional’ scales. A similar coastal resource in different region, because of different economic development level, different resource value factors and different resource structures, the value of this coastal resource is different. The value of many resources is primarily determined by the local factors (Turner, 1998). Further research to more precisely should
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define these limits and to formulate a robust validity and reliability testing protocol is an urgent requirement (Turner, 2000). Thirdly, willingness-to-pay of individuals will influence value of coastal resource. In many cases the values are based on the current WTP of individuals for coastal resources, even though these individuals may be ill-informed and their preferences may not adequately incorporate social fairness, ecological sustainability and other important goals (Costanza, 1997). Moreover, inter-country comparisons of valuation are affected by income differences. Poor people may be able to bid less for something than rich people even though it may matter to them much more in some sense. Fourthly, a more dynamic model needed. Coastal resource system is a dynamic, complex, non-linear system. Those who have attempted ecosystem valuation have typically adopted a static approach (Steven, 1997). This ignores the complex inter-dependencies between coastal resources. We need to use dynamic, adaptive, non-linear models which can simulate the way the whole system would adapt and how all values would change, also taking account of the possibility of thresholds and irreversibilities (Costanza, 1998). Final is risky and uncertainty. Coastal resource valuation must confront risky outcomes in proposing environmental decisions or taking regulatory actions under conditions of uncertainty about the benefits and costs of these actions. Uncertainty over the outcomes of environmental actions and policies can influence the valuation of coastal resources. The presence of risk and uncertainty affects both WTP and willingness to accept compensation, with the extent of each depending on the degree of economic and environmental uncertainty confronting individuals and on their attitudes towards risk and uncertainty. Risk and uncertainty affect the valuation of coastal resources together (Ulibarri, 1997). So, during coastal resource valuation, the analyst should take account of these risk and uncertainty. 4. CONCLUSIONS Coastal resources represent an incalculable economic value for human activities and must be conserved (White, 1998). However, coastal resources are regarded as common property, which makes them overexploited and even exhausted. The cultural traditions of open access must be replaced with more appropriate property rights regimes and governance structures (Costanza, 1999). In terms of protecting and utilizing coastal resources rationally, the unanimous attitude is to manage coastal resources as assets and to carry paying system into execution. And the economic evaluation of coastal resources is the prerequisite and key of capitalization management and the execution of paying system. Coastal resources valuation is an essential component of sustainable development and an effective tool of coastal resource management (White, 1998; Qudri, 2001). Proper valuation of use and nonuse values of all coastal resources will pave the way for informed decisions concerning coastal resources and provide a sound basis for establishing appropriate economic rents (Turner, 2001). Accurate coastal resource valuation will better illuminate the link between conservation and regional economic development and will help modify systems of national accounting to better reflect the value of ecosystem services and natural capital (Qudri, 2001). REFERENCES
Walters, J.S., J. Maragos, S. Siar and A.T. White, 1998. Participatory Coastal Resource Assessment: A Handbook for Community Workers and Coastal Resource Managers. Coastal Resource Management Project and Silliman University, Cebu City, Philippines. Jin Jianjun, Ran Shenghong, Zhang Lingjie, 2002. A study on the cost of coastal zone resources (in Chinese with English abstract). Marine Environment Science, Vol. 21, No.1, pp. 63-67 Costanza R., 1999. The ecological, economic, and social importance of the oceans. Ecological Economics, Vol. 31, pp.199–213
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Costanza, R.; D'Arge, R.; De Groot, R.; Farber, S.; Grasso, M.; Hannon, B.; Limburg, K.; Naeem, S.; O'Neill, R.; Paruelo, J.; Raskin, R.; Sutton, P., and van den Belt, M, 1997.The value of the world's ecosystem services and natural capital. Nature. 387, pp. 253-260. Department of Environment and Natural Resources, Bureau of Fisheries and Aquatic Resources of the Department of Agriculture, and Department of the Interior and Local Government, 2001. Philippine Coastal Management Guidebook No. 3: Coastal Resource Management Planning. Coastal Resource Management Project of the Department of Environment and Natural Resources, Cebu City, Philippines. Jean M. R., 2002. Integrated coastal zone management (ICZM) in Haiti: Opportunities and limitations. State University Of New York Col. of Environmental Science & Forestry, Thesis. White, A.T. and A. Cruz-Trinidad, 1998. The Values of Philippine Coastal Resources: Why Protection and Management are Critical. Coastal Resource Management Project, Cebu City, Philippines. Clark J. R., 1997. Coastal zone management for the new century. Ocean & Coastal Management, Vol. 37, No. 2, pp. 191-216. Cicchetti, C.J. and Smith, V.K., 1973. Congestion, quality, deterioration, and optimal use: Wilderness recreation in the Spanish Peaks primitive area. Sot. Sci. Res., 2, pp. 15-30. Oliver H.King, 1995. Estimating the value of marine resources: a marine recreation case. Ocean & Coastal Management, Vol. 27, No.(1-2), pp. 129-141. Pearce, D.W.&Markandya, A., 1988. Environmental Policy Benefits Monetary Valuation. OECD, Paris. Ledoux L., Turner R.K., 2002. Valuing ocean and coastal resources: a review of practical examples and issues for further action. Ocean &Coastal Management, Vol. 45 pp. 583 –616 Gerard S. Dharmaratne, Ivar Strand. Approach and Methodology for Natural Resources and Environmental Valuation. USA, 1999 Lipton Douglas W., Katherine Wellman, Isobel C. Sheifer, 1995. Economic Valuation of Natural Resources: A Handbook for Coastal Resource Policymakers. National Oceanic and Atmospheric Adminstration (NOAA), USA Carson, R.T., 1989. Constructed markets. In measuring demand for environmental quality, ed. J.B.Braden & C.D.Kolstad. North- Holland. Brown K, Adger NW, Tompkins E, Bacon P, Shim D, Young K., 2001. Trade-off analysis for marine protected area management. Ecological Economics, Vol.37, pp. 417 –434. Dixon, John and Paul Sherman. 1990. Economics of Protected Areas: A New Look at Benefits and Costs. East-West Center. Turner R.K., Adger W.N., Brouwer R., 1998. Ecosystem services value, research needs, and policy relevance: a commentary. Ecological Economics, Vol.25, pp. 61–65 Ulibarri C.A. & Wellman K.F., 1997. Natural Resource Valuation: A Primer on Concepts and Techniques, Prepared for the U.S. Department of Energy. Turner R. Kerry. 2000. Integrating natural and socio-economic science in coastal management, Journal of Marine Systems, 25, pp. 447–460 Steven I. Higgins, Jane K. Turpie, Robert Costanza, et al., 1997. An ecological economic simulation model of mountain fynbos ecosystems: Dynamics, valuation and management. Ecological Economics, Vol. 22, pp.155-169. Costanza R., Ralph D’Arge, Rudolf de Groot, et al., 1998. The value of ecosystem services: putting the issues in perspective, Ecological Economics, Vol.25, pp. 67–72 Qadri S. Tahir. 2001. Natural Resources Management and the Environment. Asian Development Bank 2001. Turner R. K., Bateman I. J., Adger N, editors, 2001. Economics of coastal and water resources: valuing environmental functions. Dordrecht: Kluwer Academic Publishers.
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STUDY ON COASTAL RESOURCE EVALUATION THEORIES AND METHODS
Jianjun JIN, Zhishi WANG Faculty of Science and Technology, University of Macao, China Tel: (853)8939370; Fax: (853) 838314 E-mail: [email protected]; [email protected] Shenghong RAN Institute of Geographical Sciences and Natural Resources Research, Chinese Academy of Sciences, Beijing, China Caixing YUN State Key Laboratory of Estuarine and Coastal Research, East China Normal University, Shanghai, China
Abstract: Coastal resources are important components of natural resources and they are also the important material fortunes of national economy and society development. However, a series of problems emerged from exploiting and utilizing coastal resources forced people to scan their own management and utilization styles in a new way. In terms of protecting and utilizing coastal resources rationally, the unanimous attitude is to manage coastal resources as assets and to carry paying system into execution. Economic evaluation of coastal resources is the prerequisite and key of capitalization management and the execution of paying system. At present, in China, economic evaluation of coastal resources has just been drafted out and there are no mature theories and models. This paper synthesizes evaluation conceptual framework of coastal resources based on the basic theories of value rule, rent theory, investment economics and ecology economics. It will be helpful to protect and utilize coastal resources rationally and to advance the course of utilizing coastal resources paid and the course of incorporation of coastal resources accounting into natural resource. This evaluation conceptual framework of coastal resources will add a new content in the study system of resource pricing research.
Key words: Coastal resources; Capitalization management; Resource evaluation
1. INTRODUCTION Coastal resources refer to the natural resources found in coastal areas, which is useful for human today or in the coming future, including land, forests, coastal waters and wetlands, sand minerals, hydrocarbons, and living coastal organisms (Walters, 1998; Jin, 2002). Living coastal resources include fish, shellfish, marine mammals, seabirds and other marine organisms (seaweed, coral reefs). Coastal resources also generally include other important resources such as those with archaeological, historic, sacred, or gender-specific significance (Walters, 1998). Coastal resources are crucial and important to support life on our planet. The benefits that can be derived from coastal resources are well known and widely recognized. Coastal resources are sources of primary and secondary production, and biodiversity. The importance of the coast in global material and energy cycles is now beginning to be better appreciated. Recent estimates of the economic value of the marketed and non-marketed ecosystem services
138
of the coastal system indicate a huge contribution to human welfare from the functions mentioned above plus raw materials, recreational, and cultural services (Costanza, 1997). The inherent economic value of coastal resources leads to utilization by a broad spectrum of resource uses (DNER, Philippines, 2001). Coastal zones throughout the world are attractive and important areas for socio-economic development. However, the coastal zone’s increasingly becoming the favorite site of human activities has disastrous consequences on coastal resources (Jean, 2002). Nowadays, the development of industrial and tourism as well as the increase in the urban population has generally been highly concentrated in the coastal zone. The rich coastal resources are under severe stress form the combined impacts of human overexploitation, physical disturbance, pollution, sedimentation and so on (White, 1998). Moreover, traditionally, coastal resources are open access (Costanza, 1999). In most countries coastal waters and their resources are considered ‘commons’; that is, they are not owned by any person or agency but are common property available equally to all citizens, with the government as ‘trustee’ (Clark, 1997). Their common property nature makes it impossible to exclude those who do not pay for enjoying or using them. As a result there is no incentive to conserve such resources and overuse and even exhaustion can occur when utilization or harvest rates exceed the population growth rates of species [10]. If we don’t change these situation and utilizations styles, in the future, we will have much less resource left and its net natural productivity will be significantly reduced or there will be nothing left and ultimately deprive future generation of their rightful heritage (White, 1998). Fortunately, recognition of the need to protect coastal resources is increasing. There have been growing calls for coastal resources to be valued in economic terms by economists and ecologists (Pearce, 1988; Oliver, 1995; Ledoux, 2002). This development stems from a belief that unless the value of coastal resource is expressed in monetary units it will continue to be destroyed (Oliver, 1995). If we can portray the economic values of coastal resources, we may place more importance on their management and long-term protection and control our abuse of coastal resources (White, 1998). 2. THEORY AND METHODS OF COASTAL RESOURCE VALUATION 2.1 COASTAL RESOURCE VALUE COMPONENTS The values the society places on the coastal resources originate due to different uses and services the coastal resources provide. The mainstream economic approach to valuation takes an instrumental (usage-based) approach and seeks to combine various components of value into an aggregate measure of resource value lableled total economic value (White, 1998). The components of Total Economic Value (TEV) of a costal resource are illustrated in Fig. 1. TEV of coastal resources consists of use and non-use values. Use value means many goods and services provided by coastal resources, which could be consumed or used directly or indirectly (Geard, 1999). Use value consists of direct use values, indirect use values and option values. Direct use value can be classified as “good”, which measures the consumptive value of tangible coastal resources such as fish, timber, and coastal water. Indirect use values, which can be classified as “services”, measures non-consumptive ecological and recreational uses of coastal resources such as diving, swimming, boating, and picnicking (White, 1998). Option value (which could be direct or indirect) is the willingness to pay to maintain the coastal resource weighted by the probability that the resource will be used at some future date (Oliver, 1995). Non-use values are those values, which are independent of an individual’s present or future direct or indirect use (Geard, 1999). Traditionally these components have not been quantified in monetary terms, which has led to coastal resources being undervalued (Oliver, 1995). The willingness to pay for conservation and preservation of coastal resources, to avoid irreversible changes specifically for the benefit of future generations is known as the bequest value.
139
Besides the bequest value, people may gain satisfaction from the knowledge that certain coastal resources exist and therefore may be willing to pay for their continued existence. This is known as the existence value (Gerard, 1999). Existence value arises from the notion that individuals who make no use of a particular coastal resource may gain utility from the mere existence of the resource, even if there is no intention to use the resource in the future (Oliver, 1995). In summary, the total economic value of a coastal resource is the sum of use and non-use values. However, identification is only the first step in assisting public policy, and what is required is some means of quantifying each element in monetary terms (Oliver, 1995).
Total economic
Use value Non-use value
Direct use value (“goods”)
Indirect use value (“services)
Option value
Bequest value
Existence or preservation value Value from knowledge of continued existence or preservation
Outputs/services that can be consumed Functional benefits enjoyed indirectly directly
Future direct and indirect use
Value of leaving use and nonuse values to offspring • Biodiversity • Habitats • Irreversible
• Food • Biomass • Recreation
• Ecological functions • Flood control
• Biodiversity • Conserved habitats
• Biodiversity • Habitats • Endangered
• Decreasing “tangibility” of value to individual • Increasing difficulty of measuring accurate values
Fig. 1 Total Economic Value of Coastal Resources
2.2 COASTAL RESOURCE VALUATION METHODS Resource valuation is the process of assigning a numeric value, usually monetary, to a particular resource, product or activity. The coastal resource valuation process uses a number of monetary valuation methods to account for use and non-use values of coastal resource systems (Lipton, 1995). The valuation of coastal resources is not the same as the valuation of ordinary goods and services. The value or worth of a particular good is equivalent to the price determined by the market based on supply and demand conditions. Some coastal resources such as mangrove forest can also be priced according to the market goods they produce. However, this value can only reflect the partial value of the resource because coastal resources provide other and oftentimes, more significant values, on top of those already priced in the market (White, 1998). For example, coral reefs provide habitats for fish. Traditionally coral reefs are valued according to the quantity of fish caught. This is convenient because only fish are bought and sold in the market. But other aspects of the value of coral reefs, such as recreational services and biodiversity conservation as well as protecting from coastal erosion, do not show up
140
completely in markets. These functions are often given too little weight in policy decisions (Costanza, 1997). However, this neglect may ultimately compromise the sustainability of humans in the biosphere (Costanza, 1997; White, 1998). Therefore, coastal resource valuation should take full account of all value components of coastal resources. We must begin to give the natural capital stock that produces these services adequate weight in the decision-making process, otherwise current and continued future human welfare may drastically suffer (Costanza, 1997). 2.2.1 Market-based valuation methods Market-based valuation methods use actual market prices as a surrogate for the value of coastal goods and services. These methods have the advantage of easy applicability as well as simplicity in methodology (Gerard, 1999). They are used when changes in production or productive capacity of a certain good or service can be measured. Here, willingness-to-pay (WTP) is taken to be equal to market price (White, 1998). Economists often use the concepts of consumer surplus and producer surplus to approximate the net WTP (Lipton, 1995). Fig. 2 shows conventional supply (marginal cost) and demand (marginal benefit) curves for a typical market good or service diagrammatically. The value that would show up in gross national product (GNP) is the market price p times the quantity q. The cost of production is the area under the supply curve, cbq. The ‘producer surplus’ or ‘net rent’ for a resource is the area between the market price and the supply curve, pbc. The ‘consumer surplus’ or the amount of welfare the consumer receives over and above the price paid in the market is the area between the demand curve and the market price, abp. The total economic value of coastal resource is the sum of the producer and consumer surplus, or the area abc on the diagram (Costanza, 1997).
Pric Demand curve Equilibri um price
Supply curve
The equilibrium price is the price for each individual unit of good Producer surplus Quantit y Equilibrium Quantity Demanded
Fig. 2 Consumer and Producer Surplus
Many methods have been developed and used to estimate the market value of coastal resources (Lipton, 1995; White, 1998; Gerard, 1999; Ledoux, 2002). Here, we synthesized previous studies on a wide variety of methods. • Cost effectiveness analysis—assesses the impact of different options in physical terms, and compare these to the costs of the different options to determine which option, or mix of options, achieves the target at least cost (Ledoux, 2002). • Cost–benefit analysis—values all costs and benefits in monetary terms to establish a stream of costs and benefits associated with a particular policy over time and compare these (Ledoux, 2002). Cost-benefit analysis is the major tool for conducting economic evaluation of public programs in coastal resource management (Lipton, 1995).
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Change in productivity—estimates changes in production arising from a particular intervention or coastal resource state. We need “before” and “after” or “management versus no management” production estimates with the same parameters and assumptions used to measure the changes (White, 1998). If a certain coastal resource is harmed, production goes down. The market price of the lost production reflects the economic value of the coastal resource. Most case studies on coral reef and mangrove valuation involving fisheries and wood production use this technique. • Actual defensive or preventive expenditures—measure the value people are prepared to spend on preventing damage to them or to the environment. Examples are expenses incurred to avoid or reduce unwanted environmental impacts such as coastal erosion or water pollution. This approach provides only a minimum estimate of the value of coastal resource, since it cannot be higher than an individual’s ability and WTP, which is usually constrained in developing countries (White, 1998). • Shadow Projects Approach—is simply taking the replacement cost approach one step further. In this method, the complete cost of replacing a range of coastal resource is estimated. This method is more suitable in cases where it is difficult to value individual items in an ecosystem and/or when most services and functions are unknown (Gerard, 1999).
•
2.2.2 Non-market based methods Some goods and services, such as free public beaches or parks, recreational fishing, and wildlife viewing, are not traded in the market. Nonetheless, individuals benefit from their use and loss of access to these “non-market” goods may cause significant welfare losses to individuals. There is a gap between market valuation and the economic value of coastal resources. To fill these gaps, the non-market values must first be identified (Oliver, 1995; Ledoux, 2002). Recently, resource economists have expanded the border of markets by estimating coastal resource functions and indirect economic goods using surrogate prices and by “constructing” hypothetical markets (White, 1998). Three of the techniques: travel cost, hedonic methods and contingent valuation methods have been used to indirectly determine what a market might reveal in value if it did exist (Lipton, 1995). • Travel cost—is, in general, employed to determine the recreation value of coastal resource by the willingness–to-pay of visitors (White, 1998; Lipton, 1995). It quantifies the total value of a site by calculating transportation costs, entrance fees, food, hotel as well as opportunity cost of travel time which considers lost time at work and foregone income. • Hedonic Methods—is another technique to determine coastal resource value. It can be used to estimate the effect of certain disamenities, such as air pollution and noise, on the price of a house or other property. By comparing the market value of two properties, the implicit price of that amenity (or its cost when undesirable) can be obtained by observing the behavior of buyers and sellers (Lipton, 1995). • Contingent valuation methods (CVM) —involves the construction of hypothetical markets in which coastal resources are traded to obtain willingness to pay, or willingness to accept bids. The CVM is essentially based on the direct elicitation of values from individuals via carefully designed and administered sample surveys. CVM are conducted as face-to-face interviews, telephone interviews or mail surveys. It is, in fact, the only method currently available for estimating non-use values. CVM has proved particularly flexible in valuing environmental commodities (Carson, 1989; Lipton, 1995).
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3. DISCUSSION 3.1 DIFFICULTIES OF COASTAL RESOURCE VALUATION The practical challenge in conducting resource valuations is the derivation of credible estimates of the value of coastal resources in contexts where there are either no apparent markets or very imperfect markets (Brown, 2001). Some benefits derived from coastal resources relatively concrete, such as watershed protection benefits; however, others, such as existence value, are quite abstract. Dixon and Sherman (1990) note that coastal resources have five characteristics, which make valuation difficult (Dixon, 1990): • Nonrivalry: if there is no competition in the consumption of a coastal resource’s services, the market price for such services will be inaccurate. • Nonexcludability: open access resources will often have a market price of close to zero, even when the actual value is quite large. • Off-site effects: reflecting the above two characteristics, the benefits of coastal resources often flow to other communities, provinces, or countries, skewing the market price of these services well below the actual value. • Uncertainty: market failure occurs because of incomplete or incorrect information on the scarcity of resources within coastal area. • Irreversibility: if a certain coastal resource is destroyed, it may take centuries to return the area to its original state. In effect, the supply of environmental goods and services is very inelastic, making the actual value difficult to determine. 3.2 SOME CHALLENGING ISSUES OF COASTAL RESOURCE VALUATION Although there are many difficulties existed in coastal resource valuation, it is still a very important and useful task for an efficient economic allocation of coastal resources (Cicchelti, 1973; Costanza, 1999; Costanza, 1997). There has been a multiplicity of recent valuation studies on coastal and ocean resources. However, coastal resource valuation is still a new field. A series of distinct and challenging issues are still existing. First is how to determine an appropriate discount rate and temporal scale. Temporal scale, in combination with the rate of discount applied, will influence the value assigned to coastal resources. It is frequently necessary within cost–benefit analysis (Ledoux, 2002). Discount rates enable one to determine the present value of the benefits and costs associated with the future use and enjoyment of coastal resources (Ulibarri, 1997). The choice of discount rate can have a significant influence on coastal resources. A higher rate of discount is more likely to encourage more rapid depletion of non-renewable coastal resources and overexploitation of renewable coastal resources, thereby reducing the inheritance of natural capital for future generations. However, lower rates of discount will tend to encourage investments in nonenvironmentally beneficial projects that might not otherwise have been viable and could conceivably result in more rapid depletion of resources (Ledoux, 2002). Therefore, whether a pertinent discount rate chosen or not is essential. Second is something about scaling of temporal, spatial and cultural specificity problems. The specificity problem (relative scarcity basis of value) is generic and serves to constrain the transfer of site-based coastal resources economic values across time and geographical and cultural space. Many value estimates will not be amenable to legitimate aggregation beyond local to ‘regional’ scales. A similar coastal resource in different region, because of different economic development level, different resource value factors and different resource structures, the value of this coastal resource is different. The value of many resources is primarily determined by the local factors (Turner, 1998). Further research to more precisely should
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define these limits and to formulate a robust validity and reliability testing protocol is an urgent requirement (Turner, 2000). Thirdly, willingness-to-pay of individuals will influence value of coastal resource. In many cases the values are based on the current WTP of individuals for coastal resources, even though these individuals may be ill-informed and their preferences may not adequately incorporate social fairness, ecological sustainability and other important goals (Costanza, 1997). Moreover, inter-country comparisons of valuation are affected by income differences. Poor people may be able to bid less for something than rich people even though it may matter to them much more in some sense. Fourthly, a more dynamic model needed. Coastal resource system is a dynamic, complex, non-linear system. Those who have attempted ecosystem valuation have typically adopted a static approach (Steven, 1997). This ignores the complex inter-dependencies between coastal resources. We need to use dynamic, adaptive, non-linear models which can simulate the way the whole system would adapt and how all values would change, also taking account of the possibility of thresholds and irreversibilities (Costanza, 1998). Final is risky and uncertainty. Coastal resource valuation must confront risky outcomes in proposing environmental decisions or taking regulatory actions under conditions of uncertainty about the benefits and costs of these actions. Uncertainty over the outcomes of environmental actions and policies can influence the valuation of coastal resources. The presence of risk and uncertainty affects both WTP and willingness to accept compensation, with the extent of each depending on the degree of economic and environmental uncertainty confronting individuals and on their attitudes towards risk and uncertainty. Risk and uncertainty affect the valuation of coastal resources together (Ulibarri, 1997). So, during coastal resource valuation, the analyst should take account of these risk and uncertainty. 4. CONCLUSIONS Coastal resources represent an incalculable economic value for human activities and must be conserved (White, 1998). However, coastal resources are regarded as common property, which makes them overexploited and even exhausted. The cultural traditions of open access must be replaced with more appropriate property rights regimes and governance structures (Costanza, 1999). In terms of protecting and utilizing coastal resources rationally, the unanimous attitude is to manage coastal resources as assets and to carry paying system into execution. And the economic evaluation of coastal resources is the prerequisite and key of capitalization management and the execution of paying system. Coastal resources valuation is an essential component of sustainable development and an effective tool of coastal resource management (White, 1998; Qudri, 2001). Proper valuation of use and nonuse values of all coastal resources will pave the way for informed decisions concerning coastal resources and provide a sound basis for establishing appropriate economic rents (Turner, 2001). Accurate coastal resource valuation will better illuminate the link between conservation and regional economic development and will help modify systems of national accounting to better reflect the value of ecosystem services and natural capital (Qudri, 2001). REFERENCES
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