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The Role of Economic Valuation for Regulating Service of Mangrove Ecosystem

The latest IPCC Climate Report mentions the possibility of earth temperature increasing by 1.5 °C in the next 10 years. There are concerns that this might have an impact on coastal areas by increasing the threat of more extreme disasters, such as sea-level rise and coastal floods. Coastal ecosystems, such as salt marshes and mangroves are the best solutions to reduce these threats. This has become a national development priority agenda for the upcoming years.

Mangroves serve as an important coastal ecosystem that can protect the area from natural disasters. An appropriate mangrove ecosystem management strategy can strengthen coastal resilience against the impacts of climate change, as well as support sustainable economic resilience. The mangrove ecosystem provided direct and indirect benefits for the surrounding community. This is commonly referred to as ecosystem services. The ecosystem potential can be translated as a monetary value that is calculated using an economic valuation approach based on the purpose of its utilization.

The Millenium Ecosystem Assessment (MEA) defines ecosystem services as the benefits people obtain from ecosystems. The four main categories of ecosystem services are: provisioning, regulating, cultural, and supporting.

The role of mangroves as a natural defense for coastal areas and small islands is a benefit of regulatory services. Regulatory services consist of a number of processes in ecosystems to maintain environmental conditions to support livelihood. Physically, the structure of the mangrove tree can protect the land from the onslaught of sea waves and strong winds. Its roots can collect and hold sediment to maintain the shoreline, prevent abrasion, seawater intrusion, and maintain water quality. Mangroves can also absorb and store five times more carbon than tropical rain forests. This potential greatly contributes to achieving the target of reducing greenhouse gas (GHG) emissions in Indonesia's Low Carbon Development.

However, the role of mangrove forests has not been adequately appreciated by the coastal communities due to a lack of knowledge about the potential of mangrove ecosystem services. The indirect benefits are often ignored because the community tends to prioritize the direct benefits provided by mangrove forests, hence the value and function of mangrove forests are often not quantified in the calculation as resource value.

Value of Mangrove Ecosystem Resources

Reflecting on the current condition of mangroves, economic valuation and the natural capital accounting system and the environment is highly needed to:

1. Quantify the regulatory services provided by mangrove ecosystems

The mangrove economic valuation study for coastal protection is the most common service value calculated using the avoided damage and replacement cost method. In general, the replacement cost is calculated using the estimated cost per hectare required to build breakwaters. For example, the estimated economic value of mangroves in the coastal areas of India is relatively low, i.e. approximately USD 177/ha, while the economic value of mangroves in Thailand is a very high rate, i.e. USD 10,158 – 12,392/ha.

In Indonesia, the calculation of the economic value of mangroves tends to focus on the direct use value for production or consumption. For example, PERMEN-LHK Number P.64 of 2017 stipulates the price of mangrove bark for compensation at Rp 300,000. Many studies on mangrove ecosystem services have been carried out, but only at the village or district level. Therefore, mangroves’ role in protecting coastal areas, especially at a national scale, is often unquantifiable in its resource value and tends to be neglected. On the other hand, the mangrove forests in Indonesia have proven to reduce the impact of the tsunami in parts of Palu Bay, Central Sulawesi, on 28 September 2018.

2. Increase appreciation, awareness, and concern for the mangrove ecosystem

Partial management by evaluating mangroves in terms of direct use value alone will reduce its role in supporting the economic system. The economic value of mangrove ecosystem regulatory services has not been properly calculated. This has resulted in a tendency for the community and the private sector to damage mangrove forests due to a lack of information on the importance of mangroves for coastal areas. Determining an appropriate value for mangrove ecosystem regulatory services will increase appreciation, awareness, and concern for the mangrove ecosystem.

3. Serve as guidelines in decision making for relevant policies

The examples of mangroves' economic valuation discussed earlier can be broadly adopted in Indonesia. A comprehensive economic calculation of the mangrove ecosystem (both direct and indirect use values) needs to be carried out and is a priority indicator in the 2019 – 2024 RPJMN. In addition, understanding the concept of economic valuation can serve as a guideline for policymakers to create innovative institutions, especially for effective, efficient, and sustainable use of natural resources. This is due to the fact that economic valuation is closely related to the harmony between natural resource conservation and economic development.

Implementation of Economic Valuation

Considering the large economic role of the mangrove ecosystem, the Indonesian government has launched 7 marine management tools, including ocean accounting. This instrument not only calculates the economic value of the mangrove ecosystem, but also other ecosystems such as coral reefs and seagrass beds. Ocean accounting is supported by a number of organizations, including the Ministry of Maritime Affairs and Fisheries, the Geospatial Information Agency, the Ministry of Finance, Statistics Indonesia, the Ministry of National Development Planning/National Development Planning Agency, the Coordinating Ministry for Maritime Affairs and Investment, and the Global Ocean Account Partnership.

In line with this, efforts to be taken by the government in the process of implementing economic valuations are to continue increasing the provision of data and promote the calculation of ecosystem services, such as the protection of coastal areas and potential carbon stocks. Indonesia can start designing the implementation of carbon stock-based payments or carbon credits in mangroves to increase state revenue. Other efforts to address the conversion of mangrove forest functions include controlling business licenses and development in mangrove forests as well as a moratorium on primary forests (including mangrove ecosystems). In addition, harmonizing land and ocean spatial patterns can ensure the conservation of the mangrove ecosystem and protect the community’s productivity.

Furthermore, the economic valuation of mangroves through improved management of marine and coastal assets is a strategy to transition to a blue economy and sustainable development. With economic valuation, the role of mangroves can be properly calculated and the government, private parties, and the public’s awareness about the use, conservation, and restoration of mangroves can be increased. Therefore, cooperation and coordination between relevant agencies and institutions in calculating the economic valuation of mangroves are needed, especially for data transparency and data access.

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