By Rieshav Chakraborty 

Abstract

With an emphasis on their crucial biological roles, the effects of human activity, and climate change, this article examines the economic implications of coral reef collapse. The article discusses the benefits provided by coral reefs in the context of nature and human needs. It goes on to discuss the economic value of industries existing due to coral reefs and the estimated slash in these economies due to the decline of Coral reefs. The paper concludes by providing intentional human interventions that can take place to mitigate these damages and provide an economic boost. 

Introduction

In the context of the existence of multicellular life on this planet and human existence, the ocean provides food, recreation, and acts as a natural carbon sink. Historically, a majority of human civilizations have been based at or within 100 kilometres of a sea or ocean coast, however, with the exponential increase in human population, more than half of the world’s population today live near the coast due to which marine life face an unprecedented level of risk from human activities. The fish population has been steadily decreasing in many parts of the world (with the bluefin tuna population decreasing by more than 95%), and dolphin and shark populations have been rapidly decreasing as a result of bycatch of unsustainable fishing practices. Yet still, the Coral Reef is the most threatened marine life with as much as almost 30% of the species permanently extinct, 15% of the species at risk of extinction by 2030, and another 18% at risk of extinction by 2050. This is a result of unsustainable regular human practices and climate change which not only puts them at risk of permanent extinction but also comes at a very heavy economic cost which we shall discuss in this paper. 

Source: Economics of Worldwide Coral Reef Decline

Independence of People and Coral Reefs

1. Supports Marine Life 

Coral Reefs take up only about 1.2% of the ocean floor while supporting more than a quarter of the planet’s biodiversity. A very fundamental misconception is that Coral Reefs are plants when in fact they are not. The structure is made up of tens of thousands of tiny animals called “polyps”, which makes them animals as a whole. 

Corals make a skeletal structure underneath their primary structure which is left behind as they grow towards sunlight. However, this skeleton creates a habitat for small marine life such as sponges and snails, which in turn attracts bigger fishes and marine animals. They are a valuable and rich source of nutrients on the ocean bed as they provide nitrogen, phosphorus, and other essential nutrients for marine life to survive, hence supporting entire marine food chains which are dependent on them for survival. 

2. Provides food source to a large proportion of the population 

A big proportion of the fish diversity supported by Coral Reefs is very valuable as they provide a source of food and protein to about ⅛ of the human population living within 100 kilometres of a reef. More than 130 million people in the Coral Triangle, a body of water spanning South-East Asia and the Pacific that is home to three-quarters of the known coral species, depend on reefs for food and their livelihoods in fishing and tourism.

3. Protects Coasts and Shorelines 

In addition to this, Coral Reefs act as “buffers”. The buffering effect of ocean reefs shields shorelines and coastal populations from the effects of large waves, storms, and hurricanes as they approach land. These natural barriers assist guard against coastline erosion, saving property including homes, ports, and marinas, and preventing loss of life.

4. Acts as a Carbon Sink 

Coral reefs absorb and store carbon in the same way that trees remove CO2 emissions from the environment. By controlling the amount of carbon in the waters surrounding reef systems, this technique creates a favourable environment for microorganisms to flourish.

There is a symbiotic relationship between corals and algae which enables photosynthesis to occur. During this process, they absorb CO2 and use it for energy. Next, coral reefs accumulate carbon in the form of CaCO3 (Calcium Carbonate) which forms their skeleton. Moreover, they participate in the ocean’s biological pump” mechanism which transfers carbon from the surface to deep water levels. When they die, their organic matter sinks to the ocean floor sequestering carbon for long periods. According to estimates, coral reefs capture approximately 70 to 90 Megatons of carbon per year. 

5. Regenerates Life 

Finally, corals reuse nutrients and matter from decomposed elements, creating new life from old in a process that sustains the ecosystem of the reef.

Potential Economic Value

The given table shows the estimated US $30 billion in annual net benefits that the world could receive from maintaining and managing coral reefs, in order of different industries. 

Source: Economics of Worldwide Coral Reef Degradation

Almost 100 countries benefit from tourism due to Coral Reefs. Of these, in about 23 countries, reef tourism (which includes recreational activities such as scuba diving, snorkelling etc) accounts for almost 15% of its GDP. According to the table, Reef tourism generates about US $9.7B while Fisheries, Coastal Protection, and Biodiversity Value it provides account for US $5.7B, US $9.1B, and US $5.4B respectively. 

In addition, it is estimated that a healthy Great Barrier Reef in Australia would contribute to the employment of an estimated 53,000 full-time jobs. 

Causes of Decline and It’s Economic Impact

1. Destructive Fishing Practices 

Destructive Fishing Practices (DFPs) refer to widespread practices such as Blast Fishing,  Cyanide Fishing, and muro-ami nets. In Blast Fishing, the explosion kills marine life in a large area and over time has the potential to damage whole reefs and their resource base. Cyanide Fishing uses cyanide which is meant to tranquillize the fish, not kill it in order to make the capture easier. This cyanide can break branches of corals, and even kill them when subjected regularly. In addition, it kills other smaller marine life from overdose. 

The practice of Blast Fishing mainly takes place in the Caribbean, and Southeast Asia, while Cyanide Fishing is widely practised in Asia. According to estimates from Indonesia, the costs of blast fishing to society can be up to four times greater than the benefits to fishers, resulting in a net loss of more than $300,000 per km2 of coral reef after 20 years of blast fishing in areas with high potential for tourism and coastal protection and US$33,900 per km^2 in areas with low potential for these benefits.

2. Run-Offs and Other Land-Based Practices 

Runoffs and Sediments from land-based pollution (in the form of industrial waste, domestic waste etc) are a great source of harm to Coral Reefs. Sedimentation can prevent corals from sunlight exposure, and capturing plankton. This leads to a slower death for the corals and leads to the proliferation of seaweeds which outgrow the corals. Although wastewater treatment is expensive, there are even bigger economic benefits that might offset the expense.

 3. Overuse of Tourism

Let’s take the Carribean as an example to understand how excess tourism can lead to the decline of Coral Reefs. The tourism industry there has grown tremendously due to its stunning coral reefs which required the need for rapid development and construction of new hotels, harbours, and shops. While this has provided a massive boost for their economy, now 32% of Caribbean Coral Reefs are threatened due to sewage from coastal developments. 

Moreover, the number of dives and snorkelling tourists has increased year on year. According to a study, the coral damage in a location is in direct correlation with the number of dives per year in that location. 

Source: Economics of Worldwide Coral Reef Degradation

While tourism due to Coral Reefs bring in about US $9.6B annually, policymakers need to work with the public and private sector to develop a Sustainable Tourism Industry that maintains the health of Coral Reefs over time. 

4. Bleaching due to Climate Change 

As global temperature increases, there is a loss in the population of the algae responsible for providing Corals with their nutrition which can leave a bare white skeletal look or a “bleached” appearance. Over time, this leaves them more threatened and eventually they die. 

As the Coral population in the Caribbean decreases, it’s estimated that hurricane activity could increase by as much as 40% leading to heavy economic losses. Overall, it is estimated that climate change will cost the Caribbean region US$ 109.9 million, or 13.8% of the region’s GDP, due to higher sea surface temperatures, sea level rise, and species extinction.

Measures/Interventions

In a study carried out by UNEP, they analyzed 2 locations:

1. The Coral Triangle, which accounts for 75% of all coral species and 37% of all fish species supported by reefs. It spans 6 countries in Asia including Indonesia, the Philippines, Malaysia, Papua New Guinea, the Solomon Islands and East Timor. 
2. The Mesoamerican Reef, the 2nd longest reef in the world which spans Belize, Guatemala, Honduras and Yucatan province in Mexico.

The following measures were analyzed in terms of their net positive economic impact:

1. Afforestation

The table below shows the estimated effects of programmes to improve forest cover on land within 5.8 kilometres of the coast. Increased forest cover can lessen coastal land erosion and the detrimental effects of silt on coral health. This intervention simulates a 10% (1,769 km2) increase in forest cover in Mesoamerica and a 20% (17,173 km2) increase in forest cover in Indonesia.

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Source: The Coral Reef Economy (UNEP)

In addition to small gains in commercial fisheries returns, improved live coral cover due to lessened coastal sedimentation has a positive impact on each region’s tourism and coastal development industries. Due to the bigger scope of the intervention, lower baseline forest cover, and higher baseline erosion rates in Indonesia, total net benefits are higher in Indonesia (US $145 million) than in Mesoamerica (US $18 million).

2. Vegetative Filter Strips 

The table below shows the estimated effects of installing vegetative filter strips on agricultural land located 5.8 km from the coast. In order to lessen the detrimental effects of sediments on coral health, vegetative filter strips constructed along contours at a catchment-to-filter-strip ratio of 50:1 can lower erosion rates by 50%. 

Source: The Coral Reef Economy (UNEP)

Improvements in live coral cover brought about by lowering coastal sedimentation result in modest improvements in commercial fishery returns, major gains for Indonesia’s tourist and coastal development industries, and modest net gains for Mesoamerica. Indonesia’s total net advantages (US $1.4 billion) outweigh Mesoamerica’s (US $20 million)

3. Constructing Wastelands

In order to effectively treat urban wastewater and lessen the amount of pollutants that are released into the coastal environment, where they can harm coral reefs, constructed wetlands may be an option. The creation of new wastewater treatment facilities in artificial wetlands will incur considerable implementation costs for this intervention.

Source: The Coral Reef Economy (UNEP)

The commercial fisheries returns are only slightly increased as a result of reductions in coastal nutrient pollution, while the tourism and coastal development industries gain more significantly in each region. The intervention in Mesoamerica generates a meagre annual net benefit of US $14 million, while the annualized benefits of this intervention in Indonesia are not enough to cover the substantial establishment costs, leading to an annual net loss of US $59 million.

Conclusion

Coral reefs play a very essential role in maintaining a large proportion of marine life, in addition to protecting coastlines, acting as a carbon sink, and providing a huge boost to many industries such as fishing and tourism. However, as mentioned in this article, overuse of tourism, destructive fishing practices and global warming are leading to a widescale extinction danger to many species of coral reefs which will end up having severe economic implications. Policymakers need to focus on making tourism more sustainable for coral reefs and focus on interventions such as afforestation and constructing wastelands which prevent sedimentation on the reefs. As for tackling climate change which leads to coral bleaching, we have a long way to go from here, but we can start with small measures as mentioned above to help mitigate the damage. 

About the author

Rieshav Chakraborty is a 1st -year student at the Jindal School of Government and Public Policy, pursuing BA (Hons) Economics. His research interests include Behavioral Economics, Environmental Economics, and Development Economics.