The Great Barrier Reef has been in the news for its environmental degradation, specifically, the bleaching of Coral. According to Wahlquist, (2017), a draft prepared by UNESCO has criticized the Australian government for not doing enough to protect the Great Barrier Reef. In the recent times, the pollution and global warming have impact the coral which is signified by the “bleaching” of the corals. Bleaching is an effect of the rising temperatures of the water in the Great Barrier Reef area, an effect of climate change, (McGuirk, 2017) and symbolizes serious environmental degradation of the reef.
The Great Barrier Reef of Australia is under serious existential threat due o environmental degradation. The Great Barrier Reef is home to unparalleled variety of flora and fauna. The Reef stretches 2300 kilometers along the north eastern coastline of Australia and is listed as a “one of the seven natural wonders”. (Deloitte Access Economics, 2017).
Climate change is the major cause of the degradation. However, The UNESCO expressed major concerns over the following causes of the degradation:
- Water quality
- Climate change
- Excessive “tree clearing”
(United Nations Environment Programme, 2017)
Diagram 1 Some of Threats to the Great Barrier Reef (Apart from Climate Change as a direct threat) Prepared by Auhor. Adapted from (United Nations Scientific , Educational and Cultural Organization, 2017)
The ‘Economic Value’ of the Great Barrier Reef
The reef provides sources of livelihoods to thousands of Australians in various industries such as tourism, mining etc. Any coral reef has tourism value as well as it is a source of marine naural resources. According to United Nations Environment Programme, 2017, “ A square kilometre of healthy, well managed coral reefscan yield a catch of over 15 tons of fish and sea food every year.”
The degradation of the coral reef can trigger some serious consequences for he ecological and economic well being of he country.. “The Great Barrier Reef is worth 3.7 billion annually to the Australian Economy through fishing and tourism every year.” (Cummins & Helfetz, 2017) (Deloitte Access Economics, 2017)
Deloitte Access Economics (2017) identified the ‘direct contribution of the reef ‘ as “6.4 billion AUD and 64,000 jobs to Australia’s economy” . The consultancy also, idenified it’s “iconic value” or brand value to the reef and pegged it at 56 Billion AUD.
‘Diseconomies’ of Economic Activities around the Great Barrier Area
An Negative externality or a diseconomy is, mathematically, a (negative) deviation of “Marginal Private Cost” (MPC) from the marginal social cost. According to Lipsey & Chrystal, (2011) “Private costs are those costs that are incurred by parties that are involved directly in the Economic activity” and “Social costs are those costs that are borne by the society” . Hence, the marginal private costs refers to the private cost of the last producing the last unit produced or providing services to the last consumer serviced. The ‘Marginal Social Cost’ is a valuation of the impact borne by the society in the production of the last unit of good or services. Negative externalities decrease the social good i.e. they have harmful effects or cause inconvenience to the public, in general. (Lipsey & Chrystal, 2011)
It is important to understand the actual value of the economic value of all “productive” activities conducted in the Great Barrier Reef and match them against the economic value of the reef. For a simple policy analysis, the government can and must analyze the negative externalities of various activities such as mining, fishing, tourism etc. around the Great Barrier Reef and the social costs of these activities. Hence, the environmental degradation of Great Barrier Reef should not only be of concern to environmentalists but to public, in general. The loss of flora and fauna of he Great Barrier Reef directly affects the Australian economy.
The following is a diagram of the negative externalities and the loss of social good resulting from it. The Marginal Private Costs in the cost of mining coal from around the area. This cost does not include the costs that society has to bear due to the mining. The Marginal social Cost includes the valuation of losses resulting from the mining of coal in the area. The loss of social good is the difference between the two. (Riley, 2005).
Diagram 2 : Negative Externalities: Loss of Social Good. Prepared by Author. Source: (Riley, 2005)
The problem of Great Barrier Reef is one that can be solved by simple policy measures.
Diagram 3 Key Stakeholders to the Prevention of Environmental Degradation of the Great Barrier Reef of Australia. (Prepared by Author)
Carbon Pricing: Carbon Pricing of all mining activities around an identified area around the Great Barrier Reef: ‘Carbon pricing’ will lead to internalization of the externalities. (Samuelson & NordHaus, 2004) . “A carbon price is a cost applied to carbon pollution to encourage polluters to reduce the amount of greenhouse gas they emit into the atmosphere.” (Grantham Research Institute, 2012)
The Australian Government has initiated several measures to reduce the overall greenhouse gases in the country. However, “carbon pricing” of firms that mining activities around the reef would be discouraged to do so, because there would be an additional cost to mining from the area surrounding the Reef which may lead to mining entities looking at other areas. However, the ‘carbon pricing’ must be in equilibrium with the marginal gains from taxes and the opportunity cost of mining in the given area. (Anderson, 2016)
- Coal Export Duty: A selective duty on export of coal. (Hutchens, 2016) . This duty may have a similar effect as carbon pricing.
- Ban on Riverbed Mining: Several conservationists, suggest, a ban on river bed mining in an around the area. An analysis of the economic benefits of mining, as against, the negative externalities of mining must be first conducted. (Robertson, 2017). This measure will help improve the ‘water quality’ of the Reef.
- Improved National and State Regulation on land clearing through measures like quotas, zoning etc: Quotas and zoning will have the same effect as carbon pricing would have.(Queensland Government, 2017)
- Improved National and State Regulation on Fishing.(Australian Government, 2017)
Anderson, S. (2016, December 7). Why is everyone talking about a carbon tax? The carbon pricing debate explained. Retrieved August 23, 2017, from ABCn News.com7: https://www.abc.net.au/news/2016-12-05/the-carbon-pricing-debate-explained/8092506
Australian Government. (2017). Commercial Fishing and Zoning. Retrieved August 23, 2017, from Australian Government : Great Barrier Reef Marine Park Authority: www.gbrmpa.gov.au/zoning/commercial-fishing-and zoning
Carlton, D. W., & Perloff, J. M. (2000). Modern Industrial Organization. Reading , USA: HarperCollins College Publishers.
Cummins, A., & Helfetz, J. (2017, March 2016). Great Barrier Reef Suffering Unprecedented Damage. Retrieved August 24, 2017, from CNN: ediion.cnn.com
Deloitte Access Economics. (2017). At what price? The economic, social and icon value of the Great Barrier Reef. Brisbane: Deloitte Touche Tohmatsu Limited.
Grantham Research Institute. (2012, July 16). The ultimate climate change FAQ. Retrieved August 23, 2017, from The Guardian: https://www.theguardian.com/environment/2012/jul/16/carbon-price-tax-cap
Hutchens, G. (2016, April 28). Great Barrier Reef: Greens call for new tax on mining to pay for damage. Retrieved August 23, 2017, from TheGuardian.com: https://www.theguardian.com/australia-news/2016/apr/28/great-barrier-reef-greens-call-for-new-tax-on-mining-to-pay-for-damage
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Lipsey, R., & Chrystal, A. (2011). Economics. Oxford: Oxford University Press.
McGuirk, R. (2017, June 3). UNESCO has Serious Concerns Over Great Barrier Reef Coral. M. phy.org . The Associated Press.
Queensland Government. (2017, July 3). Vegetation management. Retrieved August 23, 2017, from Queensland Government: https://www.qld.gov.au/environment/laAnswer:nd/vegetation/exemptions
Riley, G. (2005). European Economy in Focus. BerkShire (UK) : Tutor 2 u online.
Robertson, J. (2017, August 18). Queensland conservationists call for river-mining ban to protect Great Barrier Reef. Retrieved August 23, 2017, from The Guardian.com: https://www.theguardian.com/environment/2017/aug/18/queensland-conservationists-call-for-river-mining-ban-to-protect-great-barrier-reef
Samuelson, P. A., & NordHaus, W. R. (2004). Economics: Seventeenth Edition. New Delhi: Tata- McGraw Hill Publishing Company.
United Nations Environment Programme. (2017). Coral Reefs Valuable But Vulnerable. Retrieved August 23, 2017, from United Nations Environment Programme : Coral Reefs Unit: coral.unep.ch/coral_reefs.html
United Nations Scientific , Educational and Cultural Organization. (2017). CONVENTION CONCERNING THE PROTECTION OF THE WORLD CULTURAL AND NATURAL HERITAGE. Paris: United Nations Scientific , Educational and Cultural Organization.
Wahlquist, C. (2017, June 3). Great Barrier Reef: Australia must act urgently on water quality, says Unesco. Retrieved August 23, 2017, from theguardian: https://www.theguardian.com/environment/2017/jun/03/great-barrier-reef-australia-must-act-urgently-on-water-quality-says-unesc