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

Mahmoud Sarhan mahmoud.srhan at gmail.com
Wed Apr 27 18:59:34 EDT 2016

The responses we have from the coral-listers are great so far, many thanks.
I hope we can get more responses since this discussion contributes
significantly to our project.

Mcmanus, HEA is a very interesting approach indeed, we will discuss this
approach with our team. We will definitely consider the ecosystem approach
as a framework for our work. Egypt is currently using a a very simple
formula that account for % of coral cover, damage size, rate of recovery
and length of recover (years). However, our mission is to improve the
assessment procedures and propose some up to date alternatives to be
discussed with practitioners, ecologists and decision makers. For the
discounting rate, it is something that commonly used
by environmental economists and it is essential for calculating the present
value of natural resources. However, there will be always a debate about
the value of the discount rate to be used. I understand
your concerns regarding the application of
HEA especially the difficulties related
to coral rehabilitation or restoration. I have seen some coral
rehabilitation projects in Red Sea where results were not very encouraging.
It is very lengthy and challenging process. At this point, decision makers
are more concerned about the fair monetary assessment of injuries where
usage of the compensation revenues depends on conservation priorities and
also the also the feasibility of the rehabilitation process. Biodiversity
offsetting is something that we can also propose as an alternative
to rehabilitation or restoration although I believe that restoration should
have the priority where possible.

Bourke, Ministry of Environment in Egypt is responsible for taking care of
natural resources damage assessment and luckily there is not much conflict
with other governmental entities in this area of work. The ecosystem
approach is excellent in understanding the resources services. MEA,
Costanza and his colleagues work are great resources in this area. However,
from an environmental economics prospective, it is very hard to put value
for all these types of services. This is the tricky part. On one hand, it
would be good if we can identity all the service that the injured resource
provide and account for them in our economic valuation, on the other hand,
this is a going to be a very long, difficult and expensive process.
Additionally,  the compensation value will be very high and not affordable.
The links you provided are very useful, will check them.

We hope during this project to propose the most viable and science-based
alternatives to assess different levels of damages. We also aim to propose
a methodology that is not very sophisticated since in most cases the Park
Rangers (who are not all scientists or economists) will be the ones who use
it and thus it should be practical for them (after providing the required

I hope you don't mind me getting in touch with you in the following
weeks/months with more specific questions.


On Wed, Apr 27, 2016 at 4:06 PM, John Mcmanus <jmcmanus at rsmas.miami.edu>

> 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.
> Cheers!
> John
> ________________________________________
> 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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