Great Barrier Reef: Economics and Impacts

This assignment examines the economic significance of the Great Barrier Reef, analyzing its value through various lenses like tourism and research. It delves into the detrimental impacts on the reef caused by factors such as mining activities, agricultural runoff, and climate change. The assignment encourages critical thinking about policies and measures to mitigate these threats and ensure the long-term sustainability of this precious ecosystem.

Environmental Degradation of the Great
Barrier Reef
Link to the aricle : https://www.theguardian.com/environment/2017/jun/03/great-barrier-reef-
australia-must-act-urgently-on-water-quality-says-unesco
1) Introduction
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)
2) 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)
Recommendations
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)
1) 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)

2) Coal Export Duty: A selective duty on export of coal. (Hutchens, 2016) . This duty may
have a similar effect as carbon pricing.
3) 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.
4) 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)
5) Improved National and State Regulation on Fishing. (Australian Government, 2017)
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