Economic assessment of market and non-market damages of oil spills

Economic damages of an oil spill can be analysed by distinguishing two types of costs. The first type includes cleanup and restoration costs. The second type labelled as indirect damages, stems from the adverse physical effects of the spill, which occurred in spite of cleanup efforts. Indirect damages include costs to tourism, aquaculture and fishing industries, as well as amenities and ecological losses. While some damages refer to goods and services that are traded in the market place, others belong to the non-market category. When no market price is available, several approaches, including travel cost and contingent valuation methods can then be applied. The Amoco Cadiz case, which offered a good example of a comprehensive economic damage assessment, demonstrated that non-market damages represented an important share of total damages. With respect to damages caused by the Erika wreck, recreational and amenity losses concerned a quite short period of time but a highly populated shoreline close to an urbanized area, those of Nantes. Residents were disturbed by the accident, through their leisure activities, mainly shellfish collecting, a very popular activity on this coastline. For the residents, this is a major component of the whole damage. The problems with valuing ecological losses arise from the extensive uncertainty about how ecosystems function internally and what they do in terms of life supports functions. By now the economic literature favours willingness-to-pay approaches based either on the cost of restoration programmes or stated preference methods.