#### 30 April 2004 {#april-2004 .heading-style1 .unnumbered}

Cesar Environmental Economics Consulting

Kastanjelaan 9\
6828 GH Arnhem\
The Netherlands

Tel. ++31-26-4452175\
Fax. ++31-26-3704915\
E-mail: <herman.cesar@ivm.vu.nl>

E-mail: beukering@ivm.vu.nl

Web: www.ceec.nl

Number range TableNumber range TabelNumber range FiguurNumber range
FigureNumber range EquationContents

1\. Introduction
[4](#number-range-equationnumber-range-figurenumber-range-figuurnumber-range-tabelnumber-range-tableintroduction)

2\. Methodology [5](#methodology)

2.1 Model [5](#model)

2.2 Boundaries [6](#boundaries)

2.3 Quantification of benefits [6](#quantification-of-benefits)

2.4 Quantification of current trends and threats
[7](#quantification-of-current-trends-and-threats)

2.5 Assessment of management approaches
[7](#assessment-of-management-approaches)

3\. Data [8](#data)

3.1 Physical data [8](#physical-data)

3.2 Basic tourist estimates [9](#basic-tourism-and-recreation-estimates)

3.3 Economics of visitors [9](#economics-of-visitors)

4\. Scenarios [11](#scenarios)

4.1 Hanauma Bay [12](#hanauma-bay)

4.2 Waikiki Diamond Head [13](#waikiki-diamond-head)

4.3 Molokini Shoal [13](#molokini-shoal)

4.4 Honolua Mokule'ia Bay [14](#honolua-mokuleia-bay)

4.5 Kahalu'u [15](#kahaluu)

4.6 Waiopae [16](#waiopae)

5\. Results [17](#results)

5.1 Costs [17](#costs)

5.2 Benefits [18](#benefits)

5.3 Cost benefit analysis [23](#cost-benefit-analysis)

6\. Conclusions and recommendations
[25](#conclusions-and-recommendations)

7\. References [26](#references)

  -----------------------------------------------------------------------
  ***Colophon***

  This study is part of a larger report with the title "Assessment of
  Economic Benefits and Costs of Marine Managed Areas in Hawaii\" by
  Herman Cesar, Pieter van Beukering and Alan Friedlander. This
  publication is a result of research carried out by Cesar Environmental
  Economics Consulting (CEEC) and funded by the National Oceanic and
  Atmospheric Administration, Coastal Ocean Program, under awards NA
  160A2412 to the University of Hawaii for the Hawaii Coral Reef
  Initiative Research Program. Co-funding was obtained from the Division
  of Aquatic Resources (DAR) and the Department of Business, Economic
  Development & Tourism (DBEDT). Comments from Linda Flanders were
  greatly appreciated.
  -----------------------------------------------------------------------

# Number range EquationNumber range FigureNumber range FiguurNumber range TabelNumber range TableIntroduction

In recent years, there has been growing interest in marine parks,
reserves, no-take zones and refugia as tools for conserving and managing
coral reef ecosystems, both in the US and in the rest of the world. This
has resulted, for instance, in the establishment of an ever-increasing
number of such areas. The US Coral Reef Task Force, established by
President Clinton under Executive Order 1308 is playing a very active
role in this process in the US. These marine areas are sometimes
referred to as Marine Protected Areas (MPAs). However, as the management
objectives of these areas is often broader than protection or
conservation alone, this paper will refer to these areas as Marine
Managed Areas (MMAs).

MMAs provide several direct and indirect benefits to the economy of
Hawaii. These include (a) enhanced attractiveness of reefs, (b)
maintenance of shoreline, and (c) support for reef fisheries in adjacent
areas as well as pelagic fisheries in coastal areas through improved
reef health and fish biomass. In order to maximize these potential
benefits, strong MMA management is required. However, this incurs
operational costs and necessitates seeking increased revenues.

The main aim of this report is to estimate the economic value of MMAs in
Hawaii and to evaluate the costs and benefits of different management
and financing regimes of these MMAs. This study only looked only at
valuation in the inhabited areas of the main Hawaiian islands, not the
coral reefs in the Northwest Hawaiian Islands. These islands are too
distinctly different to be included.

During a meeting with DAR, HCRI and other organizations, six sites
representing typical characteristics of MPAs in the main Hawaiian
Islands were selected for more in-depth analysis. As shown in Table 1,
this selection includes sites with different coral reef habitats and
varying degrees of economic activity and reef uses. Habitat distinctions
include standard zonation patterns (reef flat, bench, slope, etc.) as
well as specific features, such as surf, etc.

Table 1 Scores on various criteria for the six sites (low = 1, high = 6)

  -------------- --------- ---------- ----------- --------- -------------- ----------
  Sites          Tourism   Research   Fisheries   Real      Biodiversity   Cultural
                                                  Estate                   

  Hanauma Bay    6         6          1           2         5              2

  Diamond Head   2         5          5           4         1              4

  Molokini       5         2          2           1         4              1

  Honolua Bay    3         4          3           3         3              3

  Kahalu\'u      4         1          4           5         2              5
  Beach                                                                    

  Waiopae        1         3          6           6         6              6
  -------------- --------- ---------- ----------- --------- -------------- ----------

This report is structured as follows. First, the method is briefly
explained in Section 2. Section 3 elaborates on the origin of the
underlying data used in the economic analysis. Future scenarios for the
six sites are explained in Section 4. Simulations and results are
presented in Section 5. Finally, conclusions and recommendations are
formulated in Section 6.

# Methodology

## Model

The basis of this analysis is an integrated model that dynamically links
ecology and economy. Figure 1 provides an overview of the approach of
the study. It shows how the mutual relationships in the model evolve. On
one hand, it shows how coral reef ecosystems generate a wide range of
goods and services which benefit Hawaiian society. On the other hand,
the over-exploitation of these economic goods and services can lead to
threats to the coral reef ecosystems and can destroy the flow of
goods/services. Measuring the impact of these threats requires more
technical approaches, such as dose-response functions and hydrological
models. Management options lead to benefits (reduction of threat) and
typically cost money. Therefore the final step in the analysis is to
compare these costs and benefits. An elaborate explanation of the
approach is provided in Cesar et al. (2002).

![](media/image1.wmf){width="5.38125in" height="5.329861111111111in"}

Figure 1 General framework of the dynamic simulation model

## Boundaries

For a clear overview of the economic consequences of the different MMA
management scenarios considered in this study, project boundaries need
to be clearly defined. The main boundary definitions include time, space
and benefits. (1) The *temporal* boundary of the project is set for the
period 2005 to 2030. This period allows enough time for the main
ecological effects to become apparent, while it is still short enough to
to enable prediction about future developments. (2) The *spatial*
boundaries are the boundaries of the study area and the impact area.
Tourists can go diving in the study area while staying and spending most
of their money outside this area. (3) Resource and budget constraints
call for a selection of the most important goods and services for coral
reef valuation. Additionally, the natural science basis for
quantification of biotic and bio-geo-chemical services is controversial.
Therefore, the following goods and services, in particular, will be
quantified to obtain a 'lower boundary' estimate of the total economic
value (TEV):

-   *Recreational services for residents and tourists*: MPAs provide
    several direct and indirect benefits to the tourism industry,
    including: (a) maintaining and enhancing coral cover and diversity
    which increases satisfaction from diving, snorkeling and glass
    bottom boat rides; (b) a healthy reef will protect the shoreline
    from erosion and maintain sand levels on beaches; (c) game fishing
    in deep seas may benefit from improved reef health.

-   *Educational spillover effect*: If snorkelers and divers are
    educated concerning sustainable reef use, this "investment" will not
    only generate results in the reef where education is provided, but
    also in most other coral reefs that the tourists will visit. Sound
    behavior in other areas prevents reef damage at other sites, which
    implicitly avoids further economic damage through tourism, coastal
    protection, fisheries, etc. The multiplier effects of education are
    labeled as the \'educational spillover effect\'.

-   *Commercial and recreational fisheries*: Fishery production in areas
    adjacent to 'no-take' zones can be enhanced through the
    following: (a) Larval spillover: egg production is increased as the
    number of fish reaching maturity increases in 'no-take' zones. The
    larvae are dispersed by ocean currents and the MPA may then act as a
    source of larvae for other areas; (b) Non-larval spillover: fish
    stocks in 'no-take' zones will increase over time. A study in
    Mayotte, for instance, estimated that the mean biomass of commercial
    species was 202g/m^2^ in the reserve compared to 79g/m^2^ outside it
    (Letourneur, 1996 as quoted in Rodwell & Roberts, 2000). Juveniles
    and adult fish can both migrate to adjacent areas especially when
    the 'no-take' zone becomes 'overcrowded'; (c) Nursery and feeding
    grounds: 'No-take' zones in seagrass beds, mangrove areas and coral
    reefs provide nursery and feeding grounds for oceanic and reef fish
    from adjacent areas; (d) Species protection: 'No-take' zones can
    provide refuges for protection of endangered species and other fish
    that may be important in the complex tropical marine food-chain.

## Quantification of benefits

The quantification of the benefits of the coral reefs ecosystem involves
various research activities, including field (market) surveys, benefit
transfers, literature reviews and expert judgement. Due to financial
resource constraints, no field survey was conducted. Therefore,
quantification was based on existing literature in combination with
benefit transfer and a recreational survey. In processing this data, a
host of valuation techniques are available to quantify the value the
goods and services provided by coral reef ecosystems. Standard
techniques in micro-economics and welfare economics rely on market
information to estimate value. However, for most externalities inherent
to environmental issues, standard techniques, such as market prices,
cannot be used.

Three general categories of valuation techniques are distinguished: (i)
generally applicable techniques that directly use the market to obtain
information about the value of the affected goods and services or of
direct expenditures; (ii) revealed preference methods that indirectly
calculate external benefits using the relationships between
environmental goods and expenditure on market goods; (iii) stated
preference methods ask the individuals their willingness to pay (WTP)
for the environmental good directly by using structured questionnaires.
The WTP is defined as the maximum amount of money a person is willing to
pay to obtain a good or service. Three valuation techniques were used
for this study: Effect on Production (EoP); Travel Costs (TC); and the
Contingent Valuation Method (CVM). For a discussion of these methods in
the Hawaiian context, see Cesar et al. (2002).

## Quantification of current trends and threats

Traditionally, economic valuation of renewable resources has been
conducted in a static manner. In the past decade, however, the trend
shifted towards dynamic systems for the economics of renewable
resources. In this project, dynamics are particularly important because
one of the objectives is to assess how disturbances and management
interventions influence the costs and benefits of the coral reef. The
impact of these disturbances may vary over time, often in a non-linear
manner. Therefore, the baseline development under different management
scenarios and the potential for threats to occur will be taken into
account.

In order to deal with these ecological-economic complexities, a
simplified dynamic simulation model will be used. The
ecological-economic relations follow a pathway, linking the type of
coral reef ecosystem, its uses and location with, the physical goods and
services provided by the reef, and the economic value of these factors
(see Figure 1). In an earlier valuation study, a general coral reef
model was developed to address a large range of threats and management
options. This general model will serve as the basis for the MPA specific
study.

## Assessment of management approaches

The main questions to be addressed in relation to MMA management include
the following: (1) What is the economic value of different types of MMA
management? (2) Is it worth protecting the reefs? In other words, do the
benefits of MMA management exceed the costs? And (3) besides economic
considerations, what are the criteria for selecting a specific type of
MMA management? For example, political sensitivity of specific
management strategies may lead to an alternative approach, despite its
favorable economic considerations. These questions are elaborately
addressed in the overall project. In this specific report, we focus on
questions (1) and (2).

Great care needs to be taken in balancing the costs and benefits of an
MMA, and in ensuring that there is an acceptable distribution between
all groups. Provision of alternatives to losers could make the MMA
attractive to all stakeholders, thereby improving the chances of
success, but compensation schemes should only be introduced after
careful consideration, so that communities do not become dependent on
such initiatives.

# Data

A number of different sources were used in order to obtain data for the
various sites\' benefits and costs, their management options. First, a
survey among residents and tourists has been conduct to retrieve
specific information about their perception of different types of coral
habitats. A summary of the results has been presented in Van Beukering
et al. (2004). Second, a literature review on fishery benefits of MPAs
in Hawaii has been produced. More information on this overview study can
be found in Friedlander and Cesar (2004). Third, specific information
has been collected on the different MMA schemes around the world to
learn more about the cost-efficiency of different regimes. This
information has been reported in Cesar and Van Beukering (2004). In this
section, we will provide the most fundamental data used to estimate the
costs and benefits in the different case studies.

## Physical data

To provide an idea of the ecological characteristics of each site Table
2 summarizes their physical parameters. Interestingly, all six sites are
relatively small and none of the sites is larger than one square
kilometer. Fish biomass also differs substantially with a low average of
around 0.4 tons per hectare for Diamond Head and Honolua and a high 1.38
tons per hectare for Hanauma Bay. Note that Hanauma Bay is the area with
the strictest enforcement, while Diamond Head and Honolua are the MMAs
with lowest levels of compliance (Cesar, 2004). Coral cover also differs
notably per site, with Hanauma and Honolua both at low levels below 25%,
whilst reaching up to 84% in the deep areas of Molokini.

Table 2 Physical parameters of study sites

  ---------------- --------- ------------- ---------- --------- ------------ ------------
  Physical         Hanauma   Diamond Head  Molokini   Honolua   Kahalu\'u    Waiopae
  Parameters                                                                 

  Area estimate    407,682   959,585       809,368    181,267   22,259^\*^   202,350^@^
  (*m^2^*)                                                                   

  Reef estimate    100,937   142,424       48,571     34,709    n.a.         n.a.
  (*m^2^*)                                                                   

  Sand estimate    47,234    39,939        n.a.       82,448    n.a.         n.a.
  (*m^2^*)                                                                   

  Fish biomass     1.38      0.41          0.98       0.91      0.39         *0.81*
  (*t/ha*)                                                                   

  Fish species     28        11            21         23        15           81^@^
  (*#)*                                                                      

  Coral cover -    21.8%     n.a.          64%        15.5%     n.a.         35.0%
  shallow^\^^                                                                

  Coral cover -    22.2%     n.a.          84%        24%       n.a.         45.0%
  deep^\^^                                                                   
  ---------------- --------- ------------- ---------- --------- ------------ ------------

Source: Friedlander and Cesar, 2004; Holland and Meyer 2003; Meyer 2003.

\* estimate by Ku\'ule Rogers

^@^ estimate by Kristian Kerr (50 acres); this is an estimate of the
total number of fish species; the number of fish species for the other
sites represents the average number of fish species per transect.

^\^^ definitions of \'shallow\' and \'deep\' vary per site, e.g. for
Hanauma 3 meters and 10 meters resp.

## Basic tourism and recreation estimates

Given the importance of recreational benefits in our analysis, basic
visitor statistics were gathered for each of the sites. This data is
summarized in Table 3. We focus on the group of so-called \'active
visitors\'. Hence, sun-bathers at Diamond Head who do not engage in any
water activities are not incorporated in our statistics. Note that
Hanauma Bay has by far the largest number of active tourists (1 million
per year), followed by Kahalu\'u (350 thousand per year). Lowest is
Diamond Head with only 10,000 active visitors per year. The vast
majority of these active visitors are snorkelers, although diving takes
place in some of the MLCDs, particularly Molokini (around 86 thousand
divers per year) and Hanauma (around 35 thousand per year).

Table 3 Basic visitor statistics (rounded figures)

  --------------- ----------- ------------ ---------- --------- ----------- ---------
  Visitor type    Hanauma     Diamond Head Molokini   Honolua   Kahalu\'u   Waiopae

  Total active    1,000,000   15,000       224,000    86,000    350,000     40,000
  visitors                                                                  

  Total divers    35,000      1,500        86,000     2,000     \-          \-

  Total           965,000     8,500        139,000    84,000    350,000     40,000
  snorkelers                                                                
  --------------- ----------- ------------ ---------- --------- ----------- ---------

Source: Cesar et al. 2002; Holland & Meyer 2003; and pers. comm. Alan
Hong, Jan Dierking and Linda Flaunders. The Waiopae numbers are very
rough estimates and include other \'active non-extractive\' users.

For each of the sites, the number of visitors per country was derived
from our surveys in combination with official statistics. Table 4
summarizes this information, which is important for a number of reasons.
Firstly, different nationalities have different spending patterns. Also,
the costs of arriving at a site depends crucially on the country and
this is important for the economic valuation exercise. Finally, for the
entrance fees discussed below, Hawaii residents are excluded from paying
the fee in some scenarios and therefore, these numbers need to be
estimated. It is interesting to observe that some sites are particularly
popular among Hawaiian residents, such as Waiopae (61% Hawaiian), while
others are catering mainly to outsiders, such as Molokini with 95% of
visitors from out-of-state.

Table 4 Visitors by country

  ---------- --------- ------------- ---------- --------- ----------- ---------
             Hanauma   Diamond Head  Molokini   Honolua   Kahalu\'u   Waiopae

  Hawaii     12%       24%           5%         7%        19%         61%

  US West    43%       38%           55%        55%       45%         20%

  US East    20%       20%           28%        29%       25%         11%

  Japan      15%       6%            7%         2%        3%          1%

  Canada     3%        4%            4%         2%        2%          4%

  Europe     4%        5%            1%         2%        4%          2%

  Other ...  2%        2%            1%         3%        2%          1%
  ---------- --------- ------------- ---------- --------- ----------- ---------

## Economics of visitors

For the economic valuation and cost benefit analysis of the MMA sites,
the recreational benefits need to be calculated. The methodology for
calculating these recreational benefits is given in Cesar et al. (2002).
First, actual expenditures of visitors to the MMA sites need to be
determined. Table 5 gives the expenditures of visitors to Hanauma Bay as
an example.

Table 5 Expenditures of visitors to Hanauma Bay

  -------------- --------------- -------------- -------------- --------------
  Country        International   National       Expenditure    Costs per dive
                 ticket costs    travel costs   per day (excl. experience
                                                snorkel)       

  Residents      \$0             \$25           \$0            \$75

  US West        \$500           \$25           \$136          \$75

  US East        \$700           \$25           \$167          \$75

  Japan          \$600           \$25           \$227          \$75

  Canada         \$650           \$25           \$143          \$75

  Europe         \$1,200         \$25           \$135          \$75

  Other ...      \$1,000         \$25           \$175          \$75
  -------------- --------------- -------------- -------------- --------------

Recreation benefits can be calculated based on these expenditures, and
on the welfare aspects presented in Cesar et al. (2002) and the survey
results of our study (Van Beukering and Cesar, 2004). Four categories of
benefits are idenitfied:

1.  The welfare gain of the visitors as reflected in their expressed
    consumer surplus. In other words, the amount the visitors would have
    been willing to pay in addition to the actual payment to enjoy the
    reef experience at an MMA site.

```{=html}
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1.  The actual expenditure directly related to snorkeling or diving
    experience. This includes entry fee, hiring of mask and fins, bus
    fare etc. We assume that only 55% of these expenditures can be
    considered as value-added.

2.  The expenditure indirectly related to the marine experience such as
    hotel costs and travel costs. DBEDT (2001) reports that marine
    activities such as diving and snorkeling form 18% of the total
    motivation of visitors to come to Hawaii. For hotel and other local
    expenditures, we assume that 35% can be considered as value-added
    for the Hawaiian economy. For travel within Hawaii, we assume a
    value-added figure of 15%, while for international travel, we assume
    a value added figure of 3%.

3.  A multiplier effect on expenditures. We use a multiplier of 1.25 for
    the Hawaiian economy (DBEDT, 2001).

Based on these assumptions, the current annual recreational value of the
coral reefs of each of the MMA sites can be estimated. These are given
in Table 6.

Table 6 Total recreational benefits in 2003

  ----------- ------------ ----------- ------------ ----------- ----------- ---------
  Country     Hanauma      Diamond     Molokini     Honolua     Kahalu\'u   Waiopae
                           Head                                             

  Residents   2,005,747    37,465      713,147      97,068      1,084,810   124,414

  US West     15,671,314   126,876     10,700,448   1,382,351   4,382,582   73,259

  US East     8,072,503    77,095      5,867,203    843,854     2,750,439   45,208

  Japan       5,760,900    20,666      1,335,041    45,487      322,306     4,193

  Canada      1,131,627    16,159      950,770      50,137      192,848     13,539

  Europe      1,398,915    15,726      154,331      55,734      319,860     6,525

  Other ...   1,124,610    9,923       192,266      97,482      307,918     5,291

  Total       35,165,617   303,910     19,913,205   2,572,112   9,360,764   272,429
  ----------- ------------ ----------- ------------ ----------- ----------- ---------

From Table 6, it is clear that the differences in recreational benefits
per MMA site are enormous. At one extreme, Hanauma Bay and Molokini have
annual recreational benefits of US\$35 million and US\$20 million
respectively, while at the other, Waiopae and Diamond Head have
recreational reef-related benefits of around US\$300,000. Honolua and
Kahalu\'u have benefits somewhere in between these extremes with US\$2.6
million and US\$9.4 million per year respectively.

These recreational benefits are all reef-related; composed of divers and
snorkelers. The snorkelers category also includes other active
non-extractive users of the sites. Table 7 summarizes the allocation of
recreational benefits. Note that these percentages are somewhat
different from the numbers presented in Table 3. The reason is that
divers tend to spend much more than snorkelers. Hence, even in places
where the number of divers is small, such as Diamond Head, their
contribution to overall recreational reef-related benefits may be
substantial.

Table 7 Allocation of recreational benefits between divers and
snorkelers

  ------------ --------- ------------- ---------- --------- ----------- ---------
  Visitor      Hanauma   Diamond Head  Molokini   Honolua   Kahalu\'u   Waiopae

  Divers       9%        42%           47%        8%        0%          0%

  Snorkelers   91%       58%           53%        92%       100%        100%
  ------------ --------- ------------- ---------- --------- ----------- ---------

# Scenarios

MMAs have higher biomass and diversity of marine life than other most
accessible marine areas in Hawaii, adding to the enjoyment of many
residents and tourists. Yet, the management of these MMAs could be
improved upon in several ways. This study explores five different
aspects of improvement in the context of each site. These aspects are:

-   *Services*: this is defined as the presence or absence of basic
    facilities, such as restrooms, showers and waste-bins;

-   *Enforcement/Compliance*: this describes how well existing
    regulations regarding fishing and non-extractive use are enforced,
    and the overall level of compliance with site regulations;

-   *Education/Awareness*: this is defined as the presence/absence of
    basic education and awareness information, such as bill-boards about
    marine life and threats, leaflets, videos, as well as the presence
    or absence of interpretive staff or volunteers who can answer any
    questions about the MMA and marine life;

-   *Assessment/Monitoring*: this describes the level of monitoring
    activities in the MMA (coral transects, use studies, etc.);

-   *Infrastructure*: this refers to the presence or absence of parking
    facilities, small piers to enter the water safely and to reduce
    impacts on corals, mooring buoys, etc.

Based on observations and interviews, the current level of these
management aspects are summarized in Table 8 For each of the sites, the
level of each of the aspects is described as \'high\', \'medium\',
\'low\' or \'none\'.

Several caveats apply: for the Honolua-Mokuleia MLCD, we focus on the
items present for the recreationists, that arrive at the MMA by car or
on foot. In this table, we therefore ignore the aspects present on the
commercial tourist catamaran that also brings visitors to Honolua. For
Molokini, infrastructure refers to the buoys situation. Finally, for
Hanauma, no improvements appear possible. However, for the description
here, we will use the situation before the construction of the visitor
center and introduction of the obligatory marine life information video
as our baseline.

Table 8 Current level of selected State or County management-related
aspects of the six MMAs.

  ---------------- --------- ------------ ---------- --------- ----------- ---------
  Management       Hanauma   Diamond Head Molokini   Honolua   Kahalu\'u   Waiopae

  Services         High      Low          High       None      Medium      None

  Enforcement      High      Medium       Medium     Low       Medium      Low

  Education        High      None         Medium     None      Low         None

  Monitoring       High      Medium       Medium     Medium    Low         Low

  Infrastructure   High      Medium       Medium     None      Medium      None
  ---------------- --------- ------------ ---------- --------- ----------- ---------

There are many possible management alternatives for each of the sites.
We consider one option per site and hence one cost-benefit analysis per
site. We will also carry out a sensitivity analysis for each site, with
respect to the cost of the selected management option. This gives an
idea of the robustness of the cost-benefit estimate. For each site, a
different hypothetical scenario is worked out, resulting in a different
long-term situation regarding each of the management aspects. These
improvements are summarized in Table 9.

Table 9 Future level of selected State or County management-related
aspects of the six MMAs.

  ---------------- --------- ------------- ---------- ---------- ----------- ----------
  Management       Hanauma   Diamond Head  Molokini   Honolua    Kahalu\'u   Waiopae

  Services         High      Low           High       High       Medium      Low

  Enforcement      High      High          High       High       High        Medium
                             (different)                                     

  Education        High      Medium        High       Medium     Medium      Medium

  Monitoring       High      Medium        Medium     Medium     Medium      Medium

  Infrastructure   High      Medium        High       Medium     High        Low
  ---------------- --------- ------------- ---------- ---------- ----------- ----------

For each of the sites, the management actions to progress from the
current situation (Table 8) to the hypothetical future situation (Table
9) are described below Note that for Hanauma, no additions to further
actions are envisaged.

## Hanauma Bay

Hanauma Bay is an enclosed embayment formed through the partial collapse
of two volcanic craters and subsequent erosional processes. In the late
1980s, Hanauma Bay was almost being 'visited to death' with 13,000
visitors a day at peak times. These crowds stirred up sediment,
disturbed and trampled the coral and algae, dropped trash, fed the fish
and left a slick of suntan lotion on the Bay\'s surface. To decrease
these impacts, the number of visitors was reduced by limiting the entry
of cars to the parking lot. Also, a Hanauma Bay Educational Program
(HBEP) was set up to improve the marine awareness of visitors. A \$3
admission fee was charged to non-Hawaii residents over the age of 13, as
well as a \$1 parking charge per car. These fees, together with shop
concessions, give Hanauma Bay a solid financial base. In August 2002, a
new visitor education center opened with an obligatory video to be
watched by all visitors to the Bay. Cesar et al. (2002) investigated the
question of whether this visitors center was a worthwhile investment.
The current study repeats this question with some new additional
numbers. One of the changes is that the entrance fee to the Bay has been
increased to \$5.

In this paper, the management option for Hanauma assumes the pre-2002
situation without the visitors center. The \'management improvement\' is
then the construction of a visitors center. Visitors of Hanauma Bay pay
their entry fee, stroll through the education stands, and sit through a
compulsory short film which explains about coral reefs in Hawaii and how
the visitors should behave to protect marine life. It is anticipated
that physical damage and fish feeding will be considerably less in this
scenario with additional education spillover effects on other
snorkeling/dive sites in Hawaii.

The investment costs of the new center are \$13.5 million and operating
expenses of the center are estimated at around \$2 million annually.
These costs can be entirely defined as education/awareness costs.

## Waikiki Diamond Head

Waikiki MLCD and Waikiki-Diamond Head Shoreline Fisheries Management
Area (FMA) are located on the south shore of Oahu and comprise about 76
acres. The MLCD includes the waters offshore of Kapiolani Beach Park.
The Waikiki-Diamond Head Shoreline FMA extends from the sea? wall of the
Waikiki War Memorial Natatorium to the Diamond Head Lighthouse. The FMA
has a rotating closed area, which is open to fishing throughout even
years, and closed throughout odd years. In the open years, all fishing
is allowed except gillnets and night spearfishing.

Currently, very few visitors to the MLCD and the FMA are attracted by
the snorkeling, although there are some interesting snorkel sites along
the reef edge. The FMA is not very successful: the build-up of fish in
the closed year is fished within weeks of opening the fishing season
(Meyer, 2003). Therefore, the management option selected in
Waikiki-Diamond Head is to split the FMA in half: one half is always
open and the other is always closed. This is a step in the direction of
increasing the MLCD as suggested by Meyer (2003) in his dissertation on
fish and fisheries at Waikiki Diamond Head.

The following improvements are envisaged in the \'with management\'
scenario:

-   The FMA is split into a no-take zone and a take zone;

-   A floating platform is fixed in the water close to the reef edge to
    facilitate snorkeling;

-   Education and awareness for visitors is increased through additional
    billboards, free leaflets and volunteers.

-   Enforcement is enhanced in collaboration with local residents,
    DOCARE and the Municipal Police, for which additional money is made
    available.

The advantage of the permanent closure is that fish can build up in the
closed area. This would enhance the snorkeling experience and therefore,
an awareness program could be set up. The infrastructure expenditures
would further add to the enjoyment of the snorkeling experience. Also,
the fish build-up would lead to fishery spillovers. The cost of this
package of measures is assumed to be US\$105,000 in terms of initial
investment costs in year one, and annual operation and maintenance costs
of US\$58,000. Specification of these costs is given below in Table 10.

## Molokini Shoal

The Molokini Shoal MLCD is the southern rim of an extinct volcanic
crater, off the coast of Maui. The actual crater is a Bird Sanctuary and
landing on the island is prohibited. Snorkeling and diving is only
possible from boats. There are currently slightly over 40 licensed boats
that offer dive and snorkel trips to Molokini, bringing more than
220,000 active recreationists to Molokini every year.

The services discussed above (restrooms, etc.) are present on these
boats. Compliance with the fishing and other regulations is fairly good,
although there are reports of poaching during the evening and night.
Marine life education/awareness takes place on the boats by various
means, including dive briefings. The level of education and the amount
of knowledge transferred depends on the crewmembers of these boats. The
only infrastructure present is mooring buoys.

The following improvements are envisaged in the \'with management\'
scenario:

-   Measures to decrease poaching in the evenings and at night are
    improved through more regular patrols and full time evening/night
    surveillance from the Maui coast;

-   Education and awareness on the boats is increased through training
    and certification of education program by DAR as a condition of
    commercial use permit of the tourist operators and by making
    information materials freely available;

-   Buoys are well maintained and replaced if needed.

These measures lead to higher biomass and diversity of marine life and
less damage to the reefs. This in turn increases the satisfaction of
divers and snorkelers. It also increases fish yields in adjacent areas
through larval and adult spillover. Finally, there is an educational
spillover, as discussed above.

The costs for this package of measures is difficult to estimate as it is
not entirely clear how much additional manpower is needed to increase
enforcement. We assume here that the suggested improvements can be
realized with an initial investment of US\$150,000 in year one
(US\$25,000 for education and US\$125,000 for enforcement) and recurrent
costs of US\$90,000 in subsequent years (US\$20,000 for education and
US\$70,000 for enforcement).

## Honolua Mokule'ia Bay

The Honolua Mokule'ia Bay MLCD consists of two semi-enclosed bays
bordered by north and south basalt cliffs. The north reef is generally
sheltered, except from north Pacific swells in winter. This area has
high human use: water recreation, boat traffic, tourism. The primary
threats include poaching, fish feeding, anchoring, trampling and
sedimentation. Visitation is high with around 86,000 active visitors per
year. Access to the MLCD is possible by land and by sea. Sea access is
organized by a commercial operator offering a sailing trip with a
catamaran, the Trilogy, including a snorkel/dive trip in Honolua Bay.
Most people, however, access the Bay by land. Cars can be parked next to
the road from which is it only a short walk to the Bay.

The Trilogy has restrooms and other facilities, and snorkelers and
divers are briefed on the boat about marine life. As yet, there is no
mooring buoy to anchor the boat to. For people accessing from shore,
there are no restroom and shower facilities. There are billboards with
information about the MLCD, but generally the information about marine
life is minimal. There is no infrastructure to facilitate access into
the water, nor are there good parking facilities on land. As the MLCD is
a CRAMP site, there is considerable monitoring. During the day, the
sheer number of visitors leads to a reasonable level of compliance of
no-fishing regulations. However, there are reports of spear fishing and
other activities during the evening and night.

The following improvements are envisaged in the \'with management\'
scenario:

-   Measures to decrease poaching in the evenings and at night are
    improved through a 24-hour guard presence;

-   Education and awareness for visitors accessing from land is enhanced
    through additional billboards. At weekends, volunteers are also
    present to explain about marine life;

-   Buoys are introduced for the commercial tourism boats;

-   Basic restroom and shower facilities are built and a short pier is
    constructed to facilitate access to the water;

These measures result in higher quality reefs, more marine life, and
better amenities for visitors, all of which lead to increased snorkeler
and diver satisfaction. In addition, increased fish yields are expected
in adjacent areas. The measures also enhance marine life in the adjacent
marine area. Finally, there is an educational spillover due to the fact
that recreationists will use the awareness raised during the Honolua
visit to be more careful during future snorkeling and/or dive trips in
the State.

The costs of a 24-hour guard presence are considerable. The costs are
estimated at \$12 per hour, plus 15% benefits/medical insurance, etc.
Including uniform, raincoat and laundry allowance, we estimate the
24-hour guard presence at around US\$125,000 per year. The guard also
needs a small shed and a restroom, and equipment (binoculars, night
vision goggles, cameras, walky-talkies, boat) requiring an estimated
US\$25,000 in investment. Basic shower and restroom facilities for the
visitors are estimated to cost US\$25,000 in investment costs and
US\$5,000 per year for maintenance and cleaning. The volunteer program
including free leaflets is assumed to cost US\$5,000 per year.
Development of the awareness program is estimated at US\$15,000. A
100-car parking lot is envisaged to decrease the dangerous situation
where people park alongside the road at a cost of US\$50,000 to
construct and US\$5,000 to maintain. This gives total additional
investment in the first year of US\$115,000 and recurrent costs of
US\$15,000 plus enforcement at US\$125,000 per year.

## Kahalu'u

Kahalu\'u Beach Park (Hawaii): This Park is home to the largest sand
beach between Kailua and Keauhou on the Kona coast of the big island.
Kahalu\'u Beach Park and is one of the most popular swimming and best
snorkeling sites in the Kona district, with 350,000 visitors per year
(Rogers, ??). Note that Kahalu\'u is not an MLCD and therefore, the
standard DAR fishing regulations apply. However, any fishing connected
to the aquarium trade is prohibited as it lies within the Kailua-Keauhou
Fish Replenishment Area (FRA).

Currently, Kahalu\'u has restrooms, showers, billboards with some
information, and a volunteer program. Regular fishing is allowed within
the Beach Park and compliance is reasonable. Some monitoring is taking
place, but this could be improved. Other than the car park, there is no
infrastructure that assists public access to the water.

The following improvements are envisaged in the \'with management\'
scenario:

-   The Beach Park is designated a \'no fishing area\' and this is
    enforced through a system of evening/night guard surveillance.
    During the day, the sheer presence of visitors is assumed to prevent
    fishing activities once this is prohibited.

-   Visitor education and awareness is enhanced through a set of new
    billboards, as well as more volunteers;

-   Meters are introduced for the parking lot and this money is
    earmarked for management activities at Kahalu\'u;

-   Consistent monitoring is envisaged, partly with the aid of
    volunteers.

This set of measures will increase reef quality, resulting in higher
satisfaction of the visiting snorkelers and additional fishing yields in
adjacent areas. Finally, the additional awareness activities are assumed
to have \'educational spillovers\'.

The estimated costs of these management improvements are as follows. We
assume here that the suggested improvements can be realized at
US\$100,000 in year one and recurrent costs of US\$75,000 per year in
subsequent years. The distribution of costs is given below in Table 10.

## Waiopae

The Waiopae MLCD was established less than a year ago in an tidal pool
environment. People can drive to within a few yards of the nearest pools
and, except for during major storms, it is possible to swim in the tide
pools under most weather conditions. The MLCD area has a total coral
cover of approximately 47% in selected monitored sites. There are only
about 40,000 recreational visitors to Waiopae per year.

Currently, there are no restrooms, showers or other facilities. There is
some monitoring by DAR in collaboration with the University of Hawaii in
Hilo as well as by a local non-profit organization. Compliance with the
regulations which prohibit all fishing is low, partly because the MLCD
is very new and people are not yet fully aware of \'what is allowed
where\'. There is no infrastructure to facilitate access. In fact, most
people enter the MLCD by threspassing people\'s private property instead
of using the one pedestrian access corridor. The State\'s education
outreach program is limited to signs along the boundaries that summarize
the rules and show the boundary. In addition, a community \"reef watch\"
program hands out DAR and NOAA educational brochures and state fishing
regulations and informs peole about the MLCD, as well as monitors
patterns of human use.

The following improvements are envisaged in the \'with management\'
scenario:

-   Measures to decrease poaching in the evenings and at night are
    improved through a reef watch program;

-   Education and awareness for visitors is stepped up by additional
    billboards and through state collaboration with the community reef
    watch program;

-   Basic individual septic-type restroom and shower facilities are
    built (the State would need to purchase a lot to make this possible)
    and a short pier is constructed to facilitate access to the water;

-   Underwater monitoring is increased, partly with the aid of the local
    reef wathc project.

-   The current parking lot is improved and parking meters are installed
    (as all roads and parking lot are on private land, this would
    require approval of the private community association).

-   Litter control - both daily litter pick-up and trash hauling as well
    as periodic beach clean-ups of marine debris (the community has been
    paying around \$1500 per year plus volunteer time in the past for
    this service).

These improvements lead to higher fish biomass and better quality
corals, and improved services and infrastructure. This leads to more
visitor satisfaction and to higher fishing yields in adjacent areas.
Also, the volunteer-based awareness-raising program will generate an
off-site educational effect. In the specific context of Waiopae, where
residential houses and vacation homes are situated directly adjacent to
the MLCD, the introduction of these investment measures may alter the
housing prices. However, it is not clear in which direction and with how
much, so it is assumed here that the prices remain constant.

The costs for these measures are difficult to estimate. We assume that
the suggested improvements can be realized with an initial investment of
US\$80,000 in year one (enforcement US\$20,000; education US\$10,000;
services US\$25,000 and infrastructure for parking lot US\$25,000) and
annual recurrent costs of US\$35,000 in subsequent years (enforcement
US\$10,000; monitoring US\$5,000; education US\$5,000; services
US\$5,000 and infrastructure US\$10,000). This estimate is lower than
the proposed budget for the second year of the local reef watch project,
to be done in collaboration with DAR and UH in Hilo (proposed budget:
\$56,000), which includes collaborative monitoring and litter control
and public education outreach by reef watch during days on weekends and
holidays only. Also, the purchase of the lot for the restroom facilities
is not included.

# Results

This chapter provides an overview of the simulations of the
ecological-economic model, which is presented in Chapter 2. The physical
and socio-economic data described in Chapter 3 provides the inputs for
the model. Variations over time are caused by the assumptions formulated
in the scenarios in Chapter 4, and endogenous interactions between the
ecological and economic modules of the model. Throughout the analysis,
we assume a time period of 25 years, starting in 2005 and running till
2030. Costs and benefits are discounted at a discount rate of 3 percent.
This is in line with the common assumption in environmental economics
applied to biodiversity related goods and services. This Chapter
subsequently describes the costs, the benefits, and the cost benefit
analysis in which the issue of sustainable financing is addressed.

## Costs

Based on the discussion and data presented for each of the sites in
Section 4, the summary of annual additional costs for the \'with
management\' scenario is given in Table 10. This combines the investment
costs and recurrent costs associated with expenditures in services,
education/awareness, monitoring/assessment, enforcement/ compliance and
other costs such as infrastructure.

Table 10 Summary of annual costs over time and aggregated/discounted
costs \*

  ---------------- ------------ ----------- ----------- ----------- ----------- ---------
                   Hanauma      Diamond     Molokini    Honolua     Kahalu\'u   Waiopae
                                Head                                            

  Fixed            \-           40,000      125,000     25,000      35,000      20,000
  enforcement                                                                   

  Fixed monitoring \-           10,000      \-          \-          20,000      \-

  Fixed education  13,500,000   20,000      25,000      15,000      30,000      10,000

  Fixed service    \-           30,000      \-          25,000      25,000      25,000

  Other            \-           5,000       \-          50,000      50,000      25,000

  Total fixed      13,500,000   105,000     150,000     115,000     160,000     80,000

  Variable         \-           30,000      70,000      125,000     15,000      10,000
  enforcement                                                                   

  Variable         \-           7,500       \-          \-          10,000      5,000
  monitoring                                                                    

  Variable         500,000      10,000      20,000      5,000       10,000      5,000
  education                                                                     

  Variable service \-           10,000      \-          5,000       5,000       5,000

  Other variable   \-           500         \-          5,000       10,000      10,000

  Total variable   500,000      58,000      90,000      140,000     50,000      350,000

  NPV overall      22,317,187   1,127,963   1,807,183   2,617,841   950,657     654,460
  ---------------- ------------ ----------- ----------- ----------- ----------- ---------

\* discount rate 3%, period 25 years. Fixed costs are initial
investments and variable costs are on-going annual costs.

  ---------------------------------------------------- ----------------------------------------------------
  *Hanauma Bay*                                        *Waikiki Diamond Head*

  ![](media/image2.wmf){width="1.7506944444444446in"   ![](media/image3.wmf){width="2.6347222222222224in"
  height="0.8763888888888889in"}                       height="1.0631944444444446in"}

  *Honolua*                                            *Molokini*

  ![](media/image4.wmf){width="2.6215277777777777in"   ![](media/image5.wmf){width="2.38125in"
  height="1.1826388888888888in"}                       height="0.9381944444444444in"}

  *Kahalu'u*                                           *Waiopae*

  ![](media/image6.wmf){width="2.604861111111111in"    ![](media/image7.wmf){width="2.5277777777777777in"
  height="1.195138888888889in"}                        height="1.1777777777777778in"}
  ---------------------------------------------------- ----------------------------------------------------

Figure 2 Allocation of the Net Present Costs (discount rate 3%, 25
years)

Table 10 shows how the level of investments differs substantially
between the sites. Being a hotspot for marine-related tourism, Hanauma
strategically invests a significant amount in visitor education. The
construction of the visitor center is far bigger than what could ever be
achieved in an economically sound manner at any of the other sites.
Moreover, it can be seriously questioned whether a second center of such
magnitude in Hawaii would make sense, given the fact that most people
visit Hanauma anyway.

Figure 2 gives the composition of management costs for each of the six
MMA sites. Interestingly, Hanauma Bay only has education/awareness
costs, while costs in Honolua are primarily for enforcement. For the
other sites, the various management components are more equally
distributed over enforcement, monitoring, education, service and
infrastructure costs.

## Benefits

#### Recreational value

Recreational value is by far the most important value of MMAs in Hawaii.
The Hawaiian economy\'s high dependency on tourism is also reflected in
the high recreational values in the overall value of MMAs. Still, as
shown in Table 11, the variation between the recreational value per site
is significant. Hanauma Bay and Molokini are the most valuable MMA sites
from the perspective of recreation. Despite the fact that Waikiki
Daimond Head is located in one of the most expensive areas of Hawaii,
this site provides the least recreational benefits. This will continue
if it is not supplemented with additional MMA management. However, the
last row in Table 11 shows that Diamond Head holds the mostpotential for
improvements in recreational value through the provision of educational
facilities and better compliance. The same can be concluded for Waiopae.
In essence, these sites are heavily "under"-managed.

Table 11 Average annual recreational benefits

  ------------- ------------ ------------ ------------ ----------- ------------ -----------
  Scenario      Hanauma      Diamond Head Molokini     Honolua     Kahalu\'u    Waiopae

  With          41,552,902   1,273,569    21,620,178   4,538,942   10,903,723   1,850,348

  Without       36,572,241   316,067      19,293,321   2,674,997   8,518,295    755,535

  Difference    4,980,661    957,502      2,326,857    1,863,945   2,385,428    1,094,813

  Improvement   14%          303%         12%          70%         28%          145%
  ------------- ------------ ------------ ------------ ----------- ------------ -----------

#### Fishery value

Surprisingly, the fishery value for MMAs may well be the hardest
reef-associated value to quantify. This is because these values are not
based on direct catch in the area but, instead, on enhanced catches in
areas outside the MMAs based on: (i) juvenile and adult spill-over
effects to adjacent areas and (ii) enhanced reproductive output
(sometimes referred to as larval spillover) in all areas outside the
MMAs. See Friedlander & Cesar (2004) for a summary of the literature on
fisheries benefits of MMAs.

For Hawaii, research is presently underway (West Hawai'i Aquarium
Project) to evaluate the effectiveness of reserves from an ornamental
fisheries point of view and to better understand the ecological dynamics
of the nearshore reef environment. Preliminary analysis indicates that
three years after closure of the Fish Replenishment Areas (FRAs), there
have been significant increases in the overall abundance of fishes
targeted by collectors. Two species, the yellow tang and Potter's
angelfish (Centropyge potteri), showed significant (74-80%) increases in
FRAs relative to previously protected reference areas. Furthermore, no
aquarium fishes declined in abundance in open areas as might be expected
if the intensity of harvesting increased outside of the FRAs. In fact,
two species displayed significant increases in abundance in the open
areas. Thus early results of this study demonstrate that MMAs can be a
highly effective strategy for managing these resources.

This study only covers ornamental fisheries. Therefore, we have used to
other studies to estimate the spillover effects in Hawaii. These are
both well-known quantitative papers from the fisheries literature.
Roberts et al. (2001) describe fisheries surrounding the Soufrière
Marine Management Area (SMMA) in St. Lucia (Eastern Caribbean).
Establishing the SMMA meant that around 35% of the previous fishing area
was closed to fishing. After 5 years of protection in the SMMA, catches
in adjacent areas increased by 46% (large traps) and 90% (small traps)
per trip with stable levels of effort. A study by Alcala and Russ (1990)
documented evidence from a village in the Philippines (Sumilon) where
catches were nearly twice as high on 75% of the reef as compared to the
entire reef after 25% of the area had been set aside as a fully
protected reserve.

As a result of the SMMA closing off one-third of the area[^1], there was
an increased fish catch of roughly 67%, while the no-take reserve in
Sumilon (a quarter of the area) led to an increase of around 100%. This
means that for St. Lucia a closure of one hectare of SMMA leads to an
additional two hectare-equivalent of pre-closure catch. For Sumilon, a
closure of one hectare around Sumilon leads to an additional four
hectare-equivalent of pre-closure catch. Taking the average of the two
sites, and assuming that these numbers can be used for the Hawaiian
situation, we assume that closure of one hectare to all fishing can lead
to an additional 3 hectare-equivalent of pre-closure catch.

However, this is taken as the maximum spill-over, given the small size
of the MMAs in Hawaii (small as percentage of total area). It is
important to note that the MLCDs described here were never initially
intended to act as fish replenishment areas for adjacent fisheries and
that these fisheries benefits should be seen as a positive indirect
consequence of their creation of the MMAs. With the small size of MMAs
in Hawaii, the actual spill-over effect may be much smaller. Therefore,
we assume that the closure of hone hectare of coastal water leads to an
addition of pre-closure catch of between 0 and 3 hecatre-equivalent with
a point-estimate of 1.5 hectare-equivalent.

Yields per hectare per year of nearshore fisheries in Hawaii are
difficult to determine. Here we assume conservatively that such yields
are 1 mT per km^2^ per year. With the assumptions above, this means that
the closure of Hanauma (0.408 km^2^ in size), increases adjacent
fisheries with up to 3 times 0.4 times 1 mT, which equals around 1.2 mT
of reef-associated fish. At a price of US\$ 5 per kilo, this gives up to
around US\$ 6,000 per year in additional catch value. This value can be
transformed in economic benefit by assuming a value added percentage of
60% for nearshore fisheries (Kona data) and a economic multiplier effect
of 40% for fisheries (Cesar et al. 2002), giving Hanauma a total annual
reef-associated fishery benefit of around US\$ 0 - 5,140 with a point
estimate of US\$ 2,570.

Table 12 Fisheries benefits from MMA closure (range and point estimate
in US\$)

  ------------------- --------- ------------ ---------- --------- --------- ---------
                      Hanauma   Diamond Head Molokini   Honolua   Kahaluu   Waiopae

  Area (in hectares)  40.8      13.5 (MLCD)  80.9       18.1      2.2       20.2

  Fisheries benefits  0 - 5,140 0 - 1,700    0 - 10,200 0 - 2,280 0 - 280   0 - 2,540
  (range)                                                                   

  Fisheries benefits  2570      850          5100       1140      140       1.270
  (point)                                                                   
  ------------------- --------- ------------ ---------- --------- --------- ---------

Source: Area estimates are from Table 2. Fisheries benefits are derived
by authors based on calculations above.

All MMA sites discussed, except Kahalu\'u Beach Park and part of the
Waikiki Diamond Head marine area, are MLCDs in which fishing is
prohibited. Therefore, the fishery value comes from the spillover effect
to adjacent areas where fishing is allowed. For Kahalu\'u, the actual
amount of fishing occurring in the Beach Park is very limited because of
the presence of large amounts of recreational users (350,000 per year).
The Waikiki Diamond Head Shoreline FMA is the only site in this study in
which a reasonable amount of legal fishing (in the \'even\' years) takes
place. This is described in the base-case for Waikiki Diamond Head. In
the management alternative, we investigate the consequence of a full
closure of half of the FMA and no closure of the other half.

These fisheries benefits are the long-term fisheries benefits after a
number of years of full well-enforced closure, such as is currently the
case for Hanauma Bay. In the short run, the fisheries benefits from
Molokini may be smaller than for Hanauma. Note that for Diamond Head,
only the actual MLCD was used for the calculation of fisheries benefits.

#### Educational spillover value

One of the side benefits of educating divers and snorkelers is the
education spillover effect. This education spillover effect refers to
the fact that snorkelers and divers who visit a site where they are
properly instructed and educated go snorkeling at an average of 2 or 3
other locations in Hawaii. It si assumed that these snorkelers and
divers will then behave better in those other reef areas. Education
therefore not only benefits the site providing the educational services,
but also prevents physical damage to other reefs. Education can
therefore be considered a long-lasting investment in environmental
awareness and tourist behavior.

In calculating the educational spillover effect, a distinction is made
between residents and visitors. As far as visitors are concerned, active
visitors snorkel an average of 3.8 times during their stay in Hawaii, of
which 1 snorkel trip will be in Hanauma Bay. The education spillover
effect for active visitors is therefore assumed to materialize in
approximately 2 snorkeling trips outside the site at which the receive
education. As shown in Table 13, the level of educational spillover
differs between the sites. Visitors to Hanauma are better educated, due
to the rich facilities available at the Bay, and go on to visit other
sites because Hanauma is usually positioned early in their vacation. The
potential of educational spillover in Waiopae is therefore much less
because this is a location that will not be followed by many other
visits, nor are the facilities as effective as is the case in Hanauma
Bay. In accounting for the educational spillover effect we adopt the
calculations reported in Van Beukering and Cesar (2004) on threats to
the reefs, using a figure for damage rate of 2 cm^2^ per trip. In
accounting for the spillover effect for residents, it should be realized
that the active residents, i.e. those who indicated that they snorkel an
average of 10 times per year, will continue doing so in the future. In
other words, the accumulative effect of their education is much larger
than for the visitors.

Table 13 Net Present Value of the educational spillover value of
education (in US\$)

  ---------------- ------------ ------------ ----------- ----------- ----------- ---------
                   Hanauma      Diamond Head Molokini    Honolua     Kahalu\'u   Waiopae

  Education        22,317,187   227,665      1,967,808   1,698,895   2,636,461   126,201
  spillover                                                                      

  Share in total   3.0%         1.1%         0.5%        2.2%        1.4%        0.4%
  NPV                                                                            
  ---------------- ------------ ------------ ----------- ----------- ----------- ---------

\* discount are of 3%, period of 25 years.

#### Overall benefits

By aggregating the above-mentioned values, the net benefits for the
scenarios "with" and "without" additional management are determined.
Figure 3 shows composition of the net-benefits for the different sites
for the various types of values.

  ---------------------------------------------------- -----------------------------------------------------
  *Hanauma Bay*                                        *Waikiki Diamond Head*

  ![](media/image8.wmf){width="2.626388888888889in"    ![](media/image9.wmf){width="2.848611111111111in"
  height="1.00625in"}                                  height="0.9756944444444444in"}

  *Honolua*                                            *Molokini*

  ![](media/image10.wmf){width="2.626388888888889in"   ![](media/image11.wmf){width="2.5965277777777778in"
  height="1.136111111111111in"}                        height="1.0923611111111111in"}

  *Kahalu'u*                                           *Waiopae*

  ![](media/image12.wmf){width="2.626388888888889in"   ![](media/image13.wmf){width="2.301388888888889in"
  height="1.0791666666666666in"}                       height="1.0791666666666666in"}
  ---------------------------------------------------- -----------------------------------------------------

Figure 3 Allocation of the Net Present Value (discount rate 3%, 25
years)

Although the composition of the net-benefits differs for each MMA, the
recreational benefits of snorkelers prevail for each case study.
Snorkelers are always in large numbers and have willingness-to-pay
levels that are comparable with other users. Snorkelers are also found
to be very sensitive to environmental improvements of the marine
ecosystems. The better the quality of the reef, the larger their
consumer surplus, and therefore their contribution to overall economic
welfare levels resulting from the additional management measures.
Typically, in neither of the MMAs does the additional management
contribute significantly to the fishery sector. The additional fishery
values vary between 0 to 2 percent of the total increase in economic
value.

Figure 4 shows the "with" and "without" extra management scenarios for
the six MMAs. Least variation is observed in the "without" scenario.
Only in the case of Molokini and Kahalu'u will the absence of additional
management lead to a decline in overall benefits. This is mainly due to
the fact that fewer visitors are tempted to visit these sites, while
those that do, are more frequently disappointed by the deteriorating
quality of the reefs. This leads to a lower consumer surplus and
willingness to contribute to conservation efforts. The other sites are
assumed to maintain the present level of visitors and benefits.

  ----------------------------------------------------- -----------------------------------------------------
  *Hanauma Bay*                                         *Waikiki Diamond Head*

  ![](media/image14.wmf){width="2.8041666666666667in"   ![](media/image15.wmf){width="2.85in"
  height="1.5652777777777778in"}                        height="1.5930555555555554in"}

  *Honolua*                                             *Molokini*

  ![](media/image16.wmf){width="2.85in"                 ![](media/image17.wmf){width="2.7527777777777778in"
  height="1.5895833333333333in"}                        height="1.5590277777777777in"}

  *Kahalu'u*                                            *Waiopae*

  ![](media/image18.wmf){width="2.8041666666666667in"   ![](media/image19.wmf){width="2.85in"
  height="1.5958333333333334in"}                        height="1.6298611111111112in"}

  ![](media/image20.wmf){width="4.6305555555555555in"   
  height="0.30416666666666664in"}                       
  ----------------------------------------------------- -----------------------------------------------------

Figure 4 Net-benefits over time (period 2005 till 2030)

As shown in Figure 4, the "with" additional management scenarios show
much more variation. The highest growth in overall benefits is achieved
in Waiopae and Diamond Head. Although these sites are not the most
economically valuable MMAs, they do hold the largest potential for
improvements because their current level of management is limited. Sites
such as Hanauma and Molokini have much less potential to develop
further. Management improvements have already been achieved in the past,
resulting in limiting significant growth of economic gains. Therefore,
the benefits curves of Hanauma and Molokini gradually stabilize over
time.

Table 14 below shows the gross benefits accumulated over time (net
present value) at a discount rate of 3 percent. Hanauma Bay is by far
the most economically valuable site from a marine-environmental
perspective. The economic importance of the marine environment of
Waikiki Diamond Head is minimal compared to Hanauma Bay. Second in value
is Molokini. Kahalu'u is the third most valuable site in Hawaii.
Clearly, the number of visitors strongly determines the overall value of
the MMA. Note that this latter value differs from the one reported in
Cesar and Van Beukering (2004), mainly due to a lower time horizon here
(25 years instead of 50 years).

Table 14 Economic value in Net Present Value terms (million US\$) with
and without additional MMA management\*

  ------------------ --------- ------------ ---------- --------- ----------- ---------
                     Hanauma   Diamond Head Molokini   Honolua   Kahalu\'u   Waiopae

  With management    732       21           383        78        193         30

  Without management 648       6            345        47        154         13

  Difference (net    84        15           38         30        39          17
  benefit)                                                                   
  ------------------ --------- ------------ ---------- --------- ----------- ---------

\* discount rate of 3%, period of 25 years.

## Cost benefit analysis

There are different ways of looking at the economic feasibility and
desirability of investments in conservation of marine ecosystems. On the
one hand, one can look at the *financial feasibility* of the measure.
This approach raises the question of whether the investments and
operational costs can ever be recovered in financial terms. If the
system is self-funding, vulnerability for political variations is much
less. This "narrow" approach will be discussed in the second part of
this section. First, we will consider the *economic feasibility* of the
proposed measures.

#### Economic feasibility

Table 15 summarizes the net costs and net benefits of the measures
proposed for the six MMAs. From a societal perspective, the measures are
desirable from a societal point of view if the ratio between the net
benefits and the net costs exceeds factor 1. As can be seen in the last
row of Table 15, all the proposed investments are economically feasible.
The net benefits widely exceed the net-costs to society. MMAs on the
main island (i.e. Kahaluu and Waiopae) offer particularly significant
potential to generate net-benefits over costs. Higher discount rates,
however, may reduce the attractiveness of the proposed measures.

Table 15 Net benefits, net costs, and the benefit cost ratio (million
US\$)\*

  ------------- --------- ------------ ---------- --------- ----------- ---------
                Hanauma   Diamond Head Molokini   Honolua   Kahalu\'u   Waiopae

  Net benefits  84        15           38         30        39          17

  Net costs     22        1.1          1.8        2.6       0.9         0.7

  Benefit cost  3.8       13.5         21.2       11.6      41.5        26.1
  ratio                                                                 
  ------------- --------- ------------ ---------- --------- ----------- ---------

\* discount rate of 3%, period of 25 years.

#### 

#### Sustainable financing

In the previous section, it was shown that from an economic welfare
point of view, the MMA management options were favorable. Yet, there are
often political forces preventing these options from being implemented.
The main challenge for MMAs is therefore how to finance these management
options even if the investments are justified from an economic
perspective. We have looked here at one specific tool, the introduction
of an entrance fee. Cesar and Van Beukering (2004) give an overview from
around the world of entrance fees and other types of user fees as well
as other revenue generating means for sustainably financing marine
parks.

User fees can be defined as any charge for non-consumptive use of an MMA
(usually 'per person' or 'per vehicle'). They include entrance fees,
diver fees and yacht mooring fees among others (see Lindberg and
Hallpenny, 2001 for an overview). Some user fees are very high, such as
the \$100 charge for entrance to the Galápagos Natonal Park in Ecuador.
Lindberg (2001) states five objectives for user fees: (i) cost recovery;
(ii) generation of \"profit,\"; (iii) generation of local business
opportunities; (iv) provision of maximum opportunities for learning and
appreciation of the natural resource; and (v) visitor management to
reduce congestion and/or ecological damage.

The National Park Service in the US has expanded its fee collection
under the authority of the Recreational Fee Demonstration Project. Yet,
there is no entrance fee at some of the most well-known National
(Marine) Parks in the US, such as the Channel Islands National (Marine)
Park in California and the Dry Tortugas National Park in Florida. A
disadvantage of user fees discussed in the US National Parks context, is
that low-income people may be excluded from resource-based tourism (More
and Stevens, 2000). However, in the Hawaiian setting where only minimal
charges will be discussed, this is likely to be a minor issue,
especially in fee schemes that exclude Hawaiian residents.

One of the main impediments to implementation of user fees in a marine
setting is fee collection. Depending on the ease of access, a user fee
system can be regulated through a booth at the point of entry (Hanauma
Bay) as is the case for most terrestrial parks. Alternatively, it can be
managed through the dive industry, where operators are responsible for
fee collection (Ras Mohamed in Egypt, Bonaire, Palau and others). At Hol
Chan (Belize), there is one main dive/snorkel location and rangers
collect fees there, while in Kenya, rangers of the Kenya Wildlife
Service collect the fee by boat at the snorkel and dive sites in the
MMAs.

In the context of the six Hawaiian study sites, we have looked at
several types of user fees to finance the management options discussed
in the previous section. To evaluate these user fees, the financial cost
benefit ratio is calculated. This ratio differs from the economic cost
benefit ratio discussed above. A financial cost benefit ratio of a user
fee for an MMA compares the costs of the management option for a site
with the collected fee (i.e. the financial benefit) for that site. The
financial cost benefit ratio is the quotient (or ratio) of these
collected fees over time and the management costs. We have looked at
three different user fees. One is the fee corresponding to the expressed
average willingness-to-pay determined by survey at each site. The other
two user fees are flat fees of \$1 and \$2. For Hanauma and Molokini, we
have looked at fees for non-Hawaiian residents only, while for the other
sites, we have looked at across-the-board fees. Besides these entrance
fees, we have also looked at parking fees, which are levied on both
residents and \'others\' (non-discriminatory). The financial
benefit-cost ratios for the three types of user fees, and the economic
benefit-cost ratio from the previous section, are summarized in Table
16. This table also gives the so-called \'break-even user fee\'. This is
the fee at which the management costs can be exactly paid for by the fee
(no profit and no loss). Note that for Hanauma, we have only looked at
the costs and benefits of the education center and the user fee to
finance that. This is separate from the US\$5 for recreationists from
outside Hawaii which is currently charged to cover other costs.

Table 16 Economic indicators\*

  ------------------- --------- ------------ ---------- --------- ----------- ---------
  Management          Hanauma   Diamond Head Molokini   Honolua   Kahalu\'u   Waiopae

  Financial BC ratio  0.8       \-           2.1        0.8       6.1         2.0
  (\$1)                                                                       

  Financial BC ratio  1.5       \-           4.1        1.6       12.1        4.0
  (\$2)                                                                       

  Financial BC ratio  2.8       \-           8.8        2.4       17.6        5.8
  (WTP)                                                                       

  Economic BC ratio   3.8       12.5         20.2       10.6      40.5        25.1

  Break-even user fee 1.5       \-           0.51       1.24      0.17        0.50
  ------------------- --------- ------------ ---------- --------- ----------- ---------

\* Discount rate 3%, period over 25 years.

As discussed, it may be easier in some sites to collect the user fees at
some sites than at others. However, given the low break-even user fees,
a collection system could be envisaged where fees are levied in MMAs
where this is easy to administer, and where the percentage of people
that would refuse to pay is very small. The revenues from this fee
system could be used not only for that particular MMA site, but also to
subsidize management of MMAs where fee collection is cumbersome or
impossible to implement. This could be an interesting first step towards
integrated ecological and economic management of clusters of MMAs.

# Conclusions and recommendations

This paper has given an economic valuation of six selected MMAs in
Hawaii, as well as the cost benefit analysis of management options for
these MMAs. The economic value (without additional management), as an
asset value in net present value terms, ranges from US\$6 million for
Diamond Head to US\$ 650million for Hanauma. As regards the cost-benefit
analysis of management options, we found that in no case did the cost
exceed the benefits. The economic benefit cost ratio was actually quite
high, for instance 10.6 for Hanolua. That means that, assuming people
pay their stated willingness-to-pay value on entry to the MMA, over
time, the benefits outweigh the costs by a factor 40.

To evaluate a system of user fees, financial benefit cost ratios were
also calculated. In all cases is US\$2 dollar fee is enough to finance
all additional management costs. For Molokini and Waiopae, a fee of only
two quarters (or 50 cents???) suffices to pay for additional management
costs.

Based on this analysis, the following recommendations can be drawn:

-   Management of MMAs makes both ecological and economic sense;

-   Low enforcement efforts decrease the benefits from MMAs
    substantially. In fact, in the absence of effective enforcement,
    MMAs have no economic benefits, and the ecological advantages are
    much lower.

-   The very high benefit-cost ratios of proper MMA management suggest
    that Hawaii should put more financial resources aside for MMA
    management. If there is not enough political will or priority to do
    so, a system of user fees should be considered.

-   A small user fee would be sufficient to finance the additional costs
    of proper MMA management.

-   Fees can be collected at those sites where implementation of this
    fee system is most straightforward. Part of the revenues of this
    system could be used to subsidize the management of remote MMAs with
    few tourists, or in areas where the fee system would be cumbersome
    or impossible to implement.

# References

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Cesar, H. and P. van Beukering (2004), \"Economic valuation of the coral
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Friedlander, A.M. and H. Cesar (2004) \"Fisheries benefits of MPAs in
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Lindberg, G. (2001) \"Protected Area Visitor Fees - Overview\", mimeo
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Meyer, C.G. (2003) An empirical evaluation of the design and function of
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More, T.A. and T. Stevens (2000) \"Do User Fees Exclude Low-Income
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Rodwell, L.D. and C.M. Roberts (2000), \"Economic Implications of
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Roberts, C.M., J.A. Bohnsack, F. Gell, J.P. Hawkins, and R. Goodridge
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[^1]: Assuming that large and small trap fishing were equally important
    and that the remaining 30% of the fisheries showed the same average
    growth rate in catch after establishing the SMMA.