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This paper presents an efficient coding method for underwater color images, called wavelet tree-based wavelet difference reduction (WTWDR). Instead of employing the wavelet difference reduction (WDR) coding technique for the entire transformed image, the proposed WTWDR method uses the difference reduction coding technique in each significant wavelet tree. Therefore, the WTWDR method can fully employ the correlations between the subbands of higher levels and lower levels as the SPHIT method does, and can also provide the features of WDR, that is, low complexity, region of interest capability, and scalability, thereby combining the strengths of both SPIHT and WDR. In addition, according to the feature of underwater color images, we propose an efficient coding scheme for underwater color images based on WTWDR. The experimental results show that the proposed method outperforms the WDR method in terms of compression ratio and coding time, and is an alternative to the SPIHT method.