According to a recent publication by the WWF, the overall value of the oceans is 2.5 trillion US dollars annually:

Working with the eminent scientist Professor Ove Hoegh-Guldberg and in collaboration with leading business consultancy The Boston Consulting Group, WWF looked at the implications that leaders should consider based on current policies and practices. The results illustrate the economic case for ocean conservation in stark terms. The economic value of coastal and oceanic environments is valued conservatively at US$2.5 trillion each year…

I will explain a bit more carefully the difference between a value and a value added, the importance of non-market values, and why forwarding only market valuation in this case may lead to dangerous policies.

First things that come to my mind reading this is: That’s it? Only roughly one fortieth of our Gross World Product? But then, reading on, one understands that what they mean is not the value of the oceans, but the value added.

Underpinning this value are direct outputs (fishing, aquaculture), services enabled (tourism, education), trade and transportation (coastal and oceanic shipping) and adjacent benefits (carbon sequestration, biotechnology).

Now there is a big difference between value and value added, and this distinction is not only semantics. Value added is a flow concept, like Gross Domestic Product (GDP). So the US$2.5 trillion each year means that the oceans contribute 1/40th to the world economic production every year. But this is only the direct value added. The authors themselves are stating this:

The economic analysis presented here estimates the value of marine ecosystems in terms of the value of marketed goods and services produced by industries that are directly associated with the marine ecosystems in question.

But one has to be extremely cautious in the way one reads all this. So let me emphasize this again: The authors have calculated only the oceans’ direct value added to the Gross World Product.

There are, obviously, many things missing from these calculations. There is the indirect value added (such as the secondary benefits from trade through shipping), and also those contributions that are not valued in the markets, like ecological benefits, sustainability, the public good nature of oceans. Again, in the authors’ words:

The analysis did not include valuable intangibles such as the ocean’s role in climate regulation, the production of oxygen, temperature stabilization of our planet, or the spiritual and cultural services the ocean provides. The fact that these additional values are not included in this analysis means that the actual value of the ocean is much higher.

I know of one study that has attempted to calculate these benefits, and this is a publication in Nature by Costanza et al. in 1997, The value of the world’s ecosystem services and natural capital. The authors calculate that the annual market and non-market value added of oceans amount to roughly US$ 31 trillion (in 2015), more than 14 times as high. If the non-market value added of oceans is that much higher, then we need to be careful about forwarding only a market value number for the value added of oceans. While the authors’ of the WWF study seem well-aware of this, it should also be clear that in the minds of policy makers the number 2.5 trillion will get stuck, leading to a sincere under-estimation of what the oceans are doing for us annually and therefore also likely to a lower willingness of policy makers to support any targeted action to sustain or improve oceans.

At the beginning of the post I talked about the value and the value added of the oceans. The value refers to a stock, to an asset, like capital, a house, the money on a bank account, or the number of fish in the sea. The authors of the WWF study have also attempted to calculate the value of the oceans itself:

The economic value of coastal and oceanic environments is valued conservatively at US$2.5 trillion each year, and the overall value of the ocean as an asset is 10 times that.

Thus, they conclude that the oceans themselves are “worth” US$25 trillion. I am bit puzzled by this number. While I can fully understand that one wants to know how large the value added of oceans to the Gross World Product is each year, I would be rather careful about trying to value the oceans themselves. Valuing something as an asset means: assume you have an asset, how much would you sell it for?

So assume aliens come to our planet and want to buy our oceans, would our world president (if I can assume that there exist aliens then I can also assume that by the time they contact us we have a world president…) want to sell our oceans for US$25 trillion? Would we want to sell it if the aliens offer us triple this amount? Or thirty times as much? Of course not… Life on the planet earth would not be very comfortable without the oceans around.

But the WWF wants to use these numbers precisely to aid policy makers in their decisions:

WWF looked at the implications that leaders should consider based on current policies and practices.

However, if one so extensively only relies on market valuation and if one only proposes one estimate for market valuation and non for non-market valuation, then policy makers are only going to use the number 2.5 trillion US dollars annually when it comes to policy making. Thus, it is really wise to exclude these non-market calculations, or to forward a number that one knows is sincerely underestimated?

To conclude, it makes sense to calculate how much the oceans add in direct value to the Gross World Product, especially if it is just in order to get a number for some Cost-Benefit Analysis at the margin. For anything else one has to be very careful as to what number one forwards and for what purpose.