Valuing Mangrove Conservation in Southern Thailand

1
Valuing Mangrove Conservation in Southern Thailand

• Suthawan Sathirathai and Ed Barbier

2
Mangroves in southern Thailand

• Whats the policy issue?

3
Mangroves in southern Thailand

• Whats the policy issue?
• Rapid conversion of mangroves to shrimp farms
  3.5/yr
• Is the conversion economically justified?

4
Mangroves in southern Thailand

• Whats 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?

5
Mangroves in southern Thailand

• Whats 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?

6
Components of study
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Components of study

• Benefits provided by mangroves
• ( opportunity cost of shrimp farming)

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Components of study

• Benefits provided by mangroves
• ( opportunity cost of shrimp farming)
• Net benefits of shrimp farming
• Financial (a.k.a. private)
• Economic (a.ka. social)

9
Benefits of mangroves

• Direct use values

• Indirect use values

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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

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Which benefits do SB 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

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Is partial analysis a problem?
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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

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Direct use values
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Direct use values

• How did they collect data?

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Direct use values

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

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Direct use values

• How did they collect data?
• 2 surveys in Tha Po Village ( 652 villagers)
• What valuation approach do they use?

18
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

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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?

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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

21
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?

22
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

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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

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See Table 1
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Protecting coastline from erosion
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Protecting coastline from erosion

• What valuation approach do they use?

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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

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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?

29
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!

30

• Major flaw in SBs 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.

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Breeding grounds and nursery habitats
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Breeding grounds and nursery habitats

• What valuation approach do they use?

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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

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Property rights and ? social surplus

• Open access

• Managed fishery

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Property rights and ? social surplus

• Open access

• Managed fishery

/kg
AC(A0)
P0
X
Note no producer surplus
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Property rights and ? social surplus

• Open access

• Managed fishery

/kg
P1
AC(A1)
AC(A0)
X
Note A0 gt A1
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Property rights and ? social surplus

• Open access

• Managed fishery

/kg
AC(A1)
AC(A0)
X
Note only consumers lose
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Property rights and ? social surplus

• Open access

• Managed fishery

/kg
/kg
MC(A0)
AC(A1)
P0
AC(A0)
X
X
Note only consumers lose
Note both consumers and producer surplus
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Property rights and ? social surplus

• Open access

• Managed fishery

/kg
/kg
MC(A1)
MC(A0)
P1
AC(A1)
AC(A0)
X
X
Note only consumers lose
Note A0 gt A1
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Property rights and ? social surplus

• Managed fishery

• Open access

/kg
/kg
MC(A1)
MC(A0)
AC(A1)
AC(A0)
X
X
Note both consumers and producers lose
Note only consumers lose
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Applying this model
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Applying this model

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

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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

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Applying this model

• Use regression methods to determine m, a, and b
  in X mEaAb
• Solve for E E m-1/aX1/aA-b/a
• Multiply by c (unit cost) to get total cost
• TC cm-1/aX1/aA-b/a

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Applying this model

• Use regression methods to determine m, a, and b
  in X mEaAb
• Solve for E E m-1/aX1/aA-b/a
• Multiply by c (unit cost) to get total cost
• TC cm-1/aX1/aA-b/a
• Divide TC by X to get average cost
• AC cm-1/aX(1-a)/aA-b/a

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Applying this model

• Use regression methods to determine m, a, and b
  in X mEaAb
• Solve for E E m-1/aX1/aA-b/a
• Multiply by c (unit cost) to get total cost
• TC cm-1/aX1/aA-b/a
• Divide TC by X to get average cost
• AC cm-1/aX(1-a)/aA-b/a
• Differentiate TC w.r.t. X to get marginal cost
• MC (c/a)m-1/aX(1-a)/aA-b/a

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Applying this model

• Use regression methods to determine m, a, and b
  in X mEaAb
• Solve for E E m-1/aX1/aA-b/a
• Multiply by c (unit cost) to get total cost
• TC cm-1/aX1/aA-b/a
• Divide TC by X to get average cost
• AC cm-1/aX(1-a)/aA-b/a
• Differentiate TC w.r.t. X to get marginal cost
• MC (c/a)m-1/aX(1-a)/aA-b/a
• Assume isoelastic demand curve X DP-?

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Applying this model

• Use regression methods to determine m, a, and b
  in X mEaAb
• Solve for E E m-1/aX1/aA-b/a
• Multiply by c (unit cost) to get total cost
• TC cm-1/aX1/aA-b/a
• Divide TC by X to get average cost
• AC cm-1/aX(1-a)/aA-b/a
• Differentiate TC w.r.t. X to get marginal cost
• MC (c/a)m-1/aX(1-a)/aA-b/a
• Assume isoelastic demand curve X DP-?
• For given ?, can solve the 2 equations (AC or MC
  demand) for the 2 unknowns (X, P) and the
  surpluses

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Marginal value of breeding ground and nursery
habitat

• See Table 2

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NPV of benefits per hectare (20 years)

• See Table 3

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NPV of shrimp farming financial

• See Table 4

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NPV of shrimp farming economic

• See Table 5

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Conclusions
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Conclusions

• SB 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

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Conclusions

• SB 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 SBs 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?