Total Economic Value of Bermuda’s Coral Reefs: A Summary

Abstract

The Total Economic Value (TEV) of Bermuda’s coral reef reefs is based on 6 key ecosystem goods and services. These more tangible direct and indirect use values are: (1) Coral reef-associated tourism, (2) Reef-associated fisheries, (3) Amenity or reef-associated surplus value on real estate, (4) Physical coastal protection, (5) Reef-associated recreational and cultural values, and (6) Research and education value. The study area is estimated to be 400 km2, encompassing the reefs of the Bermuda platform, excluding those of the outer edge of the North Lagoon. Quantification of each value, including data collection and decision-making, is summarized. The TEV of Bermuda’s coral reefs, dependent on the ecological integrity of the coral reefs and socio-economic conditions, ranges from 488milliontoTheTotalEconomicValue(TEV)ofBermuda’scoralreefreefsisbasedon6keyecosystemgoodsandservices.Thesemoretangibledirectandindirectusevaluesare:(1)Coralreef−associatedtourism,(2)Reef−associatedfisheries,(3)Amenityorreef−associatedsurplusvalueonrealestate,(4)Physicalcoastalprotection,(5)Reef−associatedrecreationalandculturalvalues,and(6)Researchandeducationvalue.Thestudyareaisestimatedtobe400km2,encompassingthereefsoftheBermudaplatform,excludingthoseoftheouteredgeoftheNorthLagoon.Quantificationofeachvalue,includingdatacollectionanddecision−making,issummarized.TheTEVofBermuda’scoralreefs,dependentontheecologicalintegrityofthecoralreefsandsocio−economicconditions,rangesfrom488 million to The Total Economic Value (TEV) of Bermuda’s coral reef reefs is based on 6 key ecosystem goods and services. These more tangible direct and indirect use values are: (1) Coral reef-associated tourism, (2) Reef-associated fisheries, (3) Amenity or reef-associated surplus value on real estate, (4) Physical coastal protection, (5) Reef-associated recreational and cultural values, and (6) Research and education value. The study area is estimated to be 400 km2, encompassing the reefs of the Bermuda platform, excluding those of the outer edge of the North Lagoon. Quantification of each value, including data collection and decision-making, is summarized. The TEV of Bermuda’s coral reefs, dependent on the ecological integrity of the coral reefs and socio-economic conditions, ranges from 488 million to 1.1billionperyear,withayearlyaverageof1.1 billion per year, with a yearly average of 722 million, equivalent to 12 % of Bermuda’s GDP. The contribution of ecosystem services to this value are on average: (1) Tourism (US406millionperyear,or56406 million per year, or 56 % of TEV), (2) Coastal Protection (US266 million per year, or 37 %), (3) Recreational and Cultural (US37millionperyear,or537 million per year, or 5 %), (4) Amenity (US 6.8 million per year, or 1 %), (5) Fishery (US5millionperyear,or0.75 million per year, or 0.7 %), and (6) Research and Education (US2.3 million, or 0.3 %). Additionally, the Willingness to Pay extra by both cruise ship and air visitors, for ensuring the preservation of reefs per year is US16million.Fourrecommendationsaregiven,focusingon(a)theuseofTEVinpolicyinterventionsthroughimprovedlegislation,integrationofstrategicenvironmentalassessments(SEA),extendedcost−benefitanalyses,anddamagecompensationfees,(b)makinguseoftheculturalimportanceofmarineecosystemstoresidents,(c)activelyinvolvingthetourismindustry,and(d)strategizingspatialmanagementandprotectingcriticalmarineareas..1billionperyear,withayearlyaverageof16 million. Four recommendations are given, focusing on (a) the use of TEV in policy interventions through improved legislation, integration of strategic environmental assessments (SEA), extended cost-benefit analyses, and damage compensation fees, (b) making use of the cultural importance of marine ecosystems to residents, (c) actively involving the tourism industry, and (d) strategizing spatial management and protecting critical marine areas..1 billion per year, with a yearly average of 722 million, equivalent to 12 % of Bermuda’s GDP. The contribution of ecosystem services to this value are on average: (1) Tourism (US406millionperyear,or56406 million per year, or 56 % of TEV), (2) Coastal Protection (US266 million per year, or 37 %), (3) Recreational and Cultural (US37millionperyear,or537 million per year, or 5 %), (4) Amenity (US 6.8 million per year, or 1 %), (5) Fishery (US5millionperyear,or0.75 million per year, or 0.7 %), and (6) Research and Education (US2.3 million, or 0.3 %). Additionally, the Willingness to Pay extra by both cruise ship and air visitors, for ensuring the preservation of reefs per year is US$16 million. Four recommendations are given, focusing on (a) the use of TEV in policy interventions through improved legislation, integration of strategic environmental assessments (SEA), extended cost-benefit analyses, and damage compensation fees, (b) making use of the cultural importance of marine ecosystems to residents, (c) actively involving the tourism industry, and (d) strategizing spatial management and protecting critical marine areas.

Full text

201
C.R.C. Sheppard (ed.), Coral Reefs of the United Kingdom Overseas Territories, Coral Reefs of the World 4,
DOI 10.1007/978-94-007-5965-7_15, © Springer Science+Business Media Dordrecht 2013
Introduction
The economic valuation of ecosystem goods and services is
increasingly used worldwide because it offers a useful means
of including the concept of ecosystem value into policy dis-
cussions and decision-making (Van Beukering and Slootweg
2010 ) . Currently, Bermuda supports one of the “healthiest”
coral reef systems of the Wider Caribbean Region, with a
coral cover ranging from 22% to 70%. Owing its presence to
the proximity of the Gulf Stream, Bermuda’s reef system is
of global importance as the northernmost reef system in the
Atlantic Ocean. The colder temperatures associated with its
northerly latitude have mitigated, to a certain extent, climate
change impacts such as “bleaching” events, especially that of
2005 which had a devastating effect on Caribbean reefs in
general. Nonetheless, Bermuda’s reefs are ranked worldwide
at “high risk” by the World Resources Institute (Burke et al.
2008 ) attributed in great part to the island’s high human pop-
ulation density within 20 km of the reefs. More speci fi cally,
immediate threats to Bermuda’s coral system relate to
increasing maritime traf fi c associated with the import of
goods and to the changing tourism industry. Developments
necessary to accommodate larger ships have potential direct
and indirect impact on the reef system, leading to the loss of
ecosystem goods and services provided by the reefs to
Bermuda’s community. An economic value can be attributed
to both commercial and non-commercial goods and services,
though non-commercial values are dif fi cult to measure quan-
titatively and have the greatest uncertainty attached to them.
Bermuda’s reef value involves six key ecosystem goods and
services which can be quanti fi ed and compiled to provide a
Total Economic Value (TEV) of Bermuda’s reef (see Sarkis
et al. 2010 for further detail). The greatest part of the TEV
obtained for Bermuda’s reefs refers to the more tangible direct
and indirect use values. This study focused on these values in
order to provide a TEV which is understood and widely
accepted by the community and the government, and ultimately
used in future policy and decision-making. The six key ecosys-
tem goods and services used here are: (1) Coral reef-associated
tourism, (2) Reef-associated fi sheries, (3) Amenity or reef-
associated surplus value on real estate, (4) Physical coastal pro-
tection, (5) Reef-associated recreational and cultural values,
and (6) Research and education value. The approach used to
quantify values for each are summarised in Fig. 15.1 including
both data collection and valuation techniques.
The study area, estimated to be 400 km
2 , is illustrated in
Fig. 15.2 , and does not include reefs on the outer edge of the
North Lagoon.
Tourism Value
Tourism is a key industry in Bermuda. In 2007, over 660,000
people visited Bermuda (Department of Tourism 2007 ), and
the importance of the coral reef ecosystem to the visitor’s
experience was investigated. Data was collected through
available documentation and two surveys were developed
for the study: (1) a reef-associated tourist operator survey
providing revenue data, and (2) a tourist exit survey assess-
ing the importance of coral reefs to the visitation experience.
The economic analysis for estimating the reef-associated
tourism value involves three methods:
(1) the travel cost method, resulting in the “consumer sur-
plus”, or the value of the coral reefs to tourist recreation from
the visitor’s perspective, (2) the net factor income method,
Total Economic Value of Bermuda’s
Coral Reefs: A Summary
Samia Sarkis , Pieter J. H. van Beukering , Emily McKenzie ,
Luke Brander , Sebastiaan Hess , Tadzio Bervoets , Lois
Looijenstijn-van der Putten , and Mark Roelfsema
1 5
S. Sarkis
Department of Conservation Services , Government of Bermuda ,
17 North Shore Road , Smith’s Parish FL 03 , Bermuda
e-mail: scsarkis@gov.bm
P. J. H. van Beukering • L. Brander • S. Hess • T. Bervoets
L. Looijenstijn-van der Putten • M. Roelfsema
Institute for Environmental Studies (IVM) , University of Amsterdam ,
Amsterdam , The Netherlands
e-mail: pieter.van.beukering@vu.nl; lukebrander@gmail.com ;
sebastiaan.hess@ivm.vu.nl ; manager@naturefoundationsxm.org
E. McKenzie
Joint Nature Conservation Committee , Peterborough , UK
e-mail: Emily.McKenzie@wwfus.org

202 S. Sarkis et al.
Fishing
Tourism
Recreational /
cultural
Shoreline
protection
Amenity /
Property
Net-factor
income
approach
Travel
costs
method
Choice
Experiment
Damage
cost
approach
Hedonic
pricing
approach
Research /
education
Market
based
approach
Fishermen
survey
data
Tourist
exit
surveys
Household
survey
GIS &
other
sources
Real-estate
database &
GIS
Institutional
inventory
Total
Economic
Value
(TEV)
Type
of
benefit
Valuation
method
Data
collection &
processing
Aggregation
&
Presentation
Fig. 15.1 Service and valuation techniques used in determining TEV for Bermuda’s coral reefs
Fig. 15.2 Bermuda’s known coral reef cover including hard and soft coral species (Taken from Sarkis et al. 2010 )

20315 Total Economic Value of Bermuda’s Coral Reefs: A Summary
resulting in the “producer surplus”, or the value of coral reefs
in the production of a marketed good generated through paid
activities such as SCUBA diving and snorkeling, and (3) the
contingent valuation method, providing a ‘Willingness to
Pay’ value for coral reef conservation, an additional measure
of “consumer surplus”.
Current Bermuda Tourism Market
A total of 407 tourists were interviewed for this study, dis-
tributed evenly between cruise and air tourists. The cruise
ship sector is substantial; in 2007, 53% of the total 663,767
visitors to the island, arrived by cruise ship. Survey results
indicate that 38.3% of the tourists interviewed are motivated
to visit Bermuda for a coral reef-associated reason, with
snorkeling and touring the reef being the most popular activ-
ities (Table
15.1 ). Bermuda’s “pristine” reefs are evidently
well appreciated and 14% of interviewees con fi rmed they
would not come to Bermuda should the coral reefs lose this
quality . This translates into a loss of 90,000 tourists per
year if coral reef health declines .
Operator Survey
Thirteen of the existing 40 reef-associated tour operators in
Bermuda were interviewed, including all dive operators, a
sample of glass bottom and rental boat operators, as well as
charter boat operators. The reef-associated tourism gross
revenue for Bermuda is estimated at $7.4 million (in 2007),
with a pro fi t margin estimated at 28%. Results concur
with the tourist survey in that reef quality is important to
the business, and that most visitors to Bermuda are sensitive
to the health of the environment.
Consumer Surplus- Visitor’s Perception of Coral
Reef Value
Estimate of the reef-associated tourism value is based on the
percentage of reef-associated recreation, stemming directly
(such as diving) and indirectly (such as beach enjoyment) from
the coral reef ecosystem. The consumer component of the
coral-reef related tourism value of Bermuda’s coral reefs in
2007 was calculated to be US$343 million, approximating
US$190 million for the cruise ship sector and US$154 million
for the air tourism sector.
Producer Surplus- Value of Marketed Goods
Provided by Coral Reefs
Producer surplus is calculated from the expenditures of tour-
ists visiting coral reefs, minus the cost of production. The
producer surplus of reef-associated operators is based on the
reported tourist expenditures for both air and cruise ship
tourists. This is estimated at US$139 per tourist for air visitors
and at US$55 per tourist for cruise ship passengers. Based on
663,767 visitors in 2007, the reef-related producer surplus
value totals US$62.5 million in that year, the greatest part
being attributed to the air tourism sector amounting to $42.9
million per year, more than twice the value of $19.5million
per year contributed by the cruise ship tourism sector.
‘Willingness to Pay’ by Tourists
Results indicate that 68% of all tourists visiting Bermuda
are – in principle – willing to pay, in addition to their current
expenses, to fund activities to preserve Bermuda’s coral
reefs. The average cruise ship tourist is willing to pay US$28
per visit to Bermuda and the average airplane tourist is will-
ing to pay markedly less, US$19. Extrapolating this informa-
tion to a yearly basis, using the number of visitors recorded
in 2007, a total sum of US$15.6 million – US$5.9 million
from the air tourism sector, and US$9.7 million from the
cruise ship sector- is potentially available for the conservation
of Bermuda’s coral reefs.
Total Tourism Value
The total tourism value of coral reefs in Bermuda is the
sum of the consumer surplus (based on travel costs), and
the producer surplus (based on tourist reef-associated
Table 15.1 Motivation to visit Bermuda for both air and cruise tourists,
expressed as a percentage of total interviewed. Signi fi cant difference
between the two types of tourists is shown
Air Cruise
Signi fi cant
different Total
Business 4.5% 4.3% No 4.4%
Snorkeling 7.3% 9.6% Yes 8.6%
Diving 5.9% 5.5% No 5.7%
Touring the reef 7.4% 9.1% Yes 8.3%
Visiting the beach 16.1% 15.4% No 15.8%
Shopping 11.1% 11.3% No 11.2%
Sailing 6.2% 6.6% No 6.4%
Sightseeing 13.7% 15.3% Yes 14.5%
Playing golf 5.5% 5.4% No 5.4%
Fishing 4.6% 5.2% Yes 4.9%
Eating and drinking 16.0% 11.5% Yes 13.7%
Other 1.5% 0.7% Yes 1.1%
Total 100% 100% 100%
Total reef related 36.8% 39.7% 38.3%

204 S. Sarkis et al.
expenditures). All tourists add substantial reef related
value to the island’s economy; the total tourism value of
Bermuda’s coral reefs per visitor is US$611 per tourist.
This value is slightly lower for cruise ship tourists
(US$591 per visitor) than for air tourists (US$635 per
visitor). This difference is due in great part to higher on-
island expenditures incurred by air visitors, resulting in a
twofold producer surplus spent by this sector; air tourists
add US$43 million per year to the island’s reef-related
economy, compared to less than half that added by cruise
ship tourists (US$20 million per year) (Table 15.2 ).
However, because of the higher volume of cruise ship
visitors, the resulting reef-associated tourism value for
cruise ship tourism (US$197 million) is similar to that of
air tourism (US$209 million). In addition, appreciation of
the reefs by cruise ship tourists is similar to that of air-
plane tourists, re fl ected in their ‘ Willingness to Pay’ for
conservation (US$9.7million for cruise ship and US$5.9
million for air visitors). The reef-associated tourism
value for Bermuda’s coral reefs is US$406 million per
year (calculated in 2007). The ‘ Willingness to Pay ’ extra
for ensuring the preservation of reefs per year by all tour-
ists is US$16 million .
Fishery Value
Coral reefs are a crucial habitat for fi sh stock and in this
way also provide important ecosystem services through
the commercial and recreational fi shery sector. The value
of coral reef-associated fi sheries encompasses both direct
and indirect values. The direct value of coral reef-associ-
ated fi sheries refers to the market value of the fi sh catch
and the indirect value refers to the cultural and recreational
importance of fi shing in Bermuda. The direct value was
obtained through existing data from the Marine Resources
Section (GOB
2000 ) and from face-to-face interviews with
fi shermen. The indirect value was obtained through a sur-
vey designed and administered for the purpose of this
study, where 400 households were interviewed face to
face. The valuation focuses on fi sheries that depend directly
on coral reefs for at least one portion of their life cycle,
and is referred to as “reef-associated”. The fi sheries value
includes (1) commercial fi sheries and (2) recreational
fi sheries. To avoid overestimation of the fi shery value, a
distinction is made between reef-associated and non reef-
associated catch.
Commercial Fisheries
Based on existing records, 42% of the total commercial catch
is considered reef-associated. Reef-associated catch for
fi n fi sh ranges from 257,000 to 375,000 lbs., resulting in a
value ranging from US$1.6 million to US$2.5 million; note
that these data exclude the catches recorded for pelagic and
sharks, which would increase fi n fi sheries value to a maxi-
mum of US$5.1 million. The gross value of the whole reef-
associated commercial fi sheries including fi n fi sh and lobster
species ranges from US$2.5 million to US$3.2 million, with
a mean of US$2.9 ± 0.3 million. Net values for the reef-catch
were calculated by deducting estimated fi shing costs. Total
fi shing costs were estimated at 40–80% of the gross value of
the total catch; due to the small sample size ( n = 6 fi shermen),
this should be considered as a very preliminary estimate. The
fi nal net values of the commercial reef-associated catch ,
for both fi n fi sh and lobster is calculated to be US$0.6 ± 0.06
million to US$1.8 ± 0.2 million based on a 20–60% pro fi t
margin.
Recreational Fisheries
To date, a recreational fi shing license is required only for lob-
ster diving in Bermuda; for this reason, there is no statistical
record of recreational fi n fi sh catch. This study provides scope
for a fi rst assessment of recreational fi sheries in Bermuda,
based on responses of local residents in 400 households.
Details of socio-demographics characteristics, such as ethnic-
ity, income and household size, were compared with the 2004
Expenditure survey, conducted by the Department of Statistics
(Government of Bermuda); results are similar, and details of
these characteristics are given in the Recreational and Culture
value section of this document.
Of the 400 households interviewed, 30% indicate that
one or more household member fi shes recreationally. This
Table 15.2 Total tourism value and potential extra value (WTP) of Bermuda’s coral reefs
per year
Variable Air Cruise Total
Consumer surplus $153.7 million $189.8 million $343.3 million
Producer surplus $42.9 million $19.5 million $62.4 million
Total tourism value $196.6 million $209.4 million $405.8 million
WTP for conservation $5.9 million $9.7 million $15.7 million

20515 Total Economic Value of Bermuda’s Coral Reefs: A Summary
translates into a total of almost 16,000 recreational fi shermen
on Bermuda in 2007. Based on interview results, the motiva-
tion for fi shing is foremost the strengthening of bonds with
friends and family, and enjoyment, rather than fi shing for
food. Details on fi shing periods, fi shing methods and pre-
ferred sites were obtained (see Sarkis et al. 2010 for further
details). On average, 72% of the catch is made up of shallow
reef fi sh (Table 15.3 ). Deep “reef” fi sh (>26 m depth) and
deep sea fi sh (e.g. Tuna) are targeted by a minority of recre-
ational fi shermen. Bait fi shing is recorded as being only 4%
of the recreational total catch. Lobsters and mussels are
reported to be least targeted by the fi shermen interviewed,
and make up <1% of the recreational total catch.
Results indicate that the average reef fi n fi sh catch per
fi shing household, i.e. a household in which at least one of
the members is a recreational fi sherman, is 50 ± 53 lbs per
fi shing household. The large standard deviation illustrates
wide differences among fi shermen’s catch success, with a
few fi shermen catching much more than the main group.
This total reef-associated fi n fi sh catch is estimated at
387,000 lb (in 2007), or 68% of the total (i.e. commercial
and recreational) fi n fi sh catch. The lobster recreational catch
ranges from 2,720 lobsters in 2000 to 2,973 in 2007 (with a
total of 556 registered recreational lobster divers in 2007).
Based on the same market prices as those used for the
commercial fi shery value, the recreational reef-associated
value is estimated to be US$3.5 million for fi n fi sh (excluding
big game sport fi shing), and US$ 0.1 million for lobster. This
results in a total recreational reef-associated fi shery value
of US$3.7 million for 2007. There are no costs deducted to
estimate the net value as this activity is done for enjoyment
and not with a fi nancial goal; for this reason, the recreational
fi shery value seems high in comparison to the values of the
commercial sector. The reef-associated fi shery is an impor-
tant component of the total recreational fi shery, comprising
79% of the total value in 2007.
Recreational fi shermen caught 40% of the total fi n fi sh
catch in weight in 2007. Taking into account the total
reef-associated catch for fi n fi sh (i.e. both commercial and
recreational), recreational fi shermen are responsible for
53% of the total catch in weight (2007 data). Recreational
lobster diving accounts for 9% of the total lobster catch
(2007).
The sum of the reef-associated commercial fi shery
(both fi n fi sh and lobster) and of the reef-associated rec-
reational fi shery ( fi n fi sh and lobster) result in a fi shery
ecosystem value estimated at US$5 million per year
(Table
15.4 ).
Table 15.3 Recreational catch classi fi cation and share of catch
Fish type
Average share
of total catch (%)
Share of fi shermen
not involved at all (%)
Share of fi shermen
with 90% or more (%)
Shallow reef fi sh (< 26 m) 72 12 55
Deep reef fi sh (> 26 m) 13 65 3
Deep Sea fi sh (e.g. tuna) 10 79 3
Lobster 1 95 0
Bait fi sh 4 90 3
Mussels 0 99 0
Table 15.4 Overview of commercial and recreational catch in Bermuda
2000 2001 2002 2003 2004 2005 2006 2007
Commercial total fi n fi sh catch (× 1,000 lbs.) 856 640 832 727 804 834 784 886
Recreational total fi n fi sh catch (× 1,000 lbs.) 524 530 537 544 551 558 565 572
Total fi n fi sh catch (× 1,000 lbs.) 1,380 1,170 1,369 1,271 1,355 1,392 1,349 1,458
Commercial reef-ass. fi n fi sh catch (× 1,000 lbs.)
a 362 327 329 257 282 357 375 349
Recreational reef-ass. fi n fi sh catch (× 1,000 lbs.)
a 354 359 363 368 373 377 382 387
Total reef-ass. fi n fi sh catch (× 1,000 lbs.) a 716 686 692 625 655 734 757 736
Commercial lobster catch (× 1,000 individuals caught) 19.1 17.4 23.4 28.1 20.4 23.8 26.7 26.1
Recreational lobster catch (× 1,000 individuals caught) 2.7 2.8 2.8 2.8 2.9 2.9 2.9 3.0
Total lobster catch (× 1,000 individuals) 21.9 20.1 26.2 30.9 23.3 26.7 29.7 29.0
Reef-ass. commercial value low (× 1,000 USD)
a 551 552 586 513 498 646 687 649
Reef-ass. commercial value high (×1,000 USD)
a 1,654 1,657 1,759 1,540 1,494 1,938 2,061 1,947
Reef-ass. recreational value (× 1,000 USD)
a 3,312 3,352 3,426 3,471 3,515 3,571 3,609 3,652
a Refers to reef-associated catch or value. Commercial value is net value

206 S. Sarkis et al.
Amenity Value
The environmental amenity of Bermuda’s coral reefs potentially
adds value to residential properties. The assessment of such a
value is determined using the hedonic pricing method. The
underlying question is whether the proximity of coral reefs,
assessed by the view from the house, access to the beach, or
pristine waterfront is perceived as an important attribute affect-
ing the purchase price. Should a higher house price be attributed
to a coral reef-related characteristic, the additional value is an
estimate of the amenity value given to this environmental eco-
system by a homeowner. This study is one of few using this
methodology; it is a complex analysis, requiring a large data set
of house sales. A number of challenges and limitations were
encountered in the valuation of this service, among which was
the dif fi culty in accessing house sale data, and in establishing a
coral reef attribute adequately re fl ecting the relationship between
house prices and the coral reef ecosystem. Following a series of
analyses, ‘distance from house to beach’, was accepted as the
coral reef attribute best associated with house price. Beaches in
Bermuda can be considered as a coral reef variable, because of
their coralline origin, tightly linking their existence to the status
of coral reefs.
The dataset included 593 residential buildings, with an
equal share of condominiums and houses. The average price
of a 2.6 bedroom/2.2 bathroom house was of $1.5million.
Approximately 14% of houses bought were located on the
waterfront, and on average residences were less than 1km
away from beach or coral reef, and always less than 3 km;
this proximity is due to the nature of Bermuda’s coastline.
The amenity value is based on the estimated non-linear
relationship between house prices and beach distance. The
analysis reveals a quadratic relationship; unexpectedly, house
prices are directly proportional to the distance from the beach
up to 1.1 km with house price increasing with distance from
the beach, with a reversal in trend beyond 1 km (Fig.
15.3 ).
The total amenity value is calculated as the difference
between: (1) The total price of the houses sold in the dataset
($890 million) and (2) The extrapolated calculation of the
house prices in a “deterioration” scenario- or should beaches
disappear (US$ 728 million). This yields an amenity value of
US$221,000 per house, and when extrapolated for all houses
in Bermuda, a total amenity value of US$5.6 billion.
Converting this value into equal annual amounts generates
an amenity value of coral reefs in Bermuda of around
US$6.8 million per year.
This leads to the conclusion that Bermudans implicitly
enjoy the ecosystem services derived from coral reefs but
because of its invisibility, they do not explicitly consider
such an amenity when buying a residential property. Living
close to a beach does not appear to be a determinant charac-
teristic in the purchase of house in Bermuda, probably due to
the island’s narrowness (1.5 km at the widest point) and
hence the natural proximity of residences to beaches.
However, should coral reefs and beaches become scarce
due to degradation of this valuable ecosystem, the economic
value in terms of a surplus on house prices is likely to
become more apparent .
Recreational and Cultural Value
Residents of Bermuda appear to place a high value on their
coral reef resources, made apparent by the signi fi cant number
of people using the island’s marine environment for rec-
reational purposes. Because most residents do not depend on
the ocean for subsistence or livelihood, the relationship
between Bermudans and the coral reefs can be described as
predominantly recreational and cultural.
A large-scale resident survey was developed in order to have
a better understanding of what connects Bermudan households
to their reefs. A special valuation technique, choice modeling,
was used to quantify recreational and cultural values related to
$0.00
0 500 1000
Distance to beach in meters
1500 2000 2500 3000 3500
$200,000.00
$400,000.00
$600,000.00
$800,000.00
$1,000,000.00
$1,200,000.00
$1,400,000.00
Fig. 15.3 The relationship
between house price
in Bermuda and distance to the
beach ( n = 593)

20715 Total Economic Value of Bermuda’s Coral Reefs: A Summary
coral reefs. In total, 400 households collaborated, statistically
representative of Bermuda’s population.
The questionnaire includes seven sections: background of
respondent; recreational use of reefs; environmental aware-
ness; choice model; demographic characteristics; recreational
fi shing; diving and snorkeling. (Note that the recreational
fi shing section was added for the bene fi t of the Fishery value,
and is not discussed within the context of the recreational and
cultural value, but in the Fishery value section.) In the choice
model section, each respondent was repeatedly asked to
choose between complex, multi-attribute pro fi les describing
various changes in Bermuda’s coral reefs. The selection of
coral reef attributes is speci fi c to this case study and deter-
mined by consultation with focus groups and experts.
Choice Model Development
Three focus group discussions and one expert consultation
were held. The three focus groups were: (1) Recreational
fi shers, comprising Bermudan residents who fi sh recreation-
ally; (2) Snorkelers and scuba divers, comprising Bermudan
residents who scuba dive and snorkel; and (3) Bermuda
Residents, comprising both expatriates and Bermudans, who
do not fi sh or scuba dive. The expert consultation was held
with coral reef and fi shery experts, from governmental
departments (Conservation Services and Environmental
Protection) and the Bermuda Institute for Ocean Science
(BIOS), a local NGO.
Selection of attributes was based on the ability to deter-
mine the residents’ use values for the coral reef ecosystem
and enable the measurement of non-use values. Five attri-
butes were identi fi ed: (1) recreational fi shing, (2) coral
diversity/ fi sh diversity (or fi sh abundance), (3) recre-
ational activities (scuba diving/snorkeling), (4) water
quality (described as coral diversity, fi sh diversity, water
clarity, and swimming restrictions), and (5) a payment
vehicle (described as an environmental levy). The fi ve
attributes and their respective levels included in the design
are summarised as follows:
1. Fish catch per trip: Percentage increase/decrease from the
present catch. The levels are set at 20% higher catch, no
change in catch, and 20% lower catch.
2. Quality of the Coral Reef: The variety and abundance
of coral, reef fi sh and other creatures. The three levels
for this attribute are poor, medium and high quality of
the reef.
3. Swimming Restrictions: Number of closures during the
swimming season (the summer months when the waters
are warmest). The three levels for this attribute are set at 7
days, 4 days, and 0 days restrictions.
4. Water Clarity: Described as poor, medium or high
clarity.
5. Payment vehicle: An environmental levy tied to the monthly
electricity bill etc. The four levels for this attribute are set at
5 BMD, 10 BMD, 20 BMD, and 50 BMD per month.
Socio-Demographic Characteristics
A comparison of results obtained in this study was made
with the 2004 Expenditure survey (Department of Statistics,
Bermuda), indicating a similar ethnic composition
(black = 59%, mixed = 8% and white = 27%), and house-
hold income. The majority (82%) of respondents were
born in Bermuda. The level of educational attainment in
the sample was normally distributed with 94% of the
respondents having achieved, senior, technical or University
level education. The average annual household income
was US$124,900.
Reef-Related Activities
Swimming is by far the most popular marine-related recre-
ational activity of the interviewed households. Beach picnic
is also a popular leisure activity. While half of the respon-
dents participate in water sports such as sailing, sur fi ng, and
boating, only 20% of the households go out snorkeling and/
or diving. For the latter, seeing fi sh and coral species are the
top two pleasures during the trip.
Environmental Awareness
The results of the survey indicate that Bermudans are con-
cerned with the environment of their island. “Marine pollu-
tion” ranks a close second after the overarching concern of
“Trash/littering and illegal dumping on the island”; the
“Degradation of coral reefs” ranks 4th after “Increased devel-
opment and lack of open space”.
‘Willingness to Pay’ by Residents
Bermudan residents hold signi fi cant positive recreational and
cultural values related to Bermuda’s coral reefs and marine
environment. Although there are issues associated with the
payment of an environmental levy, residents are willing to pay
to preserve their marine environment. Minimizing marine pol-
lution, translated as the ability to swim anytime, anywhere was
fi rst and foremost, yielding an average ‘Willingness to Pay’
(WTP) of US$42 per month per household (Table
15.5 ).
Second was maintaining coral reef quality (i.e. coral and fi sh
diversity), resulting in an average WTP of US$32 per month
per household. Third, water clarity (maintained by a healthy

208 S. Sarkis et al.
coral reef system) was considered important and respondents
were willing to pay on average US$27 per month to preserve
or improve this attribute.
This implies that marine management policies resulting in
improvements across all four environmental attributes (i.e. main-
tain/improve coral reef quality, avoid swimming restrictions,
increase fi sh catch, and maintain/improve water clarity) would
generate substantial bene fi ts to the Bermudan population; more
speci fi cally, they would result in a welfare improvement equiv-
alent to an increase in average monthly household income
of around US$113. In aggregate terms, these improvements
would be worth over US$37 million per year to the population of
Bermuda, and considered to be the total recreational and
cultural value of coral reefs to Bermuda.
Less than half of the respondents indicated that they
would be willing to pay an environmental levy. This share is
unusually high, compared to similar studies. The results of
the choice experiment suggest that most Bermudans are actu-
ally willing to make clear trade-offs between levies and the
non-monetary attributes. The contribution by residents for
the preservation of the coral reef ecosystem enables the
implementation of conservation and management measures.
Coastal Protection
Coral reefs absorb much of the incoming wave energy,
functioning as natural breakwaters and helping to protect
the shoreline from erosion and property damage. Awareness
about the vital role of the rim and boiler reefs in protecting
Bermuda’s shoreline is raised in earlier coastal vulnerability
assessment studies (Wallingford 1991 ; SWI 2004a, b ) . The
current average number of storms passing Bermuda is
calculated to be 11 every 10 years, estimated to increase to
13 storms every 10 years over the next 50 years (SWI 2004a ) .
This excludes subtropical storms (Guishard et al. 2007 ).
Due to the typical trajectory of tropical storms in the
Atlantic basin the majority of waves from storms and hurri-
canes come from the southeast affecting the relatively unpro-
tected properties on the South shore (Fig.
15.4 ).
Table 15.5 Average monthly household ‘Willingness to Pay’ (WTP) for environmental changes
Attribute Change in good/service
Average monthly
household WTP (USD)
Total monthly
WTP (USD)
Coral reef quality From poor to moderate 32.33 869,644
Swimming restrictions From 4 to 0 days 42.17 1,134,360
Fish catch From current to 20% higher 11.13 299,444
Visibility From poor to moderate 27.42 737,699
4%
0
315
270
225
180
135
90
45
16%12%
8%
Wave heights
in meters
<=2
>2 - 4
>4 - 6
>6 - 8
>8 - 10
>10 - 12
>12
Fig. 15.4 Directional distribution of waves during storm events 1900–2003 (Taken from SWI (2004b))

20915 Total Economic Value of Bermuda’s Coral Reefs: A Summary
Despite the recognition of the importance of coral reefs to
coastal protection, the economic value of this ecosystem
service has not yet been estimated. Here the “avoided dam-
ages” approach is used to value this service. This involves
the estimation of potential damage (and associated economic
losses) to the Bermuda coastal area from a given storm event,
with and without the presence of a reef.
The current study is one of the few examples of the valu-
ation of coastal protection services provided by coral reef
ecosystems. Not all of the required parameters were avail-
able for Bermuda at the time of analyses. The value for
coastal protection in this case was obtained by combining
local information about the island’s coastal pro fi le, the storm
regime for Bermuda, historic information on property dam-
age caused by storms, fl ood zones susceptible for high waves,
coral reef locations, shoreline stability and the role of coral
reefs, and property values for land areas.
Property damage information is based on reports for
Hurricane Fabian, a Category 3 (bordering Category 4)
storm, hitting Bermuda directly in 2003. This results in an
average damage share of 27.5% – in other words, for a storm
category 3 or 4, damage to property can be as high as a quar-
ter of the property value –. Given the lack of reporting, dam-
age in this study relates only to properties and excludes
infrastructures (such as roads). It is recommended that fur-
ther modeling and data gathering are conducted to improve
on the existing calculations, as this value is based on numer-
ous simplifying assumptions, and underestimates the true
value.
The economic value of the coastal protection function of
coral reefs in Bermuda is determined at US$266 million per
year.
Research and Education Value
The research and education value of Bermuda’s coral reefs is
simply based on budgets of both governmental and non-gov-
ernmental institutions in Bermuda. Only research and educa-
tion budgets relating to the coral reef ecosystem are
incorporated within this ecosystem service. Available data
did not include monies invested in management and/or
enforcement of coral reef-associated resources. The sum of
all research and education activities associated with coral
reefs in Bermuda amounts to US$2.3 million in 2007.
Total Economic Value
The value of the sum of compatible uses of the above goods
and services constitutes the TEV of coral reef ecosystems. It
is worth noting that although TEV is known as ‘Total’
Economic Value, this analysis has not included all goods and
services provided by Bermuda’s coral reefs and that some
aspects of coral reefs may be ‘invaluable’ i.e. they have
intrinsic value, beyond any bene fi ts provided to people.
Hence, the TEV estimated here is likely to under-estimate
the true ‘total’ value of Bermuda’s coral reefs.
The estimation of the various ecosystem service values
involves a large number of assumptions that simplify the
underlying dynamics and complexities. Therefore, lower and
upper bound estimates are determined for each ecosystem
service, recognizing the uncertainty surrounding the eco-
nomic analysis. The basis for this range differs for each value
category. The ranges estimated for each ecosystem service
are presented in Table 15.6 . The average annual value of the
coral reef ecosystem amounts to $722 million . This high
number certainly suggests that this ecosystem is highly valu-
able and worth conserving from an ecological, social and
economic perspective. Lower and upper bound estimates
were determined for each ecosystem service recognizing the
uncertainty surrounding the economic analyses, and result in
a TEV ranging from $488 million to $1.1 billion per year .
Further study could allow for the reduction of uncertainties
and thus the narrowing of the value range. N.B. the values
are annual values, based on 2007 data and prices.
The contribution of ecosystem services to this value are,
in order of importance: (1) Tourism (56% of TEV), (2)
Coastal Protection (37%), (3) Recreational and Cultural
(5%), (4) Amenity (1%), (5) Fishery (0.7%), and (6) Research
and Education (0.3%) (Fig. 15.5 ).
The TEV of Bermuda’s coral reefs depends on the eco-
logical integrity of the coral reefs and socio-economic condi-
tions. Degradation of the reefs is likely to lead to a loss of
Table 15.6 Upper and lower bound estimates of the annual bene fi ts of coral reefs in Bermuda (2007US$ million/year)
Ecosystem service Lower bound Average Upper bound
Tourism 324.7 405.9 487.1
Coastal protection 133.9 265.9 531.8
Recreation & Cultural 17.2 36.5 66.0
Fishery 4.3 4.9 5.6
Amenity 5.5 6.8 8.2
Biodiversity research 2.1 2.3 2.5
Total annual economic value 487.7 722.4 1,101.2

210 S. Sarkis et al.
ecosystem service provision and a reduction in TEV. Using a
discount rate of 4% for a 25-year period, it is evident that
preserving the coral reefs (or delaying their degradation)
in Bermuda pays off in economic terms. To place the
TEV of coral reefs in context of the economy of Bermuda: in
2007, the Gross Domestic Product (GDP) of Bermuda
amounted to US$5.85 billion (Government of Bermuda
2008 ). Based on this, the TEV of coral reefs constitutes
12% of Bermuda’s GDP .
Conclusions
This fi rst environmental economic valuation for Bermuda has
paved the way for an alternative approach to conservation of
natural resources. The fi ndings will generate awareness among
the general public of the valuable ecosystem services provided
by Bermuda’s coral ecosystem. Environmental valuation also
provides a tool for government policy and decision-makers, and
local businesses, to integrate the value of the coral reef ecosys-
tem into marine public policy and decision-making, and busi-
ness strategies. Four major recommendations were made within
the scope of this study, identifying the gaps in current legisla-
tion, as well as the possibility of generating revenue for conser-
vation of the coral reef system. The latter was triggered by the
analysis on the importance of reefs to the general community
and tourists. The value of coral reefs was evident by their will-
ingness to trade off monies for preservation of this natural
resource. Speci fi c policy recommendations derived are:
Recommendation 1: Prioritize potential policy interven-
tions in an economically sound manner, through improved
legislation, integration of strategic environmental assess-
ments (SEA) for major developments, incorporate TEV in
extended cost-bene fi t analyses for marine developments,
and establish damage compensation procedures for marine
vessel groundings.
Recommendation 2: Make use of the cultural importance
residents place on marine ecosystems to improve coral
reef management,
Recommendation 3: Actively involve the tourism industry
in the development of sustainable coral reef management,
through the establishment of a vehicle for enabling com-
munity support for environmental conservation, thus
allowing the use of funds currently put into the marine
environment for other socio-economic needs.
Recommendation 4: Balance consumptive and non-
consumptive uses of coral reefs by strategizing spatial
management and protecting critical marine areas,
through the careful delineation of Marine Protected
Areas (MPAs), and prioritizing strong enforcement and
protection of these zones by engaging boat and dive
operators.
In future work, economic analysis could be effectively
used to evaluate the feasibility of the potential measures rec-
ommended above. In addition, increased funding earmarked
for coral reef ecosystem sustainability would allow for the
assessment of research and management needs, and their
implementation. This is required to ensure the continued
provision of valuable ecosystem services to Bermuda’s com-
munity. Some examples are:
Monitoring and early detection of natural/human-induced •
changes;
Enhancing enforcement capacity on the Bermuda platform; •
Developing and implementing mitigation measures of •
foreseen changes – i.e. due to climate change and/or
coastal development;
Researching coral restoration and growth, connectivity •
between fi sh productivity and coral reef habitats;
Predicting wave impact on Bermuda’s coastline and iden-•
tifying fl ood zones- including collecting wave informa-
tion during storms and hurricanes.
Gaining a better understanding of coastal erosion para-•
meters required for mitigation measures of natural and
human induced erosion processes.
It is hoped that results on the TEV of Bermuda’s coral
reefs will encourage and facilitate marine policies that
ensure the sustainability of these northernmost coral reef
system in the world. A policy brief presented to the
Bermuda Cabinet in September 2011, resulted in the
approval of all four recommendations, and has initiated
their implementation.
References
Burke L, Greenhalgh S, Prager D, Cooper E (2008) Coastal capital –
economic valuation of coral reefs in Tobago and St. Lucia. WRI
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Tourism
Fishery
1%
1%
0.3%
0.7%
Recreation & Cultural
Coastal protection
Amenity
Research & Education
37%
5%
56%
Fig. 15.5 Composition of ecosystem services valued for Bermuda’s
coral reefs

21115 Total Economic Value of Bermuda’s Coral Reefs: A Summar y
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