[Coral-List] The economic valuation for natural resources damage

John Mcmanus jmcmanus at rsmas.miami.edu
Wed Apr 27 16:06:40 EDT 2016

Hi Mahmoud,

There are countries that impose fines, and it is good to compare such values. I thought I would discuss an alternative approach -- habitat equivalency analysis. 

The US federal system is not about fines. It is about replacing lost ecosystem services.  As all US waterways are under the jurisdiction of the US Army Corps of Engineers, they usually follow these procedures -- generally in cooperation with other resource agencies.  

Suppose someone temporarily damages a part of a coral community of 100 sq m at 100% coral cover. This is expected to grow back in 5 years (only for illustration -- it is usually much longer). If we use the traditional approach of assuming a linear recovery rate, it will be at 20% after year 1, 40% after year 2, then 60%, 80% and then 100% end-of-year recovery. Thus, society has lost 80% + 60% + 40% + 20% service value per year = 200%, even though it completely recovered. The units are often expressed in terms of area-years. Using habitat equivalency analysis, we often apply a rate of discount per year (as if it was about money, even though it is not), then require a similar mitigation site to be 'planted' (ideally). The size of that site depends both on the expected rate of recovery of the damaged site, and the expected rate of growth at the new site. Thus, the cost is just the cost of making the mitigation site. Of course, there may also be law suits and punitive fines as well, but these are not widely standardized. 

The 'VisualHEA" software distributed by Nova-Southeastern University's National Coral Reef Institute is designed to assist with these calculations for both simple and far more complex cases. However, many people highly recommend doing the calculations via a spreadsheet at least until one has a good grasp on the process. This is not as difficult as it sounds, and I teach it as a two-class section in one of my university courses. 

There are clearly some problems with this. One must choose start, mid-, or end year calculations, and all of these differ. Coral communities never grow linearly -- they tend to follow an "S" curve unless disrupted. One rarely knows in advance how long it will take a coral community to recover to its initial state. One also often has no mitigation site to plant -- if corals can grow someplace, they usually already do. As with the linear assumption, the process gets fudged a bit, such as through the use of artificial coral substrates or even redirecting the work to more general conservation which is aimed at replacing the lost ecosystem services somehow. The rate of planting success is rarely accounted for. Often, there is no follow-up to ensure that the site is steered through things such as diseases and weather damage. Additionally, many have argued that applying a rate of discounting to an ecosystem makes little sense, as ecosystems tend to increase in value over time unlike most manufactured commodities. The time frame one uses makes a big difference (10 years, 100 years, etc.). If one uses a discounting rate, one can extend the calculation until there is no significant change in values in each following year. However, that assumes that one is OK with applying the discount rate to begin with, and there is agreement on what that rate should be. Sometimes different species are treated separately and the whole combined in the end, based on known growth rates. However, especially in cases of high coral cover, there is a difference between knowing how long individual coral colonies take to grow, and knowing how long it will take coral communities to grow to a certain point. 

The whole process usually works better with seagrass than with coral communities. However, it makes more sense than simply charging a fine and not fixing anything. It has held up in court in several cases. 

There are efforts underway to address each of the problems I have mentioned..




From: coral-list-bounces at coral.aoml.noaa.gov [coral-list-bounces at coral.aoml..noaa.gov] on behalf of Mahmoud Sarhan [mahmoud.srhan at gmail.com]
Sent: Wednesday, April 27, 2016 1:56 PM
To: coral-list at coral.aoml.noaa.gov
Subject: [Coral-List] The economic valuation for natural resources damage

Dear all

I work with a team to establish systematic procedures for the economic
valuation and monetary calculation to support the natural resources damage
assessment (NRDA) process in Egypt in order to help officials and staff in
Ministry of Environment to deal with natural resources injuries and
calculate the monetary value of compensations owed. We will focus on marine
environment injuries especially oil spill and ship grounding on coral
reefs. We are currently reviewing the international practice in the
economic valuation for NRDA.

I highly appreciate sharing with us any experiences, case studies and
resources related to this topic. I would definitely welcome any possible
in-depth discussion in this interesting topic over phone or Skype.

Many thanks

Mahmoud Sarhan *MSc, MPS*

Research Associate

Center for Sustainable Global Enterprise

Cornell University

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