Cesar2000-Economics of Coral Reefs.pdf

3.2 Case Study 2: Sri Lanka
The societal costs of coral mining presented in the study
by Berg et al. (1998) were based on estimated losses in
fisheries, tourism and coastal protection. The fisheries
costs were based on the expected loss of fisheries income.
The quantity of this loss was approximated by the maximum
sustainable yield (MSY) of the reef fishery. This
was estimated at 10 t km –2 yr –1 . The net fisheries income
corresponding to this yield was estimated at between
US$ 7800 and US$ 9800 km –2 reef yr –1 in 1994 prices.
Coastal tourism is an important business in Sri Lanka.
Based on an contingent valuation (CV) estimate of the
recreational use value, the tourism losses were estimated
at US$ 214,000 km –2 reef yr –1 . Profits or financial revenues
(FR) from coastal tourism were also considered.
The economic losses to coastal protection were based on
2000
1000
0
–1000
–2000
–3000
–4000
–5000
Net present
benefit
— coral minig
Net present cost
— fish habitat
Net present cost
— physical
structure
high estimate
low estimate
Net present cost
— tourist
attraction
Figure 3. Costs and Benefits of Coral Mining in Sri Lanka
(US$ 1000 km –2 reef; 20 y.).
a combination of preventive expenditures (PE), such as
revetments and wave breakers, and losses in property
value (PV). The annual cost for PV were estimated at
between US$ 160 and US$ 172,000 km –2 reef yr –1 ,
depending on land price and use, while the PE-approach
gave a range of US$ 1,230,000 and US$ 4,180,000 km –2
reef yr –1 , depending on the type of coastal protection
structures used. These costs are graphically presented in
figure 3.
When the loosed values of the aforementioned three
functions were added together by Berg et al. (1998),
minimum estimates of the total quantifiable economic
losses due to coral mining were in the range of US$
13,000 to US$ 4,404,000 km –2 reef yr –1 (1994 prices).
Calculated over twenty years, with a discount rate of
9%, the net present value of losses per km 2 would be
US$ 142,000–US$ 7,504,000. Table 4 gives both these
external costs and the profits from coral mining. The
total profits of coral mining are US$ 749,000–1,671,000
and the net economic costs are US$ 111,000–7,364,000
in net present value terms over twenty years. This is
shown in the last row of table 4 as the total accumulated
benefits and costs in year 20.
4. DISCUSSION
The aim of this paper was to discuss possible ways of
assessing the costs and benefits of coral mining by comparing
two sites that vary both in geographical and biological
terms and in the sophistication of the mining
industry. First, however, in order to make the results of
the studies more comparable, a modification of the Sri
Lankan case is proposed. Thus far, the Sri Lanka study
estimated the mining revenues by assuming the area to
have 100% coral cover and 100% extraction efficiency.
In the reefs in southern Sri Lanka, the live coral cover
is actually in the range of 20–80% (Rajasuriya et al.
1998). If the same calculation is applied with a coral
cover of 50% and an extraction rate of 50%, total lime
production then ranges between 4625 t and 10,325 t
with corresponding profits ranging from US$ 48,100 to
US$ 107,400. In net present value terms, the profits
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MARCUS C. ÖHMAN & HERMAN S. J. CESAR: