Biological effects and subsequent economic effects and losses from marine pollution and degradations in marine environments: Implications from the literature

Marine Pollution Bulletin 52 (2006) 844–864 www.elsevier.com/locate/marpolbul

Review

Biological effects and subsequent economic effects and losses from marine pollution and degradations in marine environments: Implications from the literature Douglas D. Ofiara b

a,b,*

, Joseph J. Seneca

c

a Ofiara Research Associates, 5 Clearwater Drive, Scarborough, ME 04074, USA Institute of Marine and Coastal Sciences, Rutgers University, 71 Dudley Road, Cook College, New Brunswick, NJ 08901-8521, USA c Edward J. Bloustein School of Public Policy and Planning, Rutgers University, New Brunswick, NJ 08901, USA

Abstract This paper serves as the missing piece in a more fuller understanding about economic losses from marine pollution, and demonstrates what losses have been estimated in the literature. Biological effects from marine pollution are linked with resulting economic effects and losses. The merging of these two areas is usually absent in studies of marine pollution losses. The literature has examined several effects due to marine pollution: damages due to harvest closures-restrictions, damages from consumption of unsafe seafood, damages due to decreased recreational activity, and damages related to waterfront real estate adjacent to contaminated water. Overall, marine pollution can and has resulted in sizable economic effects and losses. On the basis of the literature there is adequate justification for public policy actions to curb marine pollution, require inspection of seafood for toxic substances, and preserve marine water quality and sensitive marine environments.  2006 Elsevier Ltd. All rights reserved. Keywords: Economic losses; Economic effects; Injuries; Damages; Marine pollution

1. Introduction Policy measures directed towards marine pollution can benefit from identification and estimation of economic losses. This can help justify protection measures, cleanup efforts, compensation from responsible parties, and restoration-rehabilitation efforts. In a series of articles in this Journal Ofiara discussed how economists use economic theory to define and measure benefits, what empirical methods are used to estimate such benefits, and a background of US federal policy concerning spills of hazardous substances and oil referred to as Natural Resource Damage Assessments (NRDAs) (Ofiara, 2001, 2002). What is missing regarding a fuller understanding of how economists *

Corresponding author. Address: Ofiara Research Associates, 5 Clearwater Drive, Scarborough, ME 04074, USA. E-mail address: dofi[email protected] (D.D. Ofiara). 0025-326X/$ - see front matter  2006 Elsevier Ltd. All rights reserved. doi:10.1016/j.marpolbul.2006.02.022

address losses from marine pollution, is an understanding and appreciation of how economic effects and losses are identified and distinguished. Costanza et al. (1997, 1998) follow a similar approach in developing an assessment of ecosystem services for the world (their focus is on economic value being generated), however our paper differs in its focus on losses from marine pollution and in discussing linkages between biological effects and economic losses. Our paper will serve as the missing piece in a more fuller understanding about economic losses from marine pollution, and will serve to demonstrate what losses have been estimated in the literature. This is accomplished by linking possible detrimental biological effects from marine pollution (referred to as injuries) with resulting economic effects and losses (also referred to as damages). The merging of these two areas is usually absent in studies of marine pollution losses and will serve as an important first step and as a model in opening an active dialog between the biological

D.D. Ofiara, J.J. Seneca / Marine Pollution Bulletin 52 (2006) 844–864

sciences profession and the economic and public policy professions. 2. Methodology To identify and link associated economic effects to resource effects that stem from marine pollution, a consistent and systematic approach referred to as a physical linkage (or damage function approach) is used. A number of reasons support such an approach: (1) many impairments that affect living organisms are commonly modeled as supply effects as in bioeconomic models of resource decisions (Conrad and Clark, 1987; Fisher, 1981; Hanley et al., 1997; McConnell and Strand, 1989), (2) US NRDA procedures use a physical linkage approach (see the Physical Fates Submodel in USDOI, 1987), and (3) marine scientists and researchers generally view the effects of pollution on marine organisms through a physical linkage approach (Boesch et al., 2001; Clarke, 1997; NRC, 1990, 1993, 2000; Pew Oceans Commission, 2003; US Congress, OTA, 1987). To begin, one must be more careful with terminology and general economic concepts so as to avoid confusion that has occurred in earlier research. A typical demand– supply market model will help (Fig. 1). This diagram represents the behavior of buyers via the demand-curve (the downward sloping line labeled D), and sellers via the supply-curve (the upward sloping line labeled S) [more detail is in Ofiara, 2001]. Some of the confusion stems from this diagram. When using this diagram it is useful to treat buyers separate from sellers while noting that both bits of information are implicit within the diagram. First we address economic losses and then economic effects. Economic losses (damages) refer to lost economic welfare due to pollution, consisting of lost economic welfare to the consumer (consumer surplus) and to the seller/ producer (producer surplus); known collectively as lost

A S

a

b

c D O

Q

Fig. 1. Consumer surplus and producer surplus.

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net economic value (NEV) (These surplus measures are more appropriately referred to as Hicksian surplus measures for given changes in quantity; on the basis of US NRDA rules Hicksian compensating surplus is the appropriate theoretical measure for a decrease in quantity, Hicksian equivalent surplus corresponds to an increase in quantity (Ofiara and Seneca, 2001; Bockstael et al., 1991). Economists have recently recognized the theoretical difference in welfare measures between quantity changes versus quality changes and a consensus is yet to emerge over the most appropriate measure for quality changes (Bockstael et al., 1991)). In Fig. 1, economic welfare is represented by areas associated with demand and supply curves. To consumers, consumer surplus (CS) represents shaded area a, a surplus over and above consumer expenses (represented by areas b + c). Consumer expenses also represent sales or income to the producer. Producers total costs are shown by area c (area under the supply-curve). Producer surplus (PS) represents the shaded area b, a surplus of sales net of costs (in simple cases PS is equal to the difference between sales and costs—profits, but when the firm has variable expenses PS can exceed profits). Furthermore when individuals participate in recreational uses (beach use, sportfishing), economic welfare measures are measured as ‘‘use values,’’ and when society cares about an organism-environment but does not participate, economic welfare is measured as ‘‘nonuse value.’’ Economists now agree that losses of economic welfare (lost NEV) are the appropriate measure to capture economic losses from marine pollution. In some instances, losses from marine pollution have involved or solely focused on adverse economic effects such as lost sales/income to businesses and lost jobs, and have also included subsequent indirect and induced effects (socalled ‘‘multiplier effects’’). Economic effects are generally thought of as changes in economic activity measured by changes in consumer spending (which is also a firm’s income), represented by areas b + c in Fig. 1. With marine pollution adverse economic effects refer to losses of the areas b + c, and to local firms losses in spending and income. The multiplier effects can be further thought of as representing expansions of the areas b + c. With marine pollution, multiplier losses can be thought of as expansions of losses in areas b + c equivalent to expansions of lost spending/income. Many adverse effects from pollution can be treated as supply-effects, such as reductions in the abundance and distribution of economically important organisms (fish and shellfish) as well as for non-economically, but ecologically important organisms (rare and endangered species). Both use values and non-use values can measure these supplyeffects. Demand-effects of economically important organisms such as fish can also occur as a result of actual changes in the quality of seafood products and from perceived changes in quality. There can also be demand-effects associated with both marketed and non-marketed activities that rely on coastal ecosystems such as the demand for sportfishing, birdwatching, and beach use. Both supply-effects and

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demand-effects can result in measurable losses of economic welfare. It is the task of the economist to conduct empirical research to isolate and develop estimates of these losses. When both demand and supply are affected (i.e., both consumption and production sectors) lost NEV attributable to pollution is formally represented as: DNEV ¼ ðCS þ PSÞw=o pollution  ðCS þ PSÞw pollution ; or

ð1aÞ

DNEV ¼ ðCS þ PSÞpre-spill state  ðCS þ PSÞpost-spill state ;

ð1bÞ

where D refers to ‘‘the change in, and NEV, CS, and PS are defined above. One must be careful in reading these general formulas too literally, and to ‘‘net out’’ any possible welfare transfer to avoid potential double-counting of losses (see Ofiara and Seneca, 2001 for detail). The simplest way to begin to isolate economic losses from marine pollution is to think of the NEV that would have occurred without marine pollution less that with marine pollution (i.e., NEVw/o  NEVw) or equivalently the forgone NEV associated with the presence of marine pollution. This corresponds to measuring the area of NEV associated with the original demand or supply curve less the area of NEV associated with decreased demand or supply curves less any welfare transfers. By using this ‘‘with and without’’ rule, the task can be greatly simplified. Consider the case where marine pollution results in a decrease in demand (i.e., an inward shift of the demand curve) as illustrated in Fig. 2. We first consider lost CS for the consumer alone, then lost PS for the producer alone, and then lost NEV when both are affected, all summarized below.

$ ($15) P0 S

($12) P1 E

($10) P2 ($9) P3

D C

F

D0 ($5) P4

D1

0 (9)

B (12)

A (15)

Q

Fig. 2. Loss of consumer surplus and producer surplus from a decrease in demand.

Hence, $33.75 represents the lost net economic value (after the transfer is netted out) as formally stated in Eqs. (1a) and (1b) relative to a decrease in the demand curve when both consumers and producers are combined. Now consider the case of a decrease in the supply curve (i.e., an inward shift of the supply curve) as a result of a marine pollution event as shown in Fig. 3. Again, first consider lost CS for the consumer alone, then lost PS for the producer alone, and then lost NEV when both are affected, all summarized above. Hence, $39.60 represents the lost net economic value (after the transfer is netted out) as formally stated in Eqs. (1a) and (1b) relative to a decrease in the

D.D. Ofiara, J.J. Seneca / Marine Pollution Bulletin 52 (2006) 844–864

S1

$ ($15) A

S0 B

($11) P3 ($10) P2

C

E

($9) P1

($5) P0 D

(5)

(10)

(15)

Q

Fig. 3. Loss of consumer surplus and producer surplus from a decrease in supply.

supply curve when both consumers and producers are combined. In general, if these types of losses occur over multiple time periods, then losses in future periods must be expressed in discounted values before they are summed. The presentvalue (PV) formula for evaluating NEV losses is n X i PV ¼ NEVi =ð1 þ rÞ ð2Þ i¼1

where NEV is the welfare loss in each period, r the discount rate, and i = 1, . . . , n the time period. 3. Impairments in marine environments and subsequent economic effects and losses In this section possible economic effects and losses are identified and linked/associated with specific impairments (for greater detail see Ofiara and Seneca, 2001). One can group these as impairments to: • ecosystem health and productivity – impairments to sediments, benthic organisms, aquatic vegetation, habitat, fish and shellfish, birds, mammals, sea turtles • human activities–economic activities – impairments to human health, recreational activities, consumption activities, production activities The discussion that follows is limited to a few examples due to space, but will convey the basic ideas and approach to the reader. 3.1. Damage to ecosystems–habitats 3.1.1. Biological effects–impairments Factors that complicate any attempt to identify impairments at this level (marine ecosystems–habitats) are due to the enormous variation of ‘‘services’’ of the system both

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over time and across space, scale of the system, and the range of levels of impairments. Once impairments reach some ‘‘critical’’ level, one level of damages that can occur can be thought of as decreases in the productivity of ecosystems. While these effects are hard to measure or observe with large scale ecosystems, they are more easily measured and observed once scale decreases as with small coastal wetlands along the East and Gulf US coasts, e.g., New Bedford Harbor, MA. Decreases in ecosystem productivity could be measured as a decrease in the quantity and weight of living organisms (biomass) produced by an ecosystem (Table 1). Changes in ecosystem productivity might also be measured as a decrease in the amount of nutrients cycled (i.e., change in specific functions or services) in a given ecosystem. Extreme levels of impairments that degrade sediment and water quality could damage an ecosystem sufficiently to result in a loss of benthic organisms and aquatic vegetation, in turn, affecting the food source and habitat of aquatic and terrestrial organisms. If degradations are severe enough, changes in ecosystem structure and food source can contribute to a decline in the distribution of aquatic organisms such as fish, shellfish and crustaceans, and terrestrial organisms such as birds (Table 1). Furthermore some organisms could avoid specific areas that were once important along their migratory routes. Changes in ecosystem structure and habitat loss over a large enough area or long enough time-period could result in declines in the distribution (i.e., occurrences of organisms throughout an ecosystem) and abundance (i.e., quantity or biomass) of organisms (both aquatic and terrestrial) (Table 1). For example, researchers attributed a large portion of the decline in US Atlantic coast striped bass fishery during the early 1980s to degradations that occurred in estuary–habitats (i.e., spawning grounds) important to the striped bass (Rago et al., 1989; US Congress, OTA, 1987). An additional damage to ecosystems is a result of chronic, hypoxic bottom-waters creating an environment in which organisms could not survive. Short-term hypoxic events result in much publicized fish kills. Chronic hypoxic conditions result in similar economic effects such as habitat loss, as well as site-specific productivity losses. 3.1.2. Economic effects and losses Our understanding about the ‘‘services’’ from wetlandsecosystems is somewhat limited, as is their respective values produced by marine ecosystems such as nutrient uptake and cycling, waste/pollution treatment and breakdown, maintenance of biological diversity, flood control, and climate regulation in general, although in some cases these services are known for very specific coastal wetlands (US Congress, OTA, 1987; Mitsch and Gosselink, 1993; NRC, 1995; Costanza et al., 1997). In the literature, economic assessments of marine wetlands-ecosystems have considered products sold in markets (e.g., the contribution to commercial fisheries [Bell, 1989], real estate [Batie and Mabbs-Zeno, 1985]), and selected non-market products such as storm damage (prevention) and recreational use

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(Farber, 1987; Farber and Costanza, 1987). Recognizing this, an effort by numerous researchers developed an assessment of ecosystem services for a number of the world’s biomes, most notable the marine biomes with a contribution of $20.9 trillion per year and an overall value for the world’s services of $33 trillion per year (1994$, Costanza et al., 1997, 1998). They further recognized that for many biomes, marine included, information was incomplete about many services such biomes perform. Here, we also recognize that economic investigations of impairments that reduce the productivity of marine wetlands-ecosystems can only be partially addressed with our present knowledge. Economic effects due to a decrease in the productivity of marine ecosystem–habitats and distribution of organisms could adversely affect consumptive uses of commercial fishing and shellfishing activities, recreational fishing activities, and non-consumptive uses such as birdwatching, exploring, and educational uses (Table 1). Economic effects can be local in nature at this level of damage, but are directly related to the severity of damage. Severe damages could result in regional effects to the above activities, such as with the Chesapeake Bay and the decline in striped bass along the US Atlantic Coast in the early 1980s. Possible economic effects are a decrease in the value of productivity and ‘‘services’’ provided by the habitat (Table 1). For commercial and sport activities (e.g., fishing, hunting) a decrease in habitat productivity and distribution of organisms can cause a decline in the catch per unit of effort (CPUE), result in higher costs per unit of output (i.e., catch, trips), and a subsequent decrease in NEV (both producer surplus [PS] for commercial fishermen, and consumer surplus [CS] from sportfishing). As the severity of damage increases, supply reductions could affect the market supply and price of the species involved. In general, it is unknown whether increases in price (as supply decreases relative to demand) can offset higher production costs to maintain, increase, or decrease revenue and profit levels (one needs information of the relative elasticity of the demand curve). For non-consumptive uses, severe impairments of habitat productivity can decrease the NEV resulting from decreases in supply and demand. Specific losses of NEV from damage to marine habitats in the case of minor effects consist of lost PS (from the combination of decreased revenues and increased production costs) assuming individual producers do not change their behavior. For those that change their behavior (referred to as averting behavior) such as switching to species not affected and/or traveling to areas that are unaffected, PS is further reduced due to increased costs from increased travel assuming revenues do not change, and if relative productivity is less at the new sites then revenues can also decrease, further decreasing PS. Hence, losses of NEV with averting behavior will also include losses of economic welfare equivalent to the increase in costs and the possible decrease in revenues. Similar losses exist for consumptive and non-consumptive recreational activities; lost

CS (from less satisfaction due to decreases in the habitats’ productivity and quality) for those that do not change their behavior. For those that do, lost CS is equivalent to additional costs from increased travel to new and unaffected sites, and possibly due to increased congestion at these new sites. In much the same manner we can identify and associate economic effects and economic losses as a result of specific damages to organisms and services within marine environments (see Table 1). Specific types of damages related to ecosystem–habitat are: • damage to fish and shellfish from – harvest closures and restrictions – decrease in site-specific productivity – mortality: fish–shellfish kills – disease, abnormalities, and impaired reproduction – impairments to abundance and distribution • damage to birds, mammals, sea turtles Other damages that have effects on man as a result of consumptive activities and are ‘‘services’’ provided by the specific marine environment are: • damage to public health from – pathogens in water – unsafe seafood—pathogens – unsafe seafood—hazardous/toxic substances – unsafe seafood—demand effects (from perceived quality effects) • damage to beach use (recreational use of beach) from – pathogens in water – washups of marine debris, floatable waste – washups of algal blooms • damage to property value – housing, real estate – commercial and pleasure vessels (floatable hazards, noxious, foul odor) Because of the importance placed on consumption of unsafe seafood we will discuss these damages below (see Ofiara and Seneca, 2001 for complete coverage of all damages). 3.2. Damage to public health Water quality impairments can have an affect on public health due to pathogens in marine water, pathogens in seafood, and toxic substances in seafood (Table 1). Pathogens in marine waters would primarily impact public health, while pathogens and toxic substances in seafood would affect both public health and the seafood industry from demand-type effects (due to reductions in perceived quality and avoidance of unsafe seafood) and possible supply-type effects if large enough or widespread (outright bans on harvesting tainted seafood similar to harvest closures and bans in Table 1).

Economic activities impacted

Generic effects (refer to ‘‘Abundance and Distribution’’) Specific effects: decrease in value of productivity evaluation of reduced productivity (refer to ‘‘Damage to Habitat’’) Generic effects (refer to ‘‘Abundance and Distribution’’) Specific effects: Commercial fisheries: lost market value of portion of product killed that would have been harvested lost harvest expenditures regarding portion of harvestable product that was killed lost economic surplus regarding portion of harvestable product that was killed OC of fishermen that exit if kill is severe if kill is minor to moderate, possible increases in costs (harvest) and decrease in PS Recreational fisheries: lost CS of portion of harvestable product that was killed lost harvest expenditure regarding portion of harvestable product that was killed if kill is minor to moderate, possible increases in costs (travel, time, congestion) from reduced abundance if kill is minor to moderate, possible decrease in CS from reduced abundance Seafood market/industry: lost handling/processing costs of portion of harvestable product that was killed lost economic rent of portion of harvestable product that was killed aggregate supply effects if severe (refer to ‘‘Abundance and Distribution’’)

Commercial fishery, Recreational fishery, Wholesale/Retail Trade, Processors, Consumers

(1.2.3) Mortality—fish/shellfish kills: e.g., 1976 Incident off NJ Coast; Western Long Island Sound Incidents

Generic effects (refer to ‘‘Abundance and Distribution’’) Specific effects: Commercial fisheries: value of forgone harvest harvest costs lost regarding forgone harvest economic rent (i.e., profit, producer surplus) lost regarding forgone harvest opportunity cost (OC) of fishermen that exit increase in production costs, travel costs for fishermen that remain decrease in rents (profit, producer surplus-PS) for those that remain Recreational fisheries: economic surplus (consumer surplus-CS) lost regarding forgone harvest fishing expenses lost regarding forgone harvest increase in costs (travel, time, congestion) decrease in CS regarding present catch Seafood industry: possible supply reduction if severe possible increase in local market price from decrease in local supply

Commercial fishery, Recreational fishery

Commercial fishery, Recreational fishery, Wholesale/Retail Trade

Possible economic effects

(1.2.2) Decrease in Site-Specific Productivity: e.g., Upper Delaware Bay; Estuaries in Gulf of Mexico

(1.2) Fish and shellfish: (1.2.1) Harvest closures/ restrictions on specific waterbodies e.g., New Bedford Harbor and Buzzards Bay, MA; Raritan Bay, NJ; Santa Monica Bay, CA

(1.1) Damage to habitat–ecosystem: specific effects are detailed below:

Impairments

Table 1 Association of impairments to possible economic effects from marine pollution

(continued on next page)

Commercial and Recreational fisheries: lost economic surplus (PS, CS) from portion of harvestable product that was killed if minor to moderate kill, decrease in PS, CS from reduced abundance and from increased harvest (effort) costs Seafood market/industry—consumers: lost CS from decrease in supply if severe

Commercial and recreational fisheries: decrease in economic surplus (PS, CS) regarding decline in productivity

Commercial fishing losses: lost PS regarding forgone harvest decline in PS due to increased travel costs, and other production costs to alternative fishing grounds regarding present catch Recreational fishing losses: lost CS (use value) regarding forgone harvest decrease in CS (use value) due to increase in travel costs and congestion costs to alternative sites regarding present catch Seafood market—consumer losses: lost CS from decrease in supply and higher prices

Lost economic value (welfare losses)

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if severe refer to ‘‘Abundance and Distribution’’ below if moderate effects, effects could be decreases in PS from commercial activities (commercial fishing, seafood industry) due to possible reduced supply if moderate, possible decrease in CS from consumers due to reduced supply if moderate, decrease in CS from sportfishing due to reduced abundance, and from increased effort to offset reduced abundance if slight effects, welfare losses expected to be negligible if slight, welfare effects expected to be negligible if moderate, possible decrease in PS from commercial activities due to reduced supply if moderate, possible decrease in CS from consumers due to reduced supply if moderate, decrease in CS from sportfishing due to reduced abundance, and from increased effort to offset reduced abundance if severe, decrease in PS from commercial activities (commercial fishing, seafood industry) due to supply effect (reduced supply and higher prices) if severe, decrease in CS from consumers due to reduced supply if severe, decrease in CS from sportfishing due to reduced abundance, reduced success, and from increased effort to offset reduced abundance

Generic effects (refer to ‘‘Abundance and Distribution’’ if severe) Specific effects (refer to ‘‘Disease/Abnormalities’’)

Harvest supply effects: (summed over all units involved) Commercial fisheries: decrease in overall catch (and hence, catch per unit of effort [CPUE]) decrease in revenues, profit, economic surplus due to reduced catch possible decrease in vessels, if severe increase in effort per vessel to offset reduced abundance increase in production costs to offset reduced abundance possible decrease in revenues, profit economic surplus regarding efforts to offset reduced abundance Seafood Market/Industry—Consumers: possible decrease in local catch/supply from minor to moderate reduction in stockpopulation abundance possible increase in price from supply effect (reduced supply) decrease in CS to consumers from supply effect (reduced supply and higher prices) decrease in market supply, if severe effects increase in market price, if severe effects

Commercial fishery, Recreational fishery, Wholesale/Retail Trade, Consumers

Commercial fishery, Recreational fishery, Wholesale/Retail Trade, Processors, Consumers

(1.2.6) Abundance and Distribution: e.g., Atlantic Coast Striped Bass

lost PS from increased processing costs, and from decreased demand to commercial fishermen and seafood industry net change (gain/loss) in CS to consumers due to combined effect of those that avoid the product (loss in CS), and those that continue to consume the product (gain in CS) as a result of the fall in demand and price possibly reduced CS to sport anglers from reduced enjoyment from catching diseased fish

(1.2.5) Impaired Reproduction: e.g., striped bass— Chesapeake Bay and San Francisco Bay

Generic effects (refer to ‘‘Abundance and Distribution’’ if severe) Specific effects: relative to % population affected evaluation of this % (refer to ‘‘Mortality-Kills’’) increase in labor costs to process diseased portion Demand effects: possible decrease in local demand possible decrease in local market price decrease in revenue, economic surplus in Seafood Industry possible decrease in revenue, profit, economic surplus to local fishermen possible decrease in vessels in fishery OC of fishermen that exit fishery lost CS from consumers that completely avoid seafood product increase in CS from consumers that continue consumption due to effect of decreased demand and lower prices

possible increase in local market price if severe (refer to ‘‘Abundance and Distribution’’) possible decrease in CS to consumers from decline in supply and higher prices

Commercial fishery, Recreational fishery, Wholesale/Retail Trade, Processors, Consumers

Lost economic value (welfare losses)

(1.2.4) Disease and Abnormalities: e.g., fin rot/erosion in winter flounder, shell burn in lobsters/crabs, liver tumors in flounder/ sole; Boston Harbor, San Francisco Bay, Puget Sound

Possible economic effects

Economic activities impacted

Impairments

Table 1 (continued)

850 D.D. Ofiara, J.J. Seneca / Marine Pollution Bulletin 52 (2006) 844–864

(2) Damage to public health: (2.1) Pathogens in Water, e.g., 1987–89 beach closings in NJ, Long Island; Southern CA beach closings

Public Health

increase in incidence of gastrointestinal disease, No. of cases costs of medical treatment incurred sick days from work value of lost earnings or opportunity cost of sick days

Generic effects (refer to ‘‘Fish and Shellfish’’ below) Specific effects: decrease in value of productivity/biomass decrease in value of ‘‘services’’ provided decrease in catch per unit effort (CPUE) increase in effort per vessel/angler increase in costs per unit of output (catch, trips) increase in costs (re travel, time, congestion) decrease in economic surplus, (i.e., rent, producer surplus, consumer surplus)

reduction in recreational (nonconsumptive use) participation decrease in participation expenditure totals loss in CS associated with decreased enjoyment from reduced abundance and associated with a decrease in participation (i.e., decrease in demand) loss in EV (non-use value) regarding a decline in species loss in revenues, profit, and economic surplus to commercial activities that provide trips to view shorebirds, whales from reduced participation (i.e., demand)

Biological Diversity, Preservation of Species, Public Participation

(1.3.4) Abundance and Distribution: e.g., Kemp’s Ridley Sea Turtle, Osprey, Piping Plover, various whales (many of these are threatened or endangered species)

(1.4) Overall damage to habitat–ecosystem Commercial fishery, (large-scale, aggregate Recreational fishery, effects): –decrease in productivity and biological Wholesale/Retail Trade, Consumers, Other value; e.g., Chesapeake Recreational Uses Bay—striped bass fishery decline in 1980s

refer to ‘‘Mortality-Birds, Mammals, etc.’’

Biological Diversity, Preservation of Species, Public Participation

(1.3.3) Impaired Reproduction: e.g., decreased rates and birthing difficulties

refer to ‘‘Mortality-Birds, Mammals, etc.’’

Biological Diversity, Preservation of Species, Public Participation

value of units involved (killed) expenses and CS forgone regarding non-consumptive activities, e.g., birdwatching, whale-watching replacement costs of units killed existence value (EV) forgone

(1.3.2) Disease and Abnormalities: e.g., deformities, tumors

(1.3) Birds, Mammals, Sea Turtles: Public – Recreational (1.3.1) Mortality, e.g., participation entanglement and suffocation from plastic— marine debris; ingestion and starvation from blockage caused by plastic bags, balloons—sea turtles

net change (gain/loss) in revenues, profit, economic surplus from reduced production capacity (decrease) versus supply effect (revenues and profit may increase if demand is inelastic given higher prices, and decrease when demand is elastic) Recreational fishery: (summed over all units involved) decrease in CPUE and success rates (catch/effort) decrease in CS from reduced abundance, success, and overall fishing experience reduction in participation rates increase in effort per angler to offset reduced abundance increase in costs (travel, time, congestion) to offset reduced abundance decrease in CS regarding increased efforts to offset reduced abundance

costs of medical treatment incurred, plus value of lost earnings, or value of lost productivity (continued on next page)

lost value from decline in productivity-biomass lost value from decline in ‘‘services’’ decrease in producer surplus (PS) – rent from all commercial activities decrease in consumer surplus (CS) from consumer-recreational activities (use values) decrease in CS associated with existence of habitat (existence value; non-use value)

decrease in PS from commercial activities that provide viewing trips due to decreased participation—demand decrease in CS to public (consumers) from reduced enjoyment as a result of reduced abundance, and from reduced demand decrease in economic surplus (non-use value), existence value from knowing these organisms have been compromised

refer to ‘‘Mortality-Birds, Mammals, etc.’’

refer to ‘‘Mortality-Birds, Mammals, etc.’’

if moderate to severe, refer to ‘‘Abundance and Distribution’’ below if slight, CS and EV foregone per individual lost

if severe, decrease in economic surplus (nonuse values), existence values, from knowing that the existence of a particular fish stock has been compromised

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Public Health, Recreational Activities, Travel and Tourism Industry

Demand effects: possible decrease in demand possible decrease in market price possible decrease in revenue, economic surplus in Seafood Industry possible decrease in vessels in fishery affected lost CS from consumers that avoid product increase in CS from consumers that continue consumption Recreational fishery: decrease in effort decrease in participation rates forgone fishing expenditures, travel costs forgone economic surplus

Commercial fishery, Recreational fishery, Wholesale/Retail Trade, Processors, Consumers

(2.4) Unsafe seafood—demand effects: e.g., Mercury in Swordfish (Lipton, 1986); Kepone in Oysters (Swartz and Strand, 1981)

3) Damage to beach use: (3.1) Pathogens in water, e.g., 1987–89 beach closings in NJ; So. CA beach closings

Health Effects–Illness: increased additive risk of cancer (excess cancer mortalities) costs of medical treatment incurred sick days value of lost earnings from sick days or opportunity costs of sick days value of lost productivity regarding sick days Premature Mortality effects: present value of lost earnings present value of lost productivity economic welfare to avoid premature mortality

Public Health

(2.3) Unsafe seafood—toxicants: e.g., excess cancer mortality from: PCB (Belton et al., 1983); dioxin (Belton et al., 1985a); various toxicants (Connor et al., 1984)

Health effects: refer to ‘‘Public Health—Pathogens in Water’’ Effects on Recreation: decrease in attendance at affected beaches or net change in attendance with multiple beaches decrease in expenditures at affected beach communities or net change in expenditures with multiple beaches possible increase in travel costs and opportunity costs of travel time if unaffected beaches are located farther from population centers

Health effects: refer to ‘‘Public Health—Pathogens in Water’’

Public Health

Health effects: refer to ‘‘Public Health—Pathogens in Water’’ above Other Effects (Recreation, Travel and Tourism): net change in PS from commercial activities (net loss if lost PS associated with affected communities exceeds gains in PS associated with unaffected communities, net gain if lost PS associated with affected communities is offset by gains in PS associated with unaffected communities)

possible decrease in PS from all commercial activities due to demand effect (i.e., reduced demand and lower prices) net change in CS from consumers due to demand effect (net decrease if No. of consumers that avoid product exceeds No. of consumers that continue to consume product; net increase if No. of consumers that avoid product is less than No. of consumers that continue consumption) possible decrease in CS from sportfishing due to reduced enjoyment in knowing catch is contaminated

Assessment of Illness: refer to ‘‘Public Health—Pathogens in Water’’ above Premature Mortality effects: discounted costs of medical treatment, plus present value of lost earnings, or present value of value of lost productivity or value of economic surplus (WTP) to avoid premature mortality

refer to ‘‘Public Health—Pathogens in Water’’ above

or value of economic surplus (WTP-willingness-topay) to avoid illness

value of lost productivity to employer economic value to avoid illness

(2.2) Unsafe seafood— pathogens: e.g., 103 cases of gastro-enteritis reported in NY in 1982; several dozen cases of cholera in LA; economic impacts on market (Capps et al., 1984), (Brown and Folson, 1983)

Lost economic value (welfare losses)

Possible economic effects

Economic activities impacted

Impairments

Table 1 (continued)

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Boating Public

Aesthetic: reduction in economic surplus compared to an absence of odors

Combined effects: No. of vessels with damage/repairs increase in repair costs opportunity costs or value of lost productivity of down-time of vessel in repair lost revenues, profit, and economic surplus and operating expenses from down-time for commercial vessels lost economic surplus, and operating expenses from down-time for pleasure vessels Commercial Vessels: increase in annual costs (repair costs) reduction in economic surplus due to down-time Recreational Boating: reduction in pleasure boating satisfaction (economic surplus) compared to an absence of floatable hazards

decrease in demand for housing and real estate in close proximity to closed-contaminated waterbody (demand for property may be inversely related to the distance to the waterfront-shoreline of contaminated waterbody) annual and/or present value of reduction in value and sales price of housing and real estate in close proximity to closed-contaminated waterbody lost economic surplus due to location effect (i.e., reduced satisfaction from close proximity to contaminated waterbody) and from decrease in demand

refer to ‘‘Beach Use—Pathogens in Water’’ above

All Effects (Recreation, Travel and Tourism): refer to ‘‘Beach Use—Pathogens in Water’’ above

lost CS from pleasure boating compared to an absence of odors

lost PS from commercial activities due to downtime from damage and repair to vessel lost CS from pleasure boating compared to an absence of floatable hazards

lost CS (present value of lost CS if over multiple years) compared to an absence of contamination in the waterbody (reduced value of amenities associated property in close proximity to contaminated waterbody)

refer to ‘‘Beach Use—Pathogens in Water’’ above

refer to ‘‘Beach Use—Pathogens in Water’’ above

net change in CS from beach use activities (net loss if lost CS associated with affected beaches exceeds gains in CS associated with unaffected beaches, net gain if lost CS associated with affected beaches is offset by gains in CS associated with unaffected beaches)

Note: Unless noted, all examples are from US Congress, OTA (1987) Wastes in Marine Environments. US Government Printing Office, Washington, DC ‘‘Abundance’’ refers to the quantity or biomass of organisms and ‘‘distribution’’ refers to the occurrence of organisms throughout an ecosystem. Source: Adapted from Table 6.1, Ofiara and Seneca (2001).

(4.2.2) Noxious, Foul Odor

(4.2) Commercial and pleasure vessels: (4.2.1) Floatable Hazards, e.g., Commercial Navigation, NY–NJ Harbor Boating Public Floatables Cleanup

Private PropertyOwners, Real Estate Market

Recreational Activities Travel and Tourism Industry

(3.3) Washups of Algal Blooms, e.g., 1988 beach closings in NJ

(4) Damage to property value: (4.1) Real Estate via Use Restrictions/Closures on Specific Water Bodies: e.g., New Bedford Harbor, MA (Mendelsohn, 1986)

Recreational Activities, Travel and Tourism Industry

(3.2) Washups of Marine Debris, Floatable Waste, e.g., 1988 beach closings in NJ; 1987 and 1988 beach closings in NY

possible increase in congestion cost at unaffected beaches due to increased use lost economic surplus at affected beaches or decrease associated with multiple beaches Travel and Tourism Industry effects: decrease in tourism volume at affected communities decrease (or lost) expenditures at affected communities decrease in demand, revenues, and economic surplus associated with affected communities (these are primary effects) decreases in multiplier or secondary effects (consisting of spending and respending effects as defined by indirect and induced effects) in affected economy with multiple communities: the net change in primary expenditures, revenues, and surplus, and in multiplier effects (net losses if losses in affected communities outweigh gains in unaffected communities, net gains if gains in unaffected communities outweigh losses in affected communities) D.D. Ofiara, J.J. Seneca / Marine Pollution Bulletin 52 (2006) 844–864 853

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In the case of evaluating economic losses to public health it is relatively easy to identify certain types of diseases such as gastrointestinal diseases attributable to acute water quality impairments. Assessments of these are relatively straight-forward as shown below. However, it is much harder to evaluate losses associated with chronic diseases that take many years to develop. We will identify the losses and how they can be assessed. Discussion of the cause–effect relationship is beyond the scope of this paper. 3.2.1. Damage to public health: unsafe seafood—pathogens and bacteria Water quality impairments result in illness to the public from the consumption of seafood containing bacterial organisms. Most often these organisms are associated with shellfish consumption, rather than fish consumption, and have been reported to cause hepatitis and gastroenteritis (Hughes et al., 1977; Brown and Folson, 1983). As a result, public health officials have established guidelines for bacteria levels in coastal waters. Violations of these guidelines has resulted in harvesting closures of shellfish. In many areas of the coastal US, state health officials routinely test and order closures or openings of shellfish beds. However, the system is not fool-proof and outbreaks of illness occasionally occur, although the magnitude and frequency has declined in recent times. Impacts to public health from these effects are expected to be local in scope. Assessments of economic effects and losses can include: (1) the costs of medical treatment associated with the illness, (2) the value of lost earnings or the value of lost productivity had the individual remained at work for the period of time the individual is ill (Table 1). Alternatively, losses could be assessed as the NEV individuals would be willing to pay to avoid the illness. 3.2.2. Damage to public health: unsafe seafood—hazardous– toxic substances A more serious public concern in recent times is the increased health risk and illness from long-term consumption of seafood containing toxic substances (e.g., DDT, PCB, Mercury found in bluefish, striped bass, swordfish). This is due to the nature of the health effects and the chronic persistence and occurrence of toxic substances in the food chain. Some studies have estimated excess cancer risks that can result from consumption of contaminated seafood product (Belton et al., 1983; Belton et al., 1985a,b, 1986; Connor et al., 1984; IOM, 1991), along with assessments of trends in these substances in coastal waters in the US (O’Connor and Beliaff, 1994). These investigations have coincided with an increase in the public’s awareness about environmental and health issues associated with toxic substances over the past two decades. A new concern involves the presence of antibiotics in farm raised fish (e.g., salmon) from the increasingly common use of antibiotics in fish feed (IOM, 1991).

Economic effects to public health due to illness and premature mortality could range from local to regional effects depending on the severity of the problem and area involved (Table 1). In this case, an assessment of economic losses would be based on estimates of increased or additive risk of cancer, that is, estimates of excess cancer mortalities from consuming a particular contaminated seafood product. Economic effects include the direct costs of medical treatment incurred, plus indirect costs associated with sick days and premature mortalities. These indirect costs consist of the value of lost earnings and the value of lost productivity associated with illness (i.e., morbidity effects) for all individuals involved, and the present value of lost earnings and productivity from premature mortality over the productive life of the individual had he/she remained in the work force. An alternative measure of the economic cost of sickness and premature mortality is the NEV to avoid sickness and premature death. 3.2.3. Damage to public health: unsafe seafoods—demand effects (perceived quality effects) News of illness resulting from the consumption of unsafe seafood and reports of contaminated seafood product with hazardous substances could have economic effects on the demand and price of seafood. If seafood is perceived to cause detrimental health effects, the result may be that consumers become alarmed and limit or stop their consumption of the seafood in question. This reportedly happened during the 1988 marine pollution events in New Jersey (Ofiara and Brown, 1999). When adverse health effects are at issue, it is reasonable to expect that risk-averse individuals will choose to avoid contaminated seafood products. If information is incomplete or in error, consumers will respond rationally and avoid both contaminated and uncontaminated seafood products. Opposite effects will occur when reports of beneficial effects from seafood consumption are publicized or, for that matter, reports of previously contaminated products are deemed safe for consumption. If risks are publicized widely, coupled with vague information about the location of the contaminated product or vague health effects, economic effects could be noticed in local markets and possibly in regional markets (Table 1). Economic activities affected could be all components of the seafood industry, consumers, and the recreational fishery. Specific economic effects result from a downward shift in demand for seafood product in the market accompanied with depressed prices in local and regional markets. The result will lead to a decline in revenues, profits, and PS to wholesale-retail trade establishments and processors. In the commercial fishery sector, effects of lower prices will cause a reduction in revenues, profits, and PS. If the drop in price is great enough or long enough, vessels may exit the fishery and enter other fisheries that are not affected. Regarding consumers, a decrease in CS will result for those that stop or reduce their consumption of the affected seafood product or switch to less preferred seafood products. For those individuals that continue to consume the affected

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product an increase in CS will result from lower prices. Overall, there could be a net decrease, no net change, or a possible increase in CS. In the recreational fishery, news of illness or contaminated fish species may or may not affect participation rates and subsequent CS (Table 1). A number of possible scenarios exist because sport anglers are a diverse group. Some sport anglers are subsistence-type fishermen with an objective to catch fish for home consumption in order to supplement a limited food budget. If these sport anglers are risk-averse, one may expect a decline in participation and effort and subsequent losses in CS for the species in question. However, anglers can simply switch effort to another species that is unaffected. Presently, several northeastern states, New Jersey, New York, and Connecticut have issued health advisories and warnings from consuming large bluefish and striped bass, American eels, blue crabs, white catfish, and white perch (US Congress, OTA, 1987; overall in the US some 37 individual states have some form of advisory (Cunningham et al., 1990)). Species not named in these advisories and warnings are treated as being unaffected for the purposes of this paper. The net effect over multiple species could be no change in CS in the fishery. The sport angler could also opt to catch and release the species in question, hence, a slight decrease in CS may be possible for those anglers that wish to consume caught fish. However, no change is expected for those anglers that fish strictly for sport (i.e., catch and release fishing). We would expect no change in participation and effort and CS for all sport anglers that are not risk-averse. They would continue to harvest and consume (for subsistencetype anglers) the affected species as if it did not pose a health threat. For those sport anglers that are not subsistence-type anglers and are risk-averse, there may not be any net decrease in effort or CS since these anglers can catch and release the affected species or switch to alternative species. In order to measure the above effects the total recreational fishery should be considered and segmented by type (risk-averse vs. not, subsistence vs. sport anglers) in order to examine whether or not decreases in effort and CS associated with the affected species are offset by equal gains in effort and CS in other, alternative species. Again, the overall net effect for a specific state’s fishery could be no change. 4. Economic effects and economic losses from marine pollution: insights from the literature 4.1. Damage to fish and shellfish: harvest closures and restrictions The literature has investigated the effects of harvest closures and restrictions from the perspective that these closures would cause fishermen to incur additional costs from increased travel time to ‘‘open’’ more distant fishing grounds and this would directly decrease the economic

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welfare to the fisherman. Such effects are generally not of sufficient magnitude to have noticeable effects on the markets of affected seafood. 4.1.1. Commercial lobstering Harvest closures have been in effect in New Bedford Harbor and some areas of Buzzards Bay, Massachusetts since 1979 as a result of PCB contamination (in New Bedford Harbor closures remain in effect presently). Subsequent economic losses to local commercial lobstermen were examined by McConnell and Morrison (1986, Table 2). Economic losses were found to result from changes in fishing behavior where lobstermen have had to travel to new, more distant fishing grounds (direct effects due to PCB contamination). Another possible loss not examined would be from lobstermen that discontinued lobstering and exited the fishery. Increased travel resulted in added costs of time, fuel, vessel maintenance and gear replacement found to average $1827/lobsterman per year (2002$), a reduction in PS to lobstermen. Total losses or damage was estimated at $89,544/year (2002$), giving a present value over a 106-year period (the time period damages were expected to last, 1980–2085) of $3.28 million (2002$). 4.1.2. Sportfishing The effects of harvest closures are not limited to commercial fishermen, effects can cause losses to recreational fishermen. On the basis of harvest restrictions in New Bedford Harbor due to PCB contamination, McConnell and IE (1986) examined losses to the local marine sport fishery (Table 2). Changes in behavior resulted in increased costs from increased travel time and distance to alternative sites with relatively cleaner water, in turn reducing CS and represented damages. Average losses were estimated at $2.68/ trip (2002$), and total losses were estimated at $112,167/ year; a present value of $5.2 million over a 106-year period. 4.2. Damage to fish and shellfish: fish–shellfish kills 4.2.1. Fish–shellfish kills from hypoxic event, New Jersey In 1976 an hypoxic event occurred off the coast of New Jersey that resulted in massive shellfish and benthic kills (Swanson and Sindermann, 1979). Figley et al. (1979) estimated the economic impacts of the commercial product lost at $222 million for shellfish (primarily surf clams and ocean quahogs) to the commercial fishery and seafood industry (Table 2). Economic impacts to the recreational fishery were estimated at $11.7 million and future effects to the commercial sector were projected at $1576 million (2002$). A number of shortcomings may limit this analysis. One, the entire amount of destroyed product was assessed at current (1976$) prices; correct if the amount of destroyed product has no effect on the market or market price, but here if all the product came to the market the market would be glutted and the price would collapse, hence a price that corresponds to such a scenario would be appropriate. We also believe the estimate is high because losses projected

Table 2 Economic effects and damages from marine pollution—selected literature

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Table 2 (continued)

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Note: the columns labelled (1), (2), (3) for the category ‘‘Public health impacts: unsafe seafood—hazardous–toxic substances,’’ are based on three separate economic methods (see text for discussion). Abbreviations: PV = present value, chng = change, unk = unknown, multip = multiplier, midpt = midpoint, whsale = wholesale, mill. = million, Obs’ed Q’s = observed quantities, HHs = households.

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over future time periods were not discounted, and that along with the surf clam killed, predators of the surf clam were also destroyed so the resource has come back to higher levels than before; factors that were not taken into account in the above analysis and estimate. 4.3. Damage to public health: unsafe seafood—hazardous– toxic substances As part of the New York Bight Restoration Plan, Ofiara and Brown (1999) examined and estimated the economic losses associated with long-term impairments, namely consequences of consuming various seafood with toxic substances from the New York Bight area. Estimates of economic losses were based on estimates of excess risk (excess cancer mortalities) for PCB, Dioxin, and several pesticides together associated with consumption of specific seafood taken from contaminated waters in the New York Bight. Methods used to develop economic losses followed a human capital approach to represent a lower bound estimate (column [1] in Table 2, Hartunian et al., 1981), and willingness-to-pay (WTP) approach to represent a midpoint estimate ([2] in Table 2, Thaler and Rosen, 1975) and an upper bound estimate ([3] in Table 2, Smith, 1976). Estimates of excess cancer and associated economic losses from PCB contamination were based on a low and high consumption rate over a 70-year lifetime from Belton et al. (1985b, 1986). NEV lost from striped bass and bluefish are very similar with a low range from $3943 million to $22,690 million to a high range of $9200 million to over $53,300 million (in 2002$) on the basis of which economic method is used (Table 2, see Ofiara and Brown, 1999 for more detail). On the basis of excess risk from dioxincontaminated seafood (Belton et al., 1985a), lost NEV for striped bass was estimated at a low of $117 million to a high of $9560 million (if using midpoint values the range is $889 to $8764 million, in 2002$); smaller losses compared to those from PCB contamination. Lobster and blue crab were also identified to pose excess risks from consumption. Lastly, Connor et al. (1984) developed estimates of excess risk and estimates of cumulative risk for several toxic substances from the consumption of striped bass, winter flounder, windowpane flounder, mussels, and lobster. It was not surprising that the estimates of excess risk and cumulative risk were highest for striped bass, a predator specie high on the food chain, followed by lobster. The estimates of lost NEV discussed here are based on the estimates of cumulative risk. Lost NEV for striped bass ranged from a low of $1812–6287 (midpoint of $4050) million to a high of $10,425–36,183 (midpoint of $23,304) million (in 2002$). It is concluded that although the data on which these value estimates are based are imprecise, it should be apparent that consumption of toxic-contaminated seafood can cause sizable economic losses and these losses may be disproportionately shared by recreational fishermen. It is because of this type of evidence that researchers are concerned about the health risk to the public from consuming unsafe

seafood and urge the routine inspection of seafood for toxicants, along with further studies to determine more precisely estimates of health risk (IOM, 1991; US Congress, OTA, 1987). 4.4. Damage to public health: unsafe seafood—demand effects The effects of unsafe seafood on consumer demand has been examined in the literature from evidence of decreased consumption behavior (per capita consumption) over time, and from empirical market models that estimate losses of economic welfare from decreases in demand. 4.4.1. Avoidance of oysters The presence of a pesticide, Kepone, in oysters in the James River, Virginia during the 1975–76 period resulted in harvest closures for oysters (Table 2). Because this was highly publicized, Swartz and Strand (1981) hypothesized that the local oyster market in Baltimore, MD could be impacted if consumers became alarmed and avoided oysters causing the demand curve to shift inward. Empirical results found that newspaper articles had a significant negative effect on demand for uncontaminated oysters for the 1973–76 period, and specific losses from an additional news article was found to decrease per capita consumption by 0.5 gallons/100 residents. Resulting NEV losses were estimated at $40,417 (2002$) or about 5% of the market value (including both CS and PS). Swartz and Strand further discovered that after an 8-week period following the initial news coverage consumer avoidance wore-off and consumption returned to previous levels, concluding that both consumer avoidance and welfare losses were due to conveying imperfect information via news articles. 4.4.2. Avoidance of hard clams Factors other than news of a toxic substance in seafood can cause changes in consumer behavior and demand as Capps et al. (1984) discovered in examining the effects of a gastroenteritis outbreak on the hard clam market (Table 2). An outbreak during the summer of 1982 occurred in upstate New York with widespread publicity. Results found that wholesale and ex-vessel prices of hard clams fell, a decrease of 50–74% over the 1972–82 period, translating into lost revenues of $3.82 million (2002$). However, effects were not limited to New York; ex-vessel prices of hard clams were found to be affected in Rhode Island, North Carolina, New Jersey, and Virginia. The researchers also found that consumer avoidance was short-term for the New York market (avoidance began to disappear in a few months after initial reports), however not so for the other states where impacts lasted longer. 4.4.3. Avoidance of swordfish Consumption warnings about swordfish containing high mercury concentrations were issued by the US Food and

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Drug Administration (FDA) in 1971. Lipton (1986) investigated the effect this had on the US swordfish market and on consumer demand (Table 2). Before the FDA announcement, per capita consumption was estimated at 0.04– 0.05 pounds/year. After the warning was issued in 1971, per capita consumption fell to less than 0.002 pounds/year. It was not until 1983–84 that consumption levels returned to their previous levels of 0.04–0.05 pounds/year, some 13–14 years after the FDA warning. By 1985, consumption had increased to almost 0.08 pounds/year. It is interesting to note that the FDA warning pertained to imported swordfish only, although domestic swordfish landed and sold in the same state could have contained mercury concentrations equal to or higher than limits set on imported product. The conclusion reached is that the warning resulted in depressed demand for all swordfish. 4.5. Damage to beach use The literature has examined the effects of pollution on beach use from two perspectives, (1) losses of economic welfare as a result of beach closings as beach users respond by avoiding the polluted beaches, and (2) increases in economic welfare that would result from subsequent water quality improvements. These effects are, respectively due to a downward shift (decrease) in demand for beach use, and an upward shift (increase) in demand for recreational activities. 4.5.1. 1976 Long Island pollution event Economic Research Associates (1979) examined expenditure impacts as a result of changes in travel patterns from a marine pollution incident that occurred during June 1976 at numerous Long Island beaches in New York (Table 2). ERA noted that press releases may have exaggerated the incident by not specifying which beaches were affected and concluded that imperfect information contributed to residents’ beliefs that all Long Island, NY and NJ beaches were polluted. Survey results found that beach attendance declined 50–60% in 1976 over previous 1975 levels at all three beaches in the study area (Jones and Robert Moses Beaches in NY, Smith Point beach in NY, and Seaside Heights in NJ). Subsequent losses of expenditures (excluding beach fees) were estimated at $28.1 million (2002$) for Jones and Robert Moses Beaches (representing severely polluted beaches closed during June), $2.3 million for Smith Point beach (moderately polluted beach that was not closed), and $1 million for the Seaside Heights, NJ beach (clean beach that was not closed) (2002$). 4.5.2. 1988 marine pollution events—New Jersey During the summer of 1988, the New Jersey coast experienced a series of marine pollution events (washups of marine debris, medical waste, tarballs-greaseballs, and bacterial contamination). Ofiara and Brown (1999) reexamined earlier efforts (Ofiara and Brown, 1988, 1989) to assess economic effects and losses based on changes in con-

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sumer (beach user) behavior and decreases in demand due to beach closures at affected beaches (Table 2). It was found that beach attendance fell 9–44% (midpoint of 26%) related to subsequent beach closings in 1988. Estimates of aggregate CS lost from the beach closings ranged from $209 million to $1020 million (midpoint of $603 million) and lost expenditures ranged from $397 million to $1943 million (midpoint of $1148 million) in 2002 dollars. 4.5.3. 1988 marine pollution events—New York Bight In response to USEPAs New York Bight Restoration Plan, Kahn et al. (1989) and Swanson et al. (1991) examined the effects and losses marine pollution events of 1988 in which both New York and New Jersey experienced beach closings due to marine debris and medical waste washups, and pathogens (Table 2). Estimated losses of NEV ranged from $708 to $2399 million and lost expenditures ranged from $854 to $3429 million (2002$) due to washup events. Included in this amount, pathogen contamination produced losses of NEV of $439 million and expenditure losses of $374 million. 4.5.4. Beach use losses—New Bedford Harbor A further effect of PCB contamination in New Bedford Harbor and parts of Buzzards Bay was the impact on recreational beach use and subsequent losses of CS as a result of a decrease in the demand for beach use. McConnell and IE (1986) estimated economic damages (lost CS) per trip of $10.37/household for households aware of the contamination problem (Table 2). These estimates represent lost NEV due to PCBs or conversely benefits from PCB removal. Overall, estimates of the present value of PCB-related damage to beach use over a 107-year period (1979–2085) ranged from $13.9 million (given constraints on beach capacity) to $19.1 million (without capacity constraints) (2002$). 4.5.5. Value of water quality improvements—Chesapeake Bay Bockstael et al. (1988, 1989) assessed economic benefits from improving water quality levels to ‘‘swimmable’’ levels for all recreational uses in general for the Chesapeake Bay (Table 2). The study used a contingent valuation approach (closed-ended willingness-to-pay questions coupled with a logit statistical model) based on a random sample of residents in the Baltimore-Washington area in 1984. A telephone survey was used to collect the information. Aggregate NEV for users and non-users was projected to $152 million, with an estimated probable range of $110 million to $196 million (2002$). 4.5.6. Value of water quality improvements—Narragansett Bay Similar to the above Chesapeake Bay study, Hayes et al. (1992) used a contingent valuation approach (closed-ended willingness-to-pay questions coupled with a logit statistical model) based on a random sample of Rhode Island residents to estimate improvements in water quality in the

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Narragansett Bay area, Rhode Island (Table 2). A mail survey was employed. Concerning water quality improvements to ‘‘swimmable’’ levels, aggregate NEV was found to range from $69 million to $106 million per year (a midpoint of $86 million) using a mean value of the statistical distribution, and from $55 million to $104 million per year (midpoint of $80 million) based on a median value of the distribution (2002$). 4.6. Damage to property value 4.6.1. Losses in property value—New Bedford Harbor PCB contamination in New Bedford Harbor, MA was also found to have adverse effects on waterfront real estate. Based on a repeat sales approach of single-family, owneroccupied residences, Mendelsohn (1986) found that in the most polluted areas, the adjusted value of homes averaged $9390 less, or 9.8% less (2002$), than similar homes near cleaner waters (Table 2). In the next most polluted areas, adjusted values averaged $10,597 less or 13.9% less than similar homes near cleaner waters. Aggregate damages (lost NEV) were estimated at $45.6 million–$66.5 million (2002$). 4.6.2. Losses to commercial—pleasure vessels: New York Bight Further losses from the 1988 marine pollution events in the New York Bight area to commercial and pleasure vessels were examined by Kahn et al. (1989) and Swanson et al. (1991) as part of the New York Bight Restoration Plan (Table 2). These losses were mainly due to marine debris and reflect the increase in costs and repairs to commercial vessels from striking debris estimated at $792 million and lost CS associated with reduced satisfaction from pleasure boating estimated at $41 million (2002$). 5. Conclusions On the basis of the literature, the theoretical losses of economic welfare due to marine pollution depicted in demand–supply models can and have been quantified by many. The literature has examined several effects due to marine pollution, damages due to harvest closures-restrictions, damages from consumption of unsafe seafood (simple damages from avoidance to long-term public health consequences), damages due to decreased recreational activity (sportfishing and beach use), and damages related to waterfront real estate adjacent to contaminated water. From this literature one can conclude that wider market effects are possible as a result of highly publicized local marine pollution events (both for seafood products and beach closings), news of local contaminated seafood products and health effects can influence demand for uncontaminated product, and news of beach closings can influence the use of unpolluted, open beaches. These effects can result in significant short-term losses. Overall, marine pollution can and has resulted in sizable economic effects and losses. On the basis of the literature there is adequate justi-

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