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Socio-Economic Impact of the Presence of Asian carp in the Great Lakes Basin

Socio-Economic Impact of the Presence of Asian carp in the Great Lakes Basin

Socio-Economic Impact of the Presence of Asian carp in the Great Lakes Basin (PDF, 634 KB)

Prepared by
Salim Hayder, Ph.D.

Edited by
Debra Beauchamp

Fisheries and Oceans Canada, Policy and Economics
501 University Crescent, Winnipeg, Manitoba R3T 2N6

Table of Contents

Chapter 3: Methodology Adopted

This study aims to evaluate the socio-economic impact of the presence of Asian carp in the Great Lakes Basin in Canada. This was done in two steps: Firstly, baselines values (by sector and aggregated) of all the economic activities in and around the Great Lakes have been estimated which provided the foundation for a quantitative discussion of the magnitude of values that might be impacted. It should be noted that while developing the baseline values the study deferred from speculating whether a particular activity would be impacted or not by the presence of Asian carp.; Secondly, the results from the bi-national ecological risk assessment (henceforth DFO (2012)) which was discussed below and in Chapter 6 in details) led by CEARA, DFO, have been used to determine the activities impacted.

The analytical principles set down in Treasury Board of Canada Secretariat (2007) guided the analysis. They are: (i) all feasible options, including the status quo, are considered; (ii) impacts that cannot be expressed in quantitative values are discussed qualitatively; and (iii) non-market values are considered (and can be gauged based on existing or similar data gleaned from the literature).

The methodology adopted for the analysis is the Total Economic Valuation (TEV) technique, which relates all benefits to human welfare measures. The economic valuation method was chosen because (i) it is defined as the sum of benefits involved and can be used to assess economic benefits quantitatively or qualitatively; (ii) it allows for a robust measurement and comparison of values and presents these values in terms that people are familiar with; and (iii) it is both logical and comprehensive, due to its foundations in microeconomic theory, emphasis on marginal values, and inclusion of all aspects of the associated values. Moreover, since the TEV approach is followed by economists in valuing environmental goods and services, the relevant literature could be consistently analyzed using this framework.

In the study, the TEV framework considers that the benefits provided by the Great Lakes are linked to both use and non-use values:

TEV = Use Value + Non-use Value

The use values are subdivided into current and future use values. Current use values are sub-categorized as direct and indirect use values. Finally, direct use values are sub-categorized as extractive and non-extractive use values. Based on the TEV framework developed by EnviroEconomics (2011), a revised chart showing the total economic values, along with definitions for all categories and sub-categories of values, is provided in Matrix 1.

Under the category of use values, extractive use values include activities such as commercial and recreational fishing, and non-extractive use values include activities such as wildlife watching and beach use. Indirect use values generally include ecosystem services and biodiversity. The future use values include option value to use the resource in future for commercial and/or recreational activities, as well as possible sources of research value. Finally, non-use values include bequest value (also known as legacy value) and existence value.Footnote 25

In order to estimate the economic value of the Great Lakes to Canada and the impact should Asian carp establish in those lakes, the study includes estimates of: (a) the expenditures at market values, and (b) the consumer surplus generated by major activities, based on information obtained from extant literature.

The analysis was carried out as follows:

  1. A situational overview of the study area was provided.
  2. The scenarios and available options were considered.
  3. Available information was interpreted and quantified to convert into values, whenever feasible, based on a feasible time horizon for the analysis.
  4. Information was analyzed for the biological and economic impacts for each option.
  5. The values were adjusted using the present value approach.Footnote 26

AIS can lead to significant ecosystem alterations, including general reductions in biodiversity (DFO, 2012) and accelerated extinction rates of native species. The full effects and consequences of AIS sometimes take decades to emerge (Wilson, 1992).Footnote 27 In alignment with DFO (2012),Footnote 28 this study assumes that following the arrival of Asian carp, it would take seven (7) years for the impact to be felt in the area where they are present. Therefore, the time periods considered for impact assessments begin in 2018, and are for intervals of 20 years and 50 years as the study uses 2011 as the base year.

The study extrapolated baseline values to the base year of 2011 using the inflation rate, given that the data pertained to different years. For the socio-economic impact assessment, adjustments are necessary because future losses are worth less than current losses. Money today, even in an inflation-free economy, is always worth more than money obtained in the future, because of its earning potential as well as the psychic gratification of having money now rather than tomorrow. Therefore, the discounting of future impact was performed according to the Treasury Board of Canada’s recommendation of 3%. This rate represents the social opportunity cost.Footnote 29 The discount formula used for present value is:

PV =FVt /(1+i)t

PV is the present/current value, FVt the future value in year t, and i is the discount rate.

Data Sources

The data used to develop the community profiles around the Great Lakes primarily came from Statistics Canada. The scenario followed for the study and the assumptions made were based on information derived from DFO (2012) which incorporated existing, ongoing, and new research results to inform the potential for Asian carp arrival, survival, establishment, spread and impact in the Great Lakes. As discussed in Chapter 2, while the extant literature provides very limited data on AIS for the Canadian side of the Great Lakes, where appropriate, the study used information available at relevant websites and in the literature as secondary sources of information. Moreover, where information on a particular impact was unavailable, the study used proxies based on rational judgment from the findings of studies in comparable situations with appropriate adjustment(s) as necessary, or made a qualitative assessment of the impact.

One of the major challenges encountered by the study was that the biological risk assessments expressed consequences that could not be unambiguously linked to socio-economic impact analysis. Establishing a linkage between ecological risk assessment and human risk has historically been challenging due to uncertainties in terms of the direction and the rate of change in environmental and human behavior. Therefore, in addition to results extracted from the ecological risk assessment, the study greatly benefitted from expert opinion exchanged through personal communications between a group of science experts involved in the ecological risk assessment and economists involved in the socio-economic study of the presence of Asian carp in the Great Lakes. This discourse helped to provide a defensible foundation for the socio-economic impact assessment.

Since there is no feasible way to separate out the impact from the presence of Asian carp into the Great Lakes and from other influences in the economy (e.g. climate change, urbanization), the analyses in the study were premised on scenarios both with, and without, the presence of Asian carp, holding other variables unchanged. For instance, the study projected that the reductions in native fish populations would be solely caused by Asian carp. Other changes and/or developments in the economy that might alter the native fish biomass in the Great Lakes were assumed to be absent during the period of analysis.Footnote 30

It is also important to recognize that projections of the extent and degree of impact caused by AIS are problematic because scientists rarely find opportunities to predict impact in relatively undisturbed environments. Consequently, because of the inherent uncertainties, the socio-economic impact reported in the study is mostly speculative, providing the best estimates from available research. Furthermore, since the ecological risk assessment delivered the foundation for the socio-economic assessment, the uncertainties associated with the socio-economic assessment must be greater than, or equal to, that of the ecological risk assessment.

Scope of the Study

The scope of this socio-economic study aligns with the scenario provided by the DFO (2012), particularly in terms of the impact of the presence of Asian carp, and includes:

  1. an overview of the Great Lakes;
  2. a range of estimates of the economic value of the Great Lakes to Canada;
  3. a review of relevant literature, to gauge the extensiveness of the research and data availability on the issue being addressed, and to adopt an appropriate methodology. The literature particularly focused on the types of activities considered, the methodology adopted and the results;
  4. a discussion of the methodology used in the study;
  5. a description of the baseline scenario, based on the available quantitative and qualitative information, and an attempt to reduce and/or eliminate any gaps. The baseline scenario included the current direct human use of the study area and the future trend, non-market value (e.g. ecosystem value), a profile of local demographics, and a description of the current level of protection already in place for the period of analysis chosen for the study. The baseline scenario provided a comprehensive socio-economic and ecosystem value of the study area;
  6. identification and documentation of the major activities, environmental elements, and stakeholders that would be affected by the presence of Asian carp;
  7. a description and quantification of the particular impacts that are expected to be experienced. Qualitative descriptions of the impacts were provided if they were not quantifiable and/or if no feasible proxies were available;
  8. sensitivity analyses based on discount rate and other uncertainties to be identified in the analyses; and
  9. identification of the uncertainties and shortcomings of the analysis.
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