Herman Cesar
Herman Cesar

Lauretta Burke
Lauretta Burke

Lida Pet-Soede
Lida Pet-Soede

The
TheEconomics
Economicsof
of Worldwide
Worldwide Coral
Coral Reef
Reef Degradation
Degradation

Background Information
Acknowledgements

Copies available fromFirst of all, we would like to thank Carel Drijver,
Annette Cornelisse and Sian Owen at WWF andKristian Teleki at the International Coral Reef
Action Network (ICRAN) for their support,
encouragement and critical reading of the document. We would also like to thank Pieter van
Beukering and Andrew Finlay for their background calculations and other valuable contributions to the report. Furthermore, we would
like to thank Ken Kassem (WWF-US) for providing the materials on the ‘hotspots’. We are
grateful for Gijs Blaisse, Jacqueline de Haan andMarcel Spijkerman for their work on the layout of the report. We would like to thank
Maarten van Rouveroy, Andy Bruckner, Ross
Jones and Marc Kochzius for letting us use theirphotos. The usual caveats remain.

WWF-Netherlands
Postbus 73700 AA Zeist
The NetherlandsTel.
++31-30-6937333
Fax.
++31-30-6911685
E-mail: acornelisse@wwf.nl
Web: www.panda.org/coral

Financial Support
This publication is a result of independent research funded by WWF (www.panda.org/coral)
and ICRAN (www.icran.org). The judgments
made in this report do not necessarily reflect
the views of the funding agencies.
Photo: reefs in dismal state (by K. Ostlund)

Abbreviations
NPV= Net Present Value
DFP= Destructive Fishing Practice
NOAA = National Oceanic and Atmospheric AdministrationGDP= Gross Domestic ProductCorrespondence address
Herman Cesar (CEEC)
Kastanjelaan 96828GH Arnhem
The NetherlandsTel:++31-26-4452175
Fax:++31-26-3704915
E-mail: herman.cesar@ivm.vu.nl
Web:www.ceec.nl

2

February 2003 Cesar Environmental Economics Consulting (CEEC)©

Published by: Cesar Environmental Economics Consulting (CEEC)
Maps: World Resources Institute, WWF-US,
National Oceanic and Atmospheric Administration (NOAA)
Production: Inspiration Company, Arnhem
Printed by: Veenman Drukkers, Ede
Photo’s front page: top left (© WWFCanon / Catherine Holloway), centre left(©WWF-Canon / Tom Moss).

Table of Contents

Summary and Conclusions
Reefs in Peril
Status of Coral Reefs
Causes of Reef Decline
Impacts on Biodiversity
Impacts on People

Economic Valuation of Coral Reef Decline
Potential Economic Value of Coral Reefs
Tourism Overuse
Destructive Fishing
Runoff and Land-based Pollution
Coral Bleaching and Climate Change

References
Notes
Appendix: Poverty Trap Case Study

4
6
6
7
8
9
10
10
11
14
16
18
20
21
22

3

Summary and Conclusions
Coral reefs are an incredibly valuable ecosystem. Not only are they very important for nature, but they represent a very high value forhumankind, supporting millions of people
whose lives depend on these natural resources
for a source of food and income. Estimates inthis report show that coral reefs provide eachyear nearly US$ 30 billion in net benefits in goods
and services to world economies, including,tourism, fisheries and coastal protection (Table
1).
Yet coral reefs are under heavy pressure. Already, 27% is permanently lost and with current trends, a further 30% is at risk of being
lost in the coming thirty years. With such devastating levels of destruction, the social and economic implications for the millions of people
who depend on coral reefs are of great concern. Over 39% of the world population now
live within 100 kilometres of the coast and many
people in these areas depend on reefs. Reefs
protect coastlines and reef fish provide a sourceof nutrition and income. Poverty increases andfood security decreases as fish stocks are depleted. This drives fishers further toward theuse of destructive methods to catch what little
there is left.
Key causes of coral reef decline have been theover-development of the coastal area and theover-use of coral reef resources. Migration tocoastal areas has created a surge in land development leading to clearance of important
coastal ecosystems such as mangroves andseagrass beds. Unregulated coastal construction,such as hotels, factories and desalination plants,
has increased sedimentation in the coastal waters and is destroying reefs worldwide as lightlevels in the water column are reduced and reefs
are smothered. Untreated sewage and chemical
agriculture run-off (e.g. pesticides, herbicides
and fertilizers) have caused nutrient loading into
coral reef waters, leading to algal blooms andeutrophication. Overfishing and destructive fishing practices have decimated coral reef fish
populations and their habitats. In addition, in-4

creases in sea surface temperatures associated with global climate change are causing
ever more frequent bleaching events.
Countries with coral reefs attract millions
of SCUBA divers every year, yielding significant economic benefits to the host country. Globally, tourism is estimated to provide US$ 9.6 billion in annual net benefits
and a multiple of this amount in tourism
spending (Table 1). These revenue streams
in coral reef areas are being threatened by
the deterioration of coral reefs. Damage tothe reefs has often been caused by the increase in tourism itself, through direct damage by careless tourists and through the unregulated construction and the irresponsible
operation of tourist related facilities. Mass
tourism poses a threat to reefs and to theincome that coral reefs provide to the local
population. Sustainable tourism, on theother hand, is a source of income to people
in reef areas. It even forms an alternative todestructive fishing practices.
Table 1: Potential net benefit streams per year andnet present value (NPV) of the world’s coral reefs(in billion US$)
Good/service

AmountFisheries
Coastal protection
Tourism/recreation
Biodiversity value
Total

5.7
9.0
9.6
5.5
29.8

NPV (50 year; 3%)

797.4

Source: authors’ own calculations

Reef fisheries provide nutrition and necessary incomes to millions of people in developing countries. Potential reef fishing benefits are estimated at US$ 5.7 billion annually. However, increases in fishing effort,
driven by rising populations and more effective fishing technology, have led to overfishing, such that the obtained economic
value of coral reef fisheries is now close tozero in many developing countries. With fewer fish on the reefs many fishermen haveresorted to more efficient yet highly damaging methods, such as bomb and cyanide fishing.
Because enforcement of these illegal operations is difficult, the financial incentive to fishers
in the short run is high. However, the ecological impact causes a net loss to society. For
instance, in areas of Indonesia with high potential value of tourism and coastal protection,
the socio-economic costs have been estimated to be four times higher than the total net
private benefits from blast fishing. The cost of ‘inaction’ on blast fishing has been estimatedat US$ 3.8 billion in Indonesia over the last 25 years. These figures would have justified
enforcement expenditures of around US$ 400 million annually.
Land-based pollution is another major threat to coral reefs as untreated sewage from urban
areas and runoff from chemicals used in agriculture cause sedimentation and mass algal
growth. Currently 22% of the world’s coral reefs are under medium to high risk from theseland-based sources of pollution. As a result, investment to decrease the flow of sediments
and excess nutrients into coastal waters is often justified despite high upfront costs. For
example, a proposed wastewater treatment plant in the Florida Keys requires around US$
60-70 million in investment costs and around US$ 4 million annually in operation andmainetance costs. However, in the long-term, the benefits to the local population are muchhigher, estimated at around US$ 700 million in Net Present Value (NPV) terms. Additional
side benefits such as reduction in water-borne diseases provide further arguments in favourof these investments. To be cost-effective, river basin management should be linked withcoastal zone management. This is the essence of the H2O Partnership (from Hilltop to
Ocean) launched at the World Summit on Sustainable Development in Johannesburg, August 2002.
Global climate change and related coral bleaching pose a final set of threats to coral reefs.
In 1998, 75% of reefs worldwide were affected by bleaching and 16% suffered mortality.
Recent studies predict that bleaching could become an annual event within the next 25 to 50
years. The study here calculates the net present value of future losses over the next 50 years
at a 3% discount rate. The losses in the case of the ‘severe’ coral bleaching scenario withmass coral mortality are estimated around US$ 83 billion. For the ‘moderate’ scenario,
where bleaching leads to less mortality, costs are estimated at around US$ 21 billion. Other
associated impacts of global climate change also have adverse effects on coral reefs, such asincreased frequencies of storms and hurricanes. A recent study estimates that climate change
will cause losses of US$ 109.9 million in the Caribbean due to increased sea-surface temperatures, sea-level rise and loss of species, among others. This is equal to 13.8% of thetotal GDP in the region. Reduction of other stressors to reefs such as those mentioned
above, in combination with climate change adaptation measures, could help to decrease theimpacts of climate change and coral bleaching on reefs.
Without even attempting to measure their intrinsic value, it is clear that coral reefs contributeenormously to food, income and various other quantifiable benefits, if properly managed.
Net potential benefits are estimated at US$ 30 billion per year. With current trends of reef
degradation, revenues will decrease, in some cases by as much as 75% with increasing costs.
This will imperil the lives of millions of people who rely on reefs for food and income,
especially in developing countries. Good reef management is costly, but the losses will bemuch higher if we fail to take action now. The choice is ours.

5Reefs in Peril
Status of coral Reefs
Coral reefs are productive and biologically diverse ecosystems covering only 0.2% of theocean floor, yet supporting an estimated 25%of all marine life [1]. However, coral reefs faceworldwide degradation, such that today we havealready lost 27% of the world’s reefs through a
combination of natural and, more importantly,
human impacts [2]. If present rates of destruction are allowed to continue, 60% of the world’s
coral reefs will be destroyed over the next 30
years (Figure 1).
Runoff, pollution, tourism overuse, destructive
fishing and coral bleaching among others are allcontributing to these trends (see next page). Figure 2 shows, for instance, the decrease in live
coral cover over the last five years in the highly
valued tourist/dived areas in the Sharm-el-Sheikharea of the Egyptian Sinai coast: live hard coral
cover fell from nearly 40% in 1997 to only 10%
in 2002 due to mass tourism expansion [3].

Permanently
lost

41%

hard coral18%
At risk over the
next 2-10 years

6

At risk over the
next 10-30 years

Figure 1: Percentage of Coral Reefs under Threat Worldwide [2]sea-surface temperatures have increased by
0.3-0.6°C. With increased sea temperatures
it is predicted that frequency and magnitudeof hurricanes will increase.
The combined effect of hurricanes andwarm waters can have a devastating effectwhich has already been experienced in someareas. Belize witnessed a 50% reduction inlive coral cover in 1997-98 due in part tosedimentation from rainfall linked to hurricane Mitch and to the 1998 coral bleaching
event [3].

soft coral

Figure 2: Change over time of hard and soft coral coveralong the Sinai coast (Egypt); Source: [3])

27%

14%

coral cover (%)

Aside from the local and regional human impacts, global climate change is posing a serious
long-term threat to the world’s coral reefs. Mean

Remainder

Photo: reef degredation

Causes of Reef Decline
Reef decline is due to a host of stresses in coral reef areas. Four specific causes will behighlighted in this report. Ecological aspects of these causes are discussed here, while theeconomic implications are discussed later.
Tourism overuse has had disastrous impacts on precisely the coral reefs on which thetourism industry depends. The main human impacts related to mass tourism development
include sedimentation and loss of habitat by land reclamation, dust, and disposal of solid
waste, sewage and sludge. This has, among other things, increased turbidity thereby reducing the levels of light needed for growth and survival. Alongside this, careless practices
have direct impacts on coral reef ecosystems, as corals are damaged and killed by contact
with fins, hands, knees and also boat or anchor damage.
Destructive fishing practices result in damage to either the fished habitat or the primary
habitat-structuring organisms in that habitat, and include such well-known problems as
blast and cyanide fishing and muro-ami drive nets1 . The explosion in blast fishing shattersthe stony corals and kills fish and invertebrates in a large surrounding area. Over time, blast
fishing damages the whole reef and thereby destroys the resource base of many subsistence fishers. Poison fishing uses cyanide in concentrations that are not meant to kill but only
tranquillise the fish, facilitating their capture. The cyanide is squirted into the reef cavities,
often breaking branching coral to get to hiding fish. In the process, corals come under
severe stress from the cyanide with many smaller reef organisms often dying from overdoses. Corals that are repetitively subjected to cyanide die.
Runoff and land-based pollution from effluent discharge of industrial waste, domestic
waste, agricultural sources and logging practices do great harm to corals. Sedimentationfrom dredging and runoff smothers corals, thus preventing the coral from exposure to
sunlight and capturing plankton, their primary sources of energy and nutrition. In comparison to the acute stress caused by destructive fishing practices, the chronic stress of sedimentation leads to slow and gradual decline of reef health. This, in turn, impedes growth andmakes corals more susceptible to disease and death. Nutrient enrichment can introduce
imbalance to the reef ecosystem due to stimulated phytoplankton growth. Moreover, it
may bring about proliferation of seaweeds, which rapidly outgrow the slow-growing
corals that are adapted to the low-nutrient concentrations typical of tropical seas.
Climate change, and in particular its associated effect of coral bleaching, is a key threat
to the future of coral reefs. Corals and many other reef organisms depend for survival on
symbiotic algae living in the polyps as these algae provide up to 95% of the coral’s energy
for growth, reproduction, and feeding. These algae, zooxanthellae, also give the coral theirbeautiful colour and when the corals become stressed, the loss of the zooxanthellae fromthe coral colony leaves a bare white skeleton or ‘bleached’ appearance. If conditions improve and the source of stresses is removed affected corals may recover, with zooxanthellae returning but this depends on the duration and severity of the environmental disturbance [4]. A prolonged period of stress increases the likelihood of coral death. The coralbleaching event of 1998 was by far the worst on record and also the most widespread as
16% of coral reefs were effectively destroyed throughout the world [3]. This episodecoincided with prolonged periods of drought and higher than average sea surface temperatures linked with the 1998 El Niño event.

7

Impacts on Biodiversity
Coral reefs have been evolving for the last 240
million years and scientists estimate that, in total, more than 1 million plant and animal species are associated with the coral reef ecosystem. These important natural resources provide
a home, shelter and food for nearly one quarterof all known marine species, including over
4,000 species of fish, 700 species of coral, andthousands of other forms of plant and animal
life. However, studies show that populations ofa variety of marine and coastal species have declined by 30% in the period 1970-95 [5].
With some 60% of the world’s coral reefs ‘seriously at risk’ from human activities [6], it is likelythat certain species will disappear before they
have been identified. These species may havecontained bio-active components that held curesfor cancer, HIV and other diseases. Now, morethan half of all new cancer drug research focuses on marine organisms. Compounds thathave been extracted from a Caribbean reefsponge form the basis of AZT, a treatment forpeople with HIV infections. Alongside the extinction of unknown species, commercially important species are being wiped out which are
critical to maintaining the natural balance of thecoral reef ecosystem.
Some important findings fromrecent research paint a clear picture of the plight of coral
reefs 2 :o reefs subject to land-based
pollution showed a reduction of 30-50% in diversity
at a 3 m depth, and a 4060% reduction in diversity
at a 10 m depth compared
to unpolluted reefs at similar sites in Indonesia [7].
o commercial reef fish
favoured by tourists for eating may be facing extinctionin the near future [8]. For
example:8- Nassau Groupers were absent from 82% ofshallow Caribbean reefs- Baramundi Cod were absent from 95% of
Indo-Pacific reefs- Bumphead Parrotfish were absent from 89%
of Indo-Pacific reefs- Humphead wrasse were absent from 88%
of Indo-Pacific reefs.
o Important and highly-valued seafood suchas spiny lobster and triton shells are also
close to being extinguished. Moray eelswere not recorded on 81% of reefs, andin the Indo-Pacific there were no groupers larger than 30 cm recorded at 48%
of reefs surveyed [8]. This may indicate
for some grouper species mass overfishing and removal of fish before they have
had a chance to reproduce.
o There was also a decrease in the global
mean number of butterfly fish – widely
considered to be an indicator species forreef health and diversity - from 1997 to
2001 (Figure 3) [8]. This could be an indication of overfishing and destructive fishing methods as well as a decline in general reef health.

Figure 3: Mean Abundance of butterfly fish per 100 m2 (1997-2001) on
Indo-pacific and Atlantic reefs. Source:[8]Impacts on People
The 2002 World Summit on Sustainable Development highlighted the importance of alleviation of poverty amongst the millions of people whose lives depend on coral reefs.
Almost two-fifth of the world’s population live less than 100 kilometres from the ocean [9]and most of these are in developing countries. As human populations continue to grow,coastal communities become increasingly dependent on healthy fish stocks. Reef-associatedfisheries are an important component of this. See also Appendix on Poverty trap.
A combination of highlevels of fishing pressureand habitat destructive
harvesting methods, results in declining catches
and reduces stock sizes tolevels insufficient to ensure reproduction. Table
2 indicates perceived
changes in fish stocks
since 10 years by fishers
throughout Indonesia.

Table 2: Indonesian fishers’ perceptions on current status of reef fish stocks
measured in daily catch compared with 10 years ago and reasons for change.
Note difference between MPA sites and non-protected sites.
Reason for decrease
Site

Respondents

Decreasing Overcatchfishing

DerawanSpermondea
Bunaken MPA
Riung MPA

259
225
216
160

74%
73%
56%
42%

55%
71%
No data
34%

Habitat
destruction
8%
16%
No data
2%

Source: [10]; The Spermonde data (a) come from [11]A second example is the artisanal reef-dependent fishery which is crucial to approximately
23,000 fishers in Zanzibar, contributing over 60% of protein consumption to local communities [12]. Along the reef strewn coastline of Eastern Africa, some 50% of about
100,000 full-time fishers and several hundred thousand part-time fishers risk losing theirlivelihoods if over-fishing continues [13].

Occurrence in sample of
16 villages (%)

Overfishing in reef areas and coastal habitat destruction can often a result in continued andincreased poverty. The open access character of coral reef fisheries increases fishing effort
resulting in locally decreased catches, particularly in marginal fisheries . In a spiral of diminishing returns, other family members then need to partake in securing daily food, often
through reef gleaning such as harverting octopus and sea cucumbers at low tide. Associated reef trampling with this activity puts yet another irreversible
stress on the corals. Additionally,(by)-catch of other (often endangered) marine organisms such as
whales and manta rays provide awelcome, if unsustainable, contribution to fishers’ incomes or simply to the families’ dietary require)
e
t
y
o
t
g
s
l
e
t
a
t
n
l
a
d
g
f
n
i
s
n
ments for protein. Figure 4 shows
i
o
a
l
a
i
o
i
a
n
n
an n dicr
loc
m i d l g b y b ourea
Gl fish in M ok a d far k an usin e (b to t hand
involvement of women in fishero g
e
s
o
l
h
in
e
fis o h awe ll ho shin ongl shell Sheladies in Bunaken National Parkie
Tr ade
o
a
f
L
S
b
ll
Sm NetSe
Tr B a m
sampled in 16 villages, indicating
Marine Activity
the dependence of entire families
Figure 4: Summary of Marine Activities by Women in Bunaken
on the Park’s reefs [14].
National Park, Indonesia; (Source [14])9Economic Valuation of Coral Reef Decline
Potential Economic Value of Coral Reefs
The fact that coral reefs have tremendous value
often seems to elude policy and decision makers. If these decision makers were more awareof the amount of capital that healthy reefs canbring to the economy in terms of tourism, fisheries, coastal protection and biodiversity, a moreconcerted and united management effort would
be possible. Economic valuation can help toensure that coral reefs are properly taken into
account in public decision-making and that financial resources – both locally and globally –are made available for their management andconservation. In addition, economic valuation
enables the assessment of monetary losses tothe economy when reefs are damaged as a result of human activities (e.g. ship groundings,
oil spills). Below, new estimates are given of thereef value in monetary terms.
Reefs provide a variety of goods and services,which create economic benefits to society. These
economic benefits are often taken for granted,
yet if these goods and services were taken awayor destroyed, we would be forced to provide
other methods to supply these benefits at significant costs. Table 3 illustrates the potential net
benefit streams for the world in the order of
US$ 30 billion per year if coral reefs were wellmanaged and intact, based on new calculations3.
The corresponding global asset value of coral
reefs is estimated at nearly US$ 800 billion, cal-culated at a 3% discount rate and a 50 year
timeframe.
Potential net benefits from fisheries are estimated at US$ 5.7 billion a year. Yet, overfishing and destructive fishing have taken theirtoll and reef fishery benefits in most placesin the developing world are now close tozero – fishers merely fish to stay alive without making any profits. The aesthetic beautyof coral reefs attracts millions of tourists
worldwide who come to dive and snorkel
amongst these natural treasures. Reef tourism is growing rapidly and is estimated toprovide potential annual net benefits of US$
9.6 billion. Coral reefs also act as natural sea
walls by providing a buffer to protect inshore areas from the pounding of ocean
waves. This protective function of reefs isestimated to be valued at US$ 9.0 billion per
year. Finally, reef biodiversity has a high research and conservation value, as well as a
non-use value, estimated together at US$ 5.5
billion annually. In addition to these quantified values, reefs have drawn a mass of medical and pharmaceutical research interest in the
pursuit of finding cures for human diseases.
These estimates provide new data on how
much reefs can be worth in economic terms
and give insight into the costs to society ifthese reefs are lost.

Table 3: Potential net benefit streams per year and net present value (NPV) of coral reefs per region (in US$ million)[see note 3 for supporting calculations]Reef area (km2)Southeast Caribbean Indian
Asia(ex. USA) Ocean

Pacific Japan(ex USA)USA

89,000Australia World

19,00054,00067,0003,000

3,000 49,000

284,000

Fisheries
2,281
Coastal protection 5,047
Tourism/recreation 4,872
Biodiversity value 458

391
720
663
79

969
1,595
1,408
199

1,060
579
269
172

89
268
779
529

70
172
483
401

858
629
1,147
3,645

5,718
9,009
9,621
5,483

Total

12,658

1,853

4,171

2,079

1,665

1,126

6,278

29,830

NPV (at 3%)

338,348

49,527

111,484

55,58444,50030,097 167,819

10

797,359

Tourism Overuse

Tourism is the world’s largest industry, employing 199 million people and contributing
US$3,500 billion (10%) to world GDP in 2002 [15]. Globally, tourism is one of the top
five sources of foreign exchange for 83% of countries. Moreover, it is the fastest expanding industry, growing annually at 4.6% in the year 2000 [16]. Reef-related tourism is increasing even more rapidly with dive tourism growing at a rate of 20% per year [17]. The
Caribbean, for instance, attracts about 57% of the world’s 10 million active SCUBA divers
and it has been estimated that by the year 2005, diving will generate about $1.2 billion
annually [18]. Figure 5 shows the spread of dive centres and tourism as percentage ofGDP.
Dive Centers
Tourism economy GDP
as % of National GDP
4,8-8,48,4-11,5
11,5-18,1
18,1-33
33-71,7Figure 5: Dive Centers and Tourism Economy as percentage of GDP in the Caribbean
Source: Preliminary data from Reefs at Risk in the Caribbean project, WRI (unpublished),
based on [15] and UNEP-WCMC dive centers.

However, coastal tourism has in many places been a mixed blessing. The rapidly expanding
mass tourism industry in the Caribbean has required large investments in coastal development to cater for the high influx of tourists, as there is an increasing demand for hotels,
marinas, harbours, shops, sports facilities, etc. These rapid developments have had major
impacts on the coral reefs, on which the tourism industry depends, with 32% of Caribbean
coral reefs estimated to be threatened by coastal development [6]. Sewage from coastal
developments, including tourist resorts, is the largest form of pollution in the Caribbean as80-90% of the sewage generated is disposed of in near-shore coastal waters without adequate treatment [19]. Additionally, in many areas the sheer numbers of dive and snorkel
tourists cause direct damage to coral reefs, often through careless behaviour including contact with fins and hands, as well as boat or anchor damage.
In a further illustration, in 1993 the Cayman Islands generated about US$ 280 million fromgeneral tourism. Of this, US$ 84 million was spent by divers for diving and non-diving
related activities [17]. Nearly 375,000 logged dives were recorded and some dive sites
attracted 15,000 dives in one year. The Grand Cayman office of tourism considers that11

dive sites can support between 4,500 to 5,000
dives per year before the reefs become seriously degraded [17]. A recent ecological study
in Grand Cayman [20] found significantly lower
overall hard coral cover at high intensity sites
compared with low intensity and undived sites.
High intensity sites were also found to havegreater incidences of total dead coral and coral
rubble [20]. Current levels of diving pressure
are thus unsustainable and all reefs in the Caymans are now at serious risk.
Diving is also important for the economy of
Bonaire, Netherlands Antilles. Diving rates on
this island have increased from about 20,000
total dives per year in 1991 to about 26,000 in
2001. Diver impacts were analysed for Bonairein the early 1990s [21]. This study found thatdiver impact becomes quickly apparent whenuse exceeds a level of 4,000-6,000 divers on asingle dive site per year. Thanks to effective management, current levels of diving are still largely
within these limits. This has enabled Bonaire to
maintain itself as one of the best dive sites in
the world.
A recent study in Hurghada estimated the percentage of coral damage in correlation with thenumber of dives per year [22]. The results (Figure 6) show coral impacts in heavily dived sites.
(see also Box 2).

Photo: Tourism trampling on coral (by Marc Kochzius)

It is likely that the notion of carrying capacity
is elastic rather than fixed [23] and depends
on other factors, such as the level of divereducation and briefing [24], or adverse impacts from tourism development practices
in general and construction inparticular.

Figure 6: The correllation between the number of dives per year and the observedand calclutated percentage of coral damage recorded from the examined sitesaround Hurgada, Egypt [22].

12

Tourism clearly brings substantial benefits to countries
with reefs, estimated here at
US$ 9.6 billion annually. However, the income derived fromtourism is threatened by reef
degradation, often the resultof mass tourism development. The challenge for policy
makers and the private sector
is to develop a high value sustainable tourism industry thatmaintains healthy reefs overtime.

Box 1: Dive toursim in Egypt: where do we go?
Egypt offers 1,800 km of coastline and 3,800 km2 of reef in the tropical waters of the Red Sea coast andin the Gulf of Aqaba [1]. Live coral cover is relatively high in Egypt, varying on reef slopes from 2% to62% and along reef walls from 12% to 85% [2]. Reefs are of particular importance to the Egyptian
economy due to their close proximity to the millions of tourists from Europe. Around 2.5 million visitorsa year enjoy the tropical coastal areas of Egypt, of which 23% come specifically to dive and a further 33%
participate in snorkeling activities [25].
In recent years, anthropogenic impacts have reduced coral cover in many places by 30% [2], both throughdirect contact (fins and trampling) as well as through land reclamation, artificial beach construction andhotel sewage. Around 61% of the country’s coral reefs are estimated to be at serious risk from humanimpacts [6]. A recent study has shown that in areas where the number of divers far exceeds the diver carrying
capacity, coral cover is gradually declining over time [22] and that an upper limit of around 10,000 divers
annually per dive site seems to prevent serious degradation. Some of the most popular dive sites in Hurghada,
however, are now hosting well above 100,000 divers a year. In such sites, the percentage live coral ranges from29-34% in such sites versus 69-75% in non-diving control sites around Hurghada (Figure 7) [22].
Preliminary results from a USAID-funded study on the economic value of dive tourism in Egypt highlight
positive and negative impacts of diving [25]. Two scenarios are described with a 50-year timeframe period: the‘business-as-usual’ scenario and the ‘towards sustainability’ scenario.
In Hurghada, where tourism has developed since the 1980s, the impacts of tourist activities have alreadycaused a significant decline in the value of coral reefs. The annual net benefits will decrease over time in the‘business-as-usual’ scenario as reefs continue to be exploited at the current levels. In the ‘towards sustainability’scenario, the number of divers decline to carrying capacity levels and net benefits will stabilize after an initial
drop (Figure 7). In Marsa Alam, where tourism only took off 2-3 years ago, there is less of a threat atpresent from human impacts and both scenarios show increasing net benefits over time over the coming 10-15
years. However, this is reached in two very different ways. While tourism numbers are stabilized in the‘towards sustainability’ case with higher value added per tourist, the ‘business as usual’ scenario showsincreasing numbers of tourists and decreasing value per tourist over time. After 2020, the difference inapproach starts to show off: net benefits in the ‘towards sustainability’ case keep increasing over time, while
dive benefits of the ‘business-as-usual’ case start to diminish (Figure 7).

Marsa Alam
Annual Benefits (in US$ million)

Annual Benefits (in US$ million)

Hurghada

Business as usual

Towards sustainability

Figure 7: Change in annual benefits over time in Hurghada and Marsa Alam (Source: [25])13Destructive Fishing
Destructive fishing practices (DFPs) include wellknown problems such as blast and cyanide fishing and muro-ami nets1 . DFPs result in direct
damage to the fisheries habitat or to habitatstructuring organisms, such as hard coral communities [26]. Blast fishing occurs in the Caribbean, East Africa and Southeast Asia. Cyanide
fishing and muro-ami are largely restricted to
Asia and parts of the Pacific. Figure 8 indicateshigh threat levels for major parts of Sulawesi(Indonesia), the Philippines and Vietnam [27].

Photo: Blast fishers in Indonesia (by Lida Pet-Soede)

Economics drive the use of DFPs but sooner
rather than later the reefs will have been destroyed having broad socio-economic impacts
on coastal communities and society as a whole.
Estimates from Indonesia show that costs of
blast fishing to society, can be as much as 4 times
higher than the benefits to fishers, resulting in a
net loss after 20 years of blast fishing of over
US$ 300,000 per km 2 of coral reef in areas witha high potential value of tourism and coastal
protection, and US$33,900 per km 2 where there
is low potential value [28]. The main quantifiable costs are through loss of the coastal protection function, and the foregone benefits of
tourism and non-destructive fisheries. Based onthese figures, the foregone benefits to Indonesia of blast fishing during the last 25 years could
be estimated at US$ 3.8 billion [29]. Bombs were14

originally made from World War II ammunition, but now chemical fertilizers are used
at very low cost (US$ 1-2). Income fromblast fishing compares to the highest incomesin conventional fisheries. Three types of blast
fishing occur in Indonesia: small-, mediumand large-scale. At individual household level,
differences between the three show incentives
for scale enlargement (Table 4).
Cyanide fishing is popular amongst the
younger generation of fishers who perceive
available resources opportunistically, and join
the ranks of divers roaming reefs for groupers and elusive angelfish. Cyanide fishing isboth used for the aquarium trade [Box 2] aswell as the live food fish trade. The latteremerged from Hong Kong, Taiwan andmainland-China [30], where customers arewilling to pay US$ 100 and more per serving, especially for specific species of groupers (especially Plectropomus spp. and Cromileptes
altivelis) and Napoleon wrasse (Cheilinus
undulatus). The high prices allow Indonesiantraders and middlemen to employ skilled
divers and use relatively advanced methods,
yet sizes of cyanide operations vary fromsingle outboard engine canoes to large-scale
mother ships with several dinghies and 20
crew. Profits and incomes are higher than in
any type of conventional fishery (Table 4).
Table 4: Midpoint estimates of monthly average income in
US $ for crew and owners of destructive fishing operationsin Indonesia (Source: [29]).
Destructive Activity

Blast fishing (‘97):- Crew- Owner

Small- Medium- Largescale scale
scale
55
55

146
393

179
1100

Cyanide fishing:* Food fish (‘97)- Crew
100- Owner100* Aquarium fish (‘02)- Crew
120

252
413

400
35000

253

114

Estimated Threat Levelhighmediumlow

Figure 8: Occurrence of destructive fishing in Southeast Asia (blast and cyanide fishing) [27]Individual fishers often seem locked into their destructive practices although their combined actions exhaust the resources that form the basis of their income. Management of
the vast ocean waters poses serious logistical challenges, particularly where enforcement
authorities have low wages and are thus susceptible to corruption. Yet the projected losses
would seem to justify substantially increased enforcement efforts to halt the destructive
practices and reverse the downward spiral of poverty and resource degradation.

Box 2: Aquarium Trade

The global marine aquarium trade involves some 1000 fish species, 2000 coral species, live rock andother reef invertebrates such as clams, worms and sea feathers. Indonesia is a major exporter and its
importance is rising yet the potential negative impact of international trade on the country’s wild
populations is high. In 1997 Indonesia was the main supplier of marine aquarium fish to the EU,providing 217.1 tonnes (44%). The volume shows a 60% increase compared to 1996 (132.5
tonnes) and 150% compared to 1991 [32]. In 1996, EU Member States importing most ofIndonesia’s marine ornamental fish were: the Netherlands, United Kingdom, France and Germany,[32]. Compared to other Indonesian fisheries, the ornamental trade is a small but lucrative sector.
Unfortunately destructive techniques are used and the trade experiences high losses during transportation from bad handling. In response, the Marine Aquarium Council (MAC) has launched aneffort to reform the trade through the establishment of a certification system which would allow
hobbyists the choice of fish caught and transported using sustainable methods.

15

Runoff and Land-based Pollution

Estimated Threat Levelhighmediumlow

Figure 9: Sedimentation from inland sources [6]Land-based sources of pollution and sedimentare a significant threat to coral reefs, both throughsmothering coral with sediments and throughincreased nutrients and other pollutants, which
create favourable conditions for algae and disease. Some sediment and pollution come from
activities near the coast, while others originate
far inland and are transported by rivers to thecoast. Land clearing and agricultural activities
contribute to this threat. A 1998 study by theWorld Resources Institute estimates that 22%of the world’s reefs are under medium to highthreat from inland sources of pollution and sediment [6], sometimes with large economic consequences (Figure 9).
Economic valuation of runoff and land-based
pollution is nearly impossible as often there are

multiple sources of pollution, having site-specific and seasonal dispersal, and a variety of
economic impacts (water-borne diseases,
lower fisheries productivity, reduced amenity,etc.). A possible exception is logging, wherea specific activity leads to erosion and the consequences are restricted to one or two major
impacts. An example is the logging versus
fisheries and tourism case in El Nido, Palawan(Philippines) summarised in Table 5 [32].
There are two options to address logging: alogging ban (1) versus a continuation of logging (2). Gross revenues are estimated foreach sector under both options for 19871996. Reults are striking as gross revenue
under option 1 more than doubles that under option 2 even when logging revenue

Table 5: Tourism, fisheries and logging industries: ten-year sum of gross revenue (‘000 US$) under 2scenario’s: Logging ban (option 1) and continued logging (option 2) (Source: [32].

16Gross Revenue

Ban onlogging (1)Continued
logging (2)Option 1-2

Tourism
Fisheries
Logging

47,41528,07008,178
12,844
12,844

39,237
15,226-12,884

Total

75,48533,906

41,579Box 3: Cost benefit Analysis for Wastewater Treatment Plant in Florida Keys [33]The Florida Keys contain extensive coral reefs and are a popular destination for water sports enthusiasts. Given their isolated position, fresh water availability and wastewater issues have long been amanagement challenge. Pollution from wastewater in the Keys contributes to eutrophication of thecoastal waters and degradation of local marine communities. A treatment plant would reduce wastewater entering this environment, yet it would require around US$ 60-70 million in investment costs
and around US$ 4 million annually in operational costs. However, in the long-term the benefits withrespect to the welfare gains of tourists are much higher, around US$ 700 million in NPV terms.
Hence, the wastewater treatment plant is economically fully justified in this ecologically sensitive area.

under option 1 is nil since fisheries and tourism, generate large and continuing benefits. In
contrast, continued logging generates smaller and decreasing benefits as after five years,
both the logs and a significant part of the tourism and fisheries sectors will be depleted.
The modest logging revenue generated under option 2 is easily offset by the decreased
income from tourism and fisheries. This study helped convince the provincial government
to withdraw this specific logging licence[32].
These and other studies have shown thebenefits of reduction
in runoff and pollution. In developing
countries policy makers that are challenged
to achieve economic
progress are not easily convinced of thebenefit of investing in
waste treatment andrun-off reduction. Photo: sedimentation (by Ross Jones)
Costs of wastewater
treatment is indeed high, but the costs can be supported by even greater economic benefits(Box 3).
At the World Summit on Sustainable Development, the H2O Partnership (from Hilltop to
Ocean) was launched, promoting ocean protection from land based activities. Linking river
basins with coastal zone management can reduce negative external effects of sedimentation
on reefs. In this sense, this partnership is a modern institutional version of the traditional
Hawaiian ahapu’ua system whereby the entire watershed from hilltop to reef and beyond
is seen as one area to be managed by one clan. This ensures that any impacts of land-based
activities on coral reefs are taken into account.

17

Coral Bleaching and Climate Change

Figure 10: Major bleaching areas recorded for all
years (Source: [35])Estimated levels of bleaching
severe bleachingmoderate bleaching
low bleaching
no bleaching

Global coral bleaching episodes and subsequent
coral mortality are likely to result in serious socioeconomic impacts. A study on the 1998 massive bleaching event estimated a loss of US$
700 – 8,200 million in net present value terms
for the Indian Ocean [34]. Evidence suggeststhat the cause of these bleaching events is El
Niño-related changes in sea-surface temperatures[34] (Figure 10). It is difficult to establish thislink with scientific certainty but it is important,nonetheless, to estimate likely losses over time
due to future changes in sea surface temperature.
Recent work on “hotspot frequencies” show aweak link with bleaching events. Figure 11 shows
the cumulative number of hotspots over 16 years,
between 1985-2000. The data are based on climatological mean 5-day maximum tempera-

tures4 . A hotspot is recorded whenever thetemperature in a grid cell exceeds the mean
maximum temperature in that cell by one degree Celsius. The map illustrates that there isa wide geographical variation in where
hotspots are experienced. Note that a highfrequency of hotspots does not indicate ahigh correlation with a high incidence of coralbleaching (Figure 10): corals can bleach inplaces where hotspots are infrequent and may
even be less tolerant to hotspots than in areasthat experience frequent hotspots.
There is little biophysical and ecologicalknowledge of the impacts of large-scalecoral mortality on ecosystem services [37].
This makes it even harder to estimate socioeconomic impacts of large scale bleaching
and related mortality. With these caveats in
mind, new estimates on tourism, fisheries andbiodiversity impacts are presented here, byregion and by ecosystem function.
Current estimates suggest a likely increase in
the frequency of bleaching as a result of climate change and predict that bleaching could
become an annual event in the next 25-50
years [38]. Given the uncertainties discussed
above, a scenario-analysis is used to estimate
possible economic costs of these predictions.
In the ‘moderate’ bleaching scenario – corals
would bleach but mortality is limited - it isassumed that fisheries, tourism andLegend
0
1-3
4-6
7-8
9-10
11-12
13-14
15-16
17-18
19-20
21-70
71-254

Figure 11: Cumulative Number of Hotspots over 16 years (1985-2000) (NOAA data through Ken Kassem, WWF-US)

18

billion US$

biodiversity values will decline gradually overtime to 90% of their current level. In the ‘severe’ bleaching scenario with mass coral mortality, it is assumed that these values will decline to 50% of current value. Current values
are based on calculations presented in Table 3.
Total costs of bleaching over a 50 year time
horizon with a 3% discount rate are estimatedat over US$ 84 billion in net present value.
Fisheries
Tourism Biodiversity
For moderate bleaching, this number is US$
20 billion. The tourism value is highest with
Moderate Bleaching
Severe Bleachingnearly US$ 40 billion in the ‘severe’ bleaching
Figure 12: Costs of bleaching distributed among sec- case, followed by fisheries (US$ 23 billion) andtors (in billion US$)biodiversity (US$ 22 billion) (Figure 12). The
regional distribution is given in Table 6 andshows that the main costs of bleaching are in Australia (US$ 28.4 billion) and Southeast Asia
(US$ 38.3 billion).
In addition to bleaching, there are other associated impacts of climate change which will
have adverse impacts on coral reefs and their economic value. It has been projected that thesea-surface temperature in the Caribbean could lead to about 40% more hurricane activity
in the area [39]. Hurricanes have the potential to destroy large areas of coral reef on anational and regional scale. Between 1997 and 1998 there was a 50% reduction in live coral
cover in Belize, mainly attributed to hurricane Mitch and the coral bleaching event of 1998
[3]. These events and subsequent impacts simply add to the overall economic costs tosociety. Overall, in the Caribbean, climate change is predicted to cause a loss of US$ 109.9
million in terms of increased sea-surface temperatures, sea-level rise and loss of species
among others, which equates to 13.8% of the total GDP [40].
The question is what short term measures are available to address coral bleaching, in addition to the promotion of global efforts to curb emissions from burning fossil fuels. It may
be possible to avoid the predictionsof the ‘severe’ bleaching scenarios andTable 6: Regional allocation of costs of severe bleaching (inremain at the level of the ‘moderate’
billion US$)bleaching predictions. For example, it
Severeis possible that impacts of sea surface
bleachingtemperature changes on corals can be
Australia
28.4
reduced by lowering the overall stress
Southeast Asia (excl. Japan)
38.3
level on coral reefs through concerted
Caribbean (excl. USA)
5.7
efforts by all stakeholders ind more
Indian Ocean (incl. Red Sea)
13.0
mainstream parts of international
funding agencies’ activities in the CarPacific (excl. Hawaii)
7.6
ibbean and the Pacific. A concerted
USA (excl. overseas territories)
4.8
effort is required to ensure that these
Japan
7.0
efforts are extended more widely to
Total
104.8
other regions of the worlds and that
Note: Calculated in Net Present Value (NPV) with 50
progress in addressing global climateyear time horizon at a 3% discount rate.
change is made.
19

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the Local Level in Eastern Africa, Ambio 26:590-598[14] Gallop, K. (2001) The impact of the Bunaken National Park management plan on women’s access toand utilization of marine resources, North Sulawesi,
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Ecological and Economic Goals: Marine Parks in
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Hurghada, mimeo Marine Biology and Fish Science
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the Carrying Capacity of Coral Reefs for Recreational Scuba Diving, In: Proc. 8th Int. Coral Reef
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nomic Analysis of Blast Fishing on Indonesian Coral Reefs, Environmental Conservation 26: 83-93[29] Pet-Soede, L., Cesar, H., Pet, J. (2000). Blasting Away: The Economics of Blast Fishing on IndonesianCoral Reefs, in Cesar H. (ed.) Collected Essays on the Economics of Coral Reefs, CORDIO, Kalmar
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Notes
1 The muro-ami technique involves setting bottom nets and then driving reef fish out of their hiding places andinto the nets by walking (or swimming) along the substrate and beating the reef with sticks and other hard
implements. This practice is highly unsustainable as the reefs are destroyed from trampling and beating ofsticks by the fishermen
2 Site selection of the Reef Check study is not random, among other things and therefore, the results of thestudy should be considered as indications rather than proofs over certain trends.
3 Potential values for are taken from a recent economic valuation study in Hawaii [41]. These values were used
for Australia, the US and Japan. For all other countries, potential values presented in the Reefs at Risk
Report for South East Asia are used [27]. Both publications give value ranges. Reefs at Risk data for coastal
development and overexploitation were used to calculate the weighted averages. Low values for fisheries
were used for areas with high levels of overexploitation, while high values of fisheries were used for areas
with low and medium levels of overexploitation. This was also used for the biodiversity value. For coastal
protection and tourism, high and medium levels of coastal development were used for the upper limit of therange, while low levels of coastal development were used for the lower limit of the range. An exception wasmade for the Pacific, where only areas with high coastal development were linked to the high tourism andcoastal protection value.
4 From the 9km AVHRR Pathfinder database.
5 Our estimates of average expenses include depreciation costs for boats and gear and operational costs for fueland food for crew if applicable (multi-day-trips) and estimates of average catches. Maximum catches arevery different and on a good trip the income can be a multitude of our estimates for average net incomes.
Furthermore, our estimates may vary from fishers’ estimates as these often not include depreciation of boat,
engine and gear yet merely relate to gross income.
6 Multi-day trips.

21

Appendix: Poverty Trap Case Study
The poverty trap is a vicious circle of poverty,
resource
degradationandfurther
impoverishment.Poverty is an important root
cause for biodiversity loss and unsustainable resource use resulting in an intertwining of poverty relief and sustainability. In addition, unsustainable use of resources also introduces poverty when the very base to the natural resources
disappears. This persistence of poverty is illustrated in the village of Lamakera in the Solorand Alor region of Indonesia. The region is abiodiversity hotspot for whales and other large
marine life, including manta rays, marine turtles,
billfish, tuna, ocean sunfish and other pelagics,
mainly because of the region’s function as migratory bottleneck with its productive currents
and up-welling of nutrient-rich waters. However, the concentration of marine resources andlack of marine protected areas also makes theregion highly vulnerable to increasingly modern
fisheries pressures often arriving in the area fromthe more crowded and fished-out parts of western Indonesia. Destructive practices such as blast
fishing and cyanide fishing are common, but
impoverished local communities such as thosein Lamakera, have turned to harvesting nearby
manta ray populations.
The general economic situation in the Solor andAlor region is similar to other regions in eastern
Indonesia and must be considered in the lightof dominating agricultural and service sector
contributions to regional economic production.
During the recent economic crisis the islands
were also hit by a severe drought giving theyounger generation further impetus to leave thearea. Already significant numbers of the area’s
inhabitants work in Malaysia as plantation, construction, or domestic workers. Aside fromsome minor government support projects that
include small-scale seaweed farming, provisionof some fish attracting devices and boats andengines, the general fishery is small-scale, focussing on resources nearby. Locals mention difficulties related to market access and educationlevels are low.
Not all coastal communities are full-time fishers
22

and many supplement their income throughfarming. Farming serves subsistence purposes
but also allows minor cash gains from sellingnuts, corn and copra. Infrastructure supporting the local fishery is inadequate (e.g. there
are no ice facilities) limiting the access to distant markets; and most fish must then be soldlocally. On the large island of Lembata 80%of the roads are either unpaved or in bad
condition from landslides. Access to the islands is limited to small ferries from Larantuka
on the eastern tip of Flores. As a result very
few products are sold out of the area such assea cucumbers, shark fins, and manta ray skin,meat and gills.

Photo: Dried manta skin for sale (by Lida Pet-Soede)

The average income of fishing operations isdependent on the scale of the operations andon gross revenue of catches (Table 7). Catches
are calculated on the basis of fish prices which
depends on size and species, but is generally
low pending local demand. Fishers relate decreasing tuna catches in nearshore waters tolarge, long-line fleets operating efficiently indeeper offshore waters. Reef fish are also said
to be less abundant than 5 years ago due toreef destruction by outside and local fishers
using bombs and cyanide.
Lamakera, situated on Solor has a whaling
background, but increasingly fishers buy motorboats and use spear guns for catching
manta rays. During the past five years this village has modernized its fishing fleet where all
traditional whaling boats were sold 2-3 years
ago and have been replaced by smaller boats

Table 7. Estimated mean benefits (US$) for fisheries in Alor and Solor region (1 US$ = Rp 10.000). Sorted
by net monthly income per crewmember. a: Seasonal 5 ; b: 50/50 benefit share.
Gear type

Averagecatch/trip

Trips
Gross
/month income
/boat

Net
Targetincome species/person

Scale

Purse seine
Hook & line
Traps
Manta speara
TrollingLong line
Trolling
Spear +
snorkel

300 kg
3.5 kg25 kg
1 manta
5 kg
1 kg fins dry
10
5 kg fish +1 kg teripang

20
25
25
15
25
36
25
25

55
65
90
95
100
110
120
120

Medium crew b
Small 1 crew
Small 1 crew
Medium 6 crew
Small 1 crew
Medium 4 crewb
Medium 3 crew
Small 1 crew

1000
35-100
100
120
120
1200
360-480
120-230

Scads, squid
Reef fish
Reef
Manta
Tuna
SharksTuna
Reef fish +teripang

powered with 15 horse power outboard engines (some subsidized through a poverty alleviation scheme). It was at this point that whale hunters switched to spearing manta rays.
This was likely fuelled by the new revenue streams offered by buyers of manta skin, sold as
leather to Jakarta and the brachial filter plates removed from the gills, sold as traditional
medicine in Hong Kong. Exporting cartilage for inclusion the export shark fin industry is
also being considered. Traditional hook and line fishers who have seen their reef catchesdwindle and their resulting economic situation has forced them to join the manta crews.
Fishermen now focus on manta rays (Manta birostris), locally known as belelang, bou(Mobula tarapacana) and moku (Mobula sp.). Where once most of the manta was utilized
in the village, now the vast majority is sold and the harvest has transformed into a commercial venture. Dried gill plates from one large manta bring between US$ 35-140, dried skins
US$ 6/kg. Even the meat, which was once consumed in the village, is now sold locally. A
bundle of 20 dried meat rings sell for US$ 3.5-4. This new market for skin and gill plates
has resulted from an increase in effort. The new boats have dramatically reduced travel time
to fishing grounds from 4 days to 1 day, allowing the same number of trips per month as
was previously possible in 6 months. The total effort also expanded from 18 to more than
30 boats thereby increasing the local fishing pressure by almost an order of magnitude in
only 5 years.
The total manta harvest per season (May-October) includes an average catch estimated to
be 25-50 per boat per season, with an average take for the village of 60-90 per week. The
total catch over the six-month season is estimated at 1,500 mantas (ranging between 10502400 individuals), which represents a considerable increase over historic levels that werenormally 200-300 per season. Even if effects of over-fishing are not yet apparent, it ishighly unlikely that the harvest can continue at the current rate. Whereas shark populations
are understood to be highly susceptible to fishing pressure, the closely related manta rays areat even greater risk. Manta rays normally give birth to only one offspring at a time. The
gestation period is thought to be nine months and it is not known whether females givebirth every year. Mantas are also a long-lived species and likely reach sexual maturity only
after 4 to 5 years, although this remains to be verified. For long-lived species with low
reproductive rates commercial harvests have repeatedly resulted in the collapse of populations. There is no reason to think the mantas will be any different.
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