Valuing Mangrove Conservation in Southern Thailand

Suthawan Sathirathai and Ed Barbier

Mangroves in southern Thailand

• What’s the policy issue?

Mangroves in southern Thailand

• What’s the policy issue?– Rapid conversion of mangroves to shrimp farms:

~3.5%/yr– Is the conversion economically justified?

Mangroves in southern Thailand

• What’s the policy issue?– Rapid conversion of mangroves to shrimp farms:

~3.5%/yr– Is the conversion economically justified?

• How are property rights connected to this issue?

Mangroves in southern Thailand

• What’s the policy issue?– Rapid conversion of mangroves to shrimp farms:

~3.5%/yr– Is the conversion economically justified?

• How are property rights connected to this issue?– Mangroves: de jure state property, de facto open

access• Free to shrimp-farm investors

– Fisheries: de jure state property, de facto open access/community management

• Any producer surplus in fishing?

Components of study

Components of study

1. Benefits provided by mangroves

(= opportunity cost of shrimp farming)

Components of study

1. Benefits provided by mangroves

(= opportunity cost of shrimp farming)

2. Net benefits of shrimp farminga. Financial (a.k.a. private)

b. Economic (a.ka. social)

Benefits of mangroves

• Direct use values • Indirect use values

Benefits of mangroves

• Direct use values– Timber– Fuelwood– Crabs, shrimp,

mollusks– Honey– Tourism

• Indirect use values– Breeding grounds and

nursery habitats for offshore fisheries

– Protecting coastline from erosion

– Control of flooding– Carbon sequestration

Which benefits do S&B value?

• Direct use values– Timber– Fuelwood– Crabs, shrimp,

mollusks– Honey– Tourism

• Indirect use values– Breeding grounds and

nursery habitats for offshore fisheries

– Protecting coastline from erosion

– Control of flooding– Carbon sequestration

Is partial analysis a problem?

Is partial analysis a problem?

• Not if it implies that mangroves are more valuable than shrimp farms: mangroves “win” even though not all of their benefits are counted

• Total economic value (TEV) is not always necessary for policy analysis

Direct use values

Direct use values

• How did they collect data?

Direct use values

• How did they collect data?– 2 surveys in Tha Po Village (~ 652 villagers)

Direct use values

• How did they collect data?– 2 surveys in Tha Po Village (~ 652 villagers)

• What valuation approach do they use?

Direct use values

• How did they collect data?– 2 surveys in Tha Po Village (~ 652 villagers)

• What valuation approach do they use?– Net income = Gross income – Cost of extraction

Direct use values

• How did they collect data?– 2 surveys in Tha Po Village (~ 652 villagers)

• What valuation approach do they use?– Net income = Gross income – Cost of extraction– How did they calculate gross income?

Direct use values

• How did they collect data?– 2 surveys in Tha Po Village (~ 652 villagers)

• What valuation approach do they use?– Net income = Gross income – Cost of extraction– How did they calculate gross income?

• If products sold: market prices• If products not sold: market prices for closest substitutes

Direct use values

• How did they collect data?– 2 surveys in Tha Po Village (~ 652 villagers)

• What valuation approach do they use?– Net income = Gross income – Cost of extraction– How did they calculate gross income?

• If products sold: market prices• If products not sold: market prices for closest substitutes

– How did they calculate cost of extraction?

Direct use values

• How did they collect data?– 2 surveys in Tha Po Village (~ 652 villagers)

• What valuation approach do they use?– Net income = Gross income – Cost of extraction– How did they calculate gross income?

• If products sold: market prices• If products not sold: market prices for closest substitutes

– How did they calculate cost of extraction?• Opportunity cost of time: leisure• One-third of daily wage rate

Direct use values

• How did they collect data?– 2 surveys in Tha Po Village (~ 652 villagers)

• What valuation approach do they use?– Net income = Gross income – Cost of extraction– How did they calculate gross income?

• If products sold: market prices• If products not sold: market prices for closest substitutes

– How did they calculate cost of extraction?• Opportunity cost of time: leisure• One-third of daily wage rate

• Calculation of per hectare value:$924/household 38 households / 400 ha = $88/ha

See Table 1

Protecting coastline from erosion

Protecting coastline from erosion

• What valuation approach do they use?

Protecting coastline from erosion

• What valuation approach do they use?– Replacement cost: constructing a breakwater– $875/m of coastline, or $12,263/ha of mangrove– Multiplied by 0.3 (30% of coastline is severely

eroded): $3,679/ha

Protecting coastline from erosion

• What valuation approach do they use?– Replacement cost: constructing a breakwater– $875/m of coastline, or $12,263/ha of mangrove– Multiplied by 0.3 (30% of coastline is severely

eroded): $3,679/ha

• This method is invalid! Why?

Protecting coastline from erosion

• What valuation approach do they use?– Replacement cost: constructing a breakwater– $875/m of coastline, or $12,263/ha of mangrove– Multiplied by 0.3 (30% of coastline is severely

eroded): $3,679/ha

• This method is invalid! Why?– Cost Benefit!

• Major flaw in S&B’s study– “… clearly the most important benefit, although …

villagers indicated that they were most concerned about the threats from shrimp farming to the other two benefits of the remaining mangrove area.”

Breeding grounds and nursery habitats

Breeding grounds and nursery habitats

• What valuation approach do they use?

Breeding grounds and nursery habitats

• What valuation approach do they use?– Productivity-change method: fish catch (X) is a

function of not only effort (E) but also mangrove area (A)

X = mEaAb

– For given E, if A ↓, then X ↓, too

Property rights and social surplus

Open access Managed fishery

Property rights and social surplus

Open access Managed fishery

X

$/kg

AC(A0)P0

Note: no producer surplus

Property rights and social surplus

Open access Managed fishery

X

$/kg

Note: A0 > A1

AC(A0)

AC(A1)P1

Property rights and social surplus

Open access Managed fishery

X

$/kg

AC(A0)

AC(A1)

Note: only consumers lose

Property rights and social surplus

Open access Managed fishery

X

$/kg

AC(A0)

AC(A1)

$/kg

X

MC(A0)

P0

Note: only consumers lose Note: both consumers and producer surplus

Property rights and social surplus

Open access Managed fishery

X

$/kg

AC(A0)

AC(A1)

$/kg

X

MC(A0)

MC(A1)

P1

Note: only consumers lose Note: A0 > A1

Property rights and social surplus

Managed fishery

X

$/kg

AC(A0)

AC(A1)

$/kg

X

MC(A0)

MC(A1)

Note: both consumers and producers lose

Note: only consumers lose

Open access

Applying this model

Applying this model

1. Use regression methods to determine m, a, and b in X = mEaAb

Applying this model

1. Use regression methods to determine m, a, and b in X = mEaAb

2. Solve for E: E = m-1/aX1/aA-b/a

Applying this model

1. Use regression methods to determine m, a, and b in X = mEaAb

2. Solve for E: E = m-1/aX1/aA-b/a

3. Multiply by c (unit cost) to get total cost:

TC = cm-1/aX1/aA-b/a

Applying this model

1. Use regression methods to determine m, a, and b in X = mEaAb

2. Solve for E: E = m-1/aX1/aA-b/a

3. Multiply by c (unit cost) to get total cost:

TC = cm-1/aX1/aA-b/a

4. Divide TC by X to get average cost:

AC = cm-1/aX(1-a)/aA-b/a

Applying this model

1. Use regression methods to determine m, a, and b in X = mEaAb

2. Solve for E: E = m-1/aX1/aA-b/a

3. Multiply by c (unit cost) to get total cost:

TC = cm-1/aX1/aA-b/a

4. Divide TC by X to get average cost:

AC = cm-1/aX(1-a)/aA-b/a

5. Differentiate TC w.r.t. X to get marginal cost:

MC = (c/a)m-1/aX(1-a)/aA-b/a

Applying this model

1. Use regression methods to determine m, a, and b in X = mEaAb

2. Solve for E: E = m-1/aX1/aA-b/a

3. Multiply by c (unit cost) to get total cost:

TC = cm-1/aX1/aA-b/a

4. Divide TC by X to get average cost:

AC = cm-1/aX(1-a)/aA-b/a

5. Differentiate TC w.r.t. X to get marginal cost:

MC = (c/a)m-1/aX(1-a)/aA-b/a

6. Assume isoelastic demand curve: X = DP-

Applying this model

1. Use regression methods to determine m, a, and b in X = mEaAb

2. Solve for E: E = m-1/aX1/aA-b/a

3. Multiply by c (unit cost) to get total cost:

TC = cm-1/aX1/aA-b/a

4. Divide TC by X to get average cost:

AC = cm-1/aX(1-a)/aA-b/a

5. Differentiate TC w.r.t. X to get marginal cost:

MC = (c/a)m-1/aX(1-a)/aA-b/a

6. Assume isoelastic demand curve: X = DP-

7. For given , can solve the 2 equations (AC or MC; demand) for the 2 unknowns (X, P) and the surpluses

Marginal value of breeding ground and nursery habitat

• See Table 2

NPV of benefits per hectare (20 years)

• See Table 3

NPV of shrimp farming: financial

• See Table 4

NPV of shrimp farming: economic

• See Table 5

Conclusions

Conclusions

• S&B: shrimp farming is financially viable, but it is economically less valuable than mangrove conservation– NPV for mangroves would have been even higher if

analysis had included carbon sequestration, tourism, and other excluded benefits

Conclusions

• S&B: shrimp farming is financially viable, but it is economically less valuable than mangrove conservation– NPV for mangroves would have been even higher if

analysis had included carbon sequestration, tourism, and other excluded benefits

• JRV: S&B’s estimate of the value of coastline protection accounts for 96-97% of total estimated benefits from mangroves, but it is likely biased upward– Are mangroves really economically more beneficial than

shrimp farms?