Rogers Et Al Benefit-Cost Analysis of The
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Benefit-cost analysis of the Windara shellfish reef restoration project Abbie A. Rogers, Anita Nedosyko, Ian M. McLeod, Chris Gillies and Michael P. Burton Project B1: Road testing decision support tools via case study applications 10 October 2018 Milestone 7, Final Report – Research Plan v4 (2018) Enquiries should be addressed to: Abbie Rogers [email protected] Project Leader’s Distribution List Australian Coastal Restoration Network Boze Hancock, Simon Reeves, Luis Solorzano – The Nature Conservancy Simon Bryars – DEW, South Australia Keith Rowling – PIRSA, South Australia Brooke Liebelt – Yorke Peninsula Tourism Heidi Alleway – University of Adelaide Gary Kendrick, John Statton, Elizabeth Sinclair – The University of Western Australia Preferred Citation Rogers, A.A., Nedosyko, A., McLeod, I.M., Gillies, C. and Burton, M.P. (2018). Benefit-Cost Analysis of the Windara shellfish reef restoration project. Report to the National Environmental Science Program, Marine Biodiversity Hub. The University of Western Australia. Copyright This report is licensed by the University of Tasmania for use under a Creative Commons Attribution 4.0 Australia Licence. For licence conditions, see https://creativecommons.org/licenses/by/4.0/ Acknowledgement This work was undertaken for the Marine Biodiversity Hub, a collaborative partnership supported through funding from the Australian Government’s National Environmental Science Program (NESP). NESP Marine Biodiversity Hub partners include the University of Tasmania; CSIRO, Geoscience Australia, Australian Institute of Marine Science, Museum Victoria, Charles Darwin University, the University of Western Australia, Integrated Marine Observing System, NSW Office of Environment and Heritage, NSW Department of Primary Industries. The authors would like to acknowledge the contributions of knowledge from experts in marine management, tourism and habitat restoration, including Simon Bryars, Keith Rowling, Brooke Liebelt, Boze Hancock, Simon Reeves and Luis Solorzano. Important Disclaimer The NESP Marine Biodiversity Hub advises that the information contained in this publication comprises general statements based on scientific research. The reader is advised and needs to be aware that such information may be incomplete or unable to be used in any specific situation. No reliance or actions must therefore be made on that information without seeking prior expert professional, scientific and technical advice. To the extent permitted by law, the NESP Marine Biodiversity Hub (including its host organisation, employees, partners and consultants) excludes all liability to any person for any consequences, including but not limited to all losses, damages, costs, expenses and any other compensation, arising directly or indirectly from using this publication (in part or in whole) and any information or material contained in it. Contents Executive Summary ................................................................................................... 1 1. Introduction ....................................................................................................... 3 2. Methods ............................................................................................................. 5 2.1 Defining the BCA scenarios .................................................................................................... 5 2.2 Data collation ......................................................................................................................... 6 2.3 BCA ......................................................................................................................................... 7 3. Costs of Windara Reef ...................................................................................... 9 4. Benefits of Windara Reef ................................................................................ 11 4.1 Environmental benefits........................................................................................................ 11 4.1.1 Environmental benefits – with the project....................................................................... 12 4.1.2 Environmental benefits – without the project ................................................................. 15 4.2 Intrastate recreational fishing benefits ............................................................................... 16 4.3 Interstate recreational fishing benefits ............................................................................... 18 4.4 Educational tourism benefits ............................................................................................... 20 4.5 Oyster supplier benefits ....................................................................................................... 21 4.6 Charter operator benefits .................................................................................................... 22 4.7 Commercial fishing benefits ................................................................................................ 23 5. Benefit Cost Analysis results ......................................................................... 25 6. Summary ......................................................................................................... 29 REFERENCES ........................................................................................................... 31 Benefit-cost analysis of the Windara shellfish reef restoration project Page | 2 EXECUTIVE SUMMARY EXECUTIVE SUMMARY Windara Reef is the largest underwater marine habitat restoration attempt made in Australia to construct a native oyster reef. There has been wide-scale loss of shellfish habitats globally, and they are functionally extinct in many parts of Australia including South Australia where the Windara construction is located. Restoration is therefore important for the survival of these habitats, but requires significant financial investment. To justify investments of this nature, it is important to identify the economic benefits and costs of restoration projects, and wherever possible to ensure that these assessments include as many of the non-market values as possible. Using benefit-cost analysis, we have undertaken an integrated economic assessment of the viability of the Stage Two 16ha restoration project led by The Nature Conservancy. This analysis was inclusive of the tangible, market-based outcomes of the project and also the intangible, non-market social and environmental outcomes. Specifically, the following costs and benefits were included in the analysis: • Construction costs; • Operating costs; • Environmental benefits, related to improvements in biodiversity and ecosystem functioning; • Intrastate recreational fishing benefits; • Interstate recreational fishing benefits; • Educational tourism; • Profit to oyster suppliers; • Profit to charter operators; • Potential benefit to commercial fishers if the area remains open to fishing, or equivalently the costs if the area is closed. A number of project scenarios were modelled that considered: • Duration of operating costs, in terms of ongoing monitoring and maintenance over either a 2 or 10 year period; • Alternative social discount rates used for the calculation of net present value, at either 3%, 7% or 10%; • Sensitivity of the decision outcomes from the benefit-cost analysis dependent on the estimated values used, with lower and upper bounds identified for the benefits included in the analysis. Using the estimated values for the benefits, the project demonstrated between a two and four return on investment and generated net benefits of between $4million to $10million depending on the Benefit-cost analysis of the Windara shellfish reef restoration project Page | 1 EXECUTIVE SUMMARY discount rate applied and duration of operating costs. Across the modelled scenarios that allowed for sensitivity in the values of the estimated benefits, the net present value of the project ranged from - $2million to $50million, and the benefit: cost ratio from 0.4 to 15.7. Only the project scenarios that assumed the lower bound values for all benefits at a discount rate of either 7% or 10% resulted in a negative outcome. In all other instances, the project was viable, and demonstrated substantial capacity to absorb the risk of total project failure. The key benefits driving project viability were the non-market environmental benefits and the additional spend that could be generated for the tourism sector by interstate recreational fishers. The extension of monitoring costs from 2 to 10 years into the life of the project did not alter the viability of the project and suggests that the ongoing monitoring of the reef to collect baseline data to inform future restoration investments is worthwhile. As an emerging area of conservation investment, further economic assessments would be useful to establish whether the positive returns for Windara Reef are likely to extend to other marine and coastal habitat restoration projects. Benefit-cost analysis of the Windara shellfish reef restoration project Page | 2 INTRODUCTION 1. INTRODUCTION Shellfish reefs are important and productive marine ecosystems. They provide ecosystem services such as providing food and habitat for targeted fish and crustacean species, water quality improvement through their filter feeding and protection of shorelines from erosion in low energy systems (reviewed in Grabowski 2012). The economic value of the full suite of ecosystem services derived from natural oyster reefs in