The Dead Sea and its surrounding environment have been extremely compromised. Without a change in current policies, the future looks even grimmer.  Sea level has been dropping by nearly one meter per year due to water diversions upstream and due to mineral extraction industries.  Consequences thus far include loss of one-third of the Sea’s natural surface area and much coastline, the drying up of nearby natural springs that support wildlife, and the development of hundreds of sinkholes – areas of severe land subsidence resulting from drops in the groundwater table – which have damaged infrastructure, limited economic development opportunities, and destroyed natural habitat. Moreover, unsustainable development plans in areas such as the tourism industry threaten to further degrade the basin’s environmental quality.

The Problem Setting
The management of the Dead Sea and its natural resources so as to preserve the area for future generations is, therefore, both imperative and urgent. Policymakers in the region have started to recognize the legitimacy of ethical, cultural and ecological rationales for conservation. They have failed, however, to develop, let alone implement, any type of comprehensive management plan. Policymakers have generally either viewed the degradation of the Dead Sea basin as an inevitable sacrifice at the alter of economic productivity or have promoted plans to remedy the damage by means of mega-infrastructure projects such as water importation via a Med-Dead or Red-Dead canal. Amazingly, they have adopted these positions without any clear sense of the economic benefits of conservation; the direct and indirect costs of continued destruction, or the potential indirect economic costs and adverse environmental consequences inherent in massive water transportation schemes.  

In order to fill in the gaps in knowledge and understanding regarding the future of the Dead Sea, Friends of the Earth Middle East (FoEME) through the assistance of IDRC from Canada, commissioned studies to assess the economic benefits of conservation, including the possible restoration of natural flows into the Dead Sea.   

Economic Analysis of Conservation
Because economic benefits such as satisfaction from hiking, from preservation of natural areas and ecosystem services, and from avoided damages to infrastructure, are not traded in a market, and are therefore difficult to quantify, they have largely been left out of policy analyses.  These benefits, however, are no less real than the more obvious economic benefits of sectors such as agriculture and mineral extraction, and they should be included into policy decision-making if overall social welfare is at interest. Economic benefits to conservation include use values (e.g. provision of habitat that attracts tourism or welfare gained from visiting an area), non-use values (e.g. the sense of satisfaction one gets from knowing that something exists and will be available for future generations), and option or quasi-option values (e.g. the value of preserving the option of future utilization of a resource or region).

Two non-market valuation methods were used to assess consumer welfare from conservation: the contingent valuation (stated preference survey) method, in which population samples from all three countries were asked their willingness to contribute to a fund for the preservation of the Dead Sea basin, and the travel cost method, which assessed benefits derived by those visiting the Dead Sea based on market expenditures and opportunity costs sacrificed in order to make such visits. All three peoples had a positive willingness to pay (WTP) for conservation, despite low incomes, as is shown in Table ES1, with total WTP topping US$ 59 million yearly.  Of this, over US$ 32 million per year is thought to be for non-use values only. Given the incentive people face to under provide pubic goods, these figures are probably underestimates of true WTP, and should be thought of as lower bound estimates. Moreover, this represents the WTP of the local population only and does not include that of the international community.

Country

Avg. Adjusted WTP 
(per household)

Estimated No. of Households

Estimated National WTP  (Total)

Palestine | 41.22 NIS = US$   9.48 | 575,736 | US$   5,458,000
Jordan (mid-range estimate) | 9.37 JD =   US$ 13.12 | 893,500 | US$ 11,724,000
Israel | 100.25 NIS = US$ 23.06 | 1,819,700 | US$ 41,966,000
TOTAL | | | US$ 59,148,000
Table ES1 - Average Adjusted Annual WTP for Dead Sea Fund  

From the travel cost study, the best estimate of consumer welfare of domestic tourists from visiting the Dead Sea is US$ 193 million per year (Table ES2).  

Country | National Annual Consumer Surplus
Israel | US$ 154 million
Jordan | US$   24 million
Palestine (mid-range estimate) | US$   15 million
TOTAL | US$ 193 million
Table ES2 - National Annual Consumer Surplus based on Travel Cost

Doubling this figure to account for the benefits derived by international tourists would produce a value of US$ 386 million per year. There are reasons to think that this is an overly conservative estimate, given the tendency for international tourists to stay longer and invest more in travel, and given their higher opportunity costs. The rate of decline of consumer welfare because of the decline in the sea level was estimated at 0.67% per year. This means that over the past 60 years several billion dollars in benefits have been lost due to sea level decline.  Projected losses over the next 60 years are an additional US$24 million annually, using a 3% discount rate.  The travel cost analysis also revealed that the average income of the domestic tourist at the Dead Sea is below that of the national average, indicating that their may be equity reasons for conservation, as the Dead Sea may serve as an tourist destination for those of limited economic means.

In addition to the use and non-use benefits of the general population, there are direct costs to local businesses, infrastructure, and development opportunities associated with environmental deterioration, especially as a result of sinkhole formation. While too little is known to accurately predict the future scale and location of sinkholes, damage to roads, agricultural lands, tourism development and evaporation ponds already causes hundreds of thousands of dollars in recurrent costs and has prevented development projects worth millions of dollars. The rate of sinkhole formation is thought to be increasing rapidly.  If a restoration plan could prevent further sinkhole formation, avoidance of these costs would represent additional benefits of conservation.

In sum, the economic benefits to conservation are clearly substantial: in the hundreds of millions of dollars per year. The value of the current uses of water diverted from the Dead Sea, i.e. the producers’ surplus from current resource exploitation in agriculture and mineral extraction, were examined to provide context. The annual return on water in agriculture was estimated to be close to US$ 377 million for the region as a whole, but there are reasons to believe this may be a high-end estimate. The profitability of the Dead Sea mineral extraction was estimated at US$ 143 million per year.

Rethinking the Economic Sense
A formal benefit-cost analysis of conservation vs. continued exploitation and degradation would be inappropriate given the imprecision of the values estimated, the omission of several key costs and benefits, gaps in scientific knowledge about physical trends, and lack of knowledge regarding the degree to which conservation and development goals really are mutually exclusive.  What is clear, however, is that all three peoples place a high economic value on the conservation of the Dead Sea basin. Moreover, these benefits are distributed widely across the general public, rather than accruing to private interests, as is the case for current resource exploitation.  

The significant economic benefits from conservation of the Dead Sea basin, when added to the already strong ethical, environmental, and cultural arguments, make it imperative that the economics of current practices taking place at the Dead Sea Basin be reconsidered. FoEME calls upon our governments and the World Bank to undertake what they themselves so often preach, that is, consider the full economic picture of their actions. Without re-evaluating the economics of current activities, in the opinion of FoEME decision makers would be acting contrary to the best interests of the region as a whole.

‘Reconsidering Economics at the Dead Sea’ is a summary of a full report to be soon published by FoEME with the support of IDRC Canada. Please visit our website at www.foeme.org for more information.