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

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

• Executive Summary
• Introduction
  • Objectives of the Study
  • Organization of the Study
• Chapter 1: A Brief Overview of the Study Area
  • Socio-Demographic Profile
  • A Brief Overview of the Great Lakes
  • AIS Threats to the Great Lakes
• Chapter 2: Literature Review
• Chapter 3: Methodology Adopted
  • Data Sources
  • Scope of the Study
• Chapter 4 - Baseline Values of Activities around the Great Lakes
  • Water Use
  • Raw Water Use
  • Industrial Water
  • Agricultural Water
  • Commercial Fishing
  • Recreational Fishing
  • Recreational Hunting
  • Recreational Boating
  • Beaches and Lakefront Use
  • Wildlife Viewing
  • Commercial Navigation
  • Oil and Gas
  • Ecosystem Services
  • Option Value
  • Non-Use Value
  • Aggregated Economic Contribution
  • Limitations/Gaps Identified in the Study
• Chapter 5: Social and Cultural Values of the Great Lakes
• Chapter 6: Scenario Based on Biological Risk Assessment
• Chapter 7: Socio-Economic Impact Assessment
  • Commercial Fishing
  • Recreational Fishing
  • Recreational Boating
  • Wildlife Viewing
  • Beaches and Lakefront Use
  • Other Sectors
  • Ecosystem Services
  • Social and Cultural Impact
• Chapter 8: Conclusion
• Bibliography
• Matrix 1: Total Economic Valuation Flowchart
• Definitions
• Matrix 2: The Great Lakes - Total Economic Valuation Flowchart
• Matrix 3: Summary of Empirical Studies Used for Valuation of Economic Activities in the Great Lakes basin
• Annex 1: Selected Socio-Economic Indicators for Ontario
• Annex 2: Aboriginal identity population by Sexes, Age Groups, Median Age for Ontario and Canada
• Annex 3: Estimated Water Consumption and Values by Sector, Lake and Province for the Year 2008
• Annex 4: Landings and Landed Values of Commercial fisheries in the Great Lakes by Species and Lake in 2011
• Annex 5: Number of Fish Harvested All Anglers Who Fished on the Great Lakes, by Species and Lake, 2005
• Annex 6: Heat-Map - Commercial and Recreational Fishing for 20 and 50 Years

Executive Summary

“Socio-Economic Impact of the Presence of Asian carp in the Great Lakes Basin” provides a detailed socio-economic analysis of the potential economic impact to Canada of the establishment of Asian carp in the Great Lakes.

The Great Lakes – Superior, Huron, Michigan, Erie and Ontario - are the world's largest freshwater system, with 20% of the world’s fresh surface water and 95% of North America’s fresh surface water. With the exception of Lake Michigan, they straddle the Canada-United States border, and form a basin that is home to more than 11 million people, including 98% of Ontario’s residents and over 60 aboriginal communities (Ontario Ministry of Natural Resources, 2010).

The Great Lakes are an important source of drinking water and support fish, wildlife, plants, thousands of wetlands and a variety of landscapes. They are home to world-class commercial and recreational fisheries, numerous recreational activities and commercial transportation, and provide both tangible and intangible benefits to residents of Canada and of the United States.

The Lakes and their watersheds are facing threats from Asian carp, an Aquatic Invasive Species (AIS) in North America that is responsible for significant impacts on native species and associated human activities, through ecological damage, habitat alterations and direct competition for resources. This threat has attracted the attention of the governments of Canada, the United States, the province of Ontario, a number of states, as well as First Nations, the general public, industry associations and non-governmental environmental organizations.

In 2010, the Government of Canada renewed $4 million in funding to facilitate an AIS monitoring system and to meet AIS assessment needs, such as research funding, biological risk assessment, and regulatory policy development. In 2012, Fisheries and Oceans Canada (DFO) received $17.5 million over five years to protect the Great Lakes from Asian carp, under its Great Lakes Asian carp Program. This study is a result of the risk assessment initiative.

DFO undertook the study to supplement the bi-national (Canada -US) Ecological Risk Assessment (DFO, 2012) to address the Asian carp threat to the Great Lakes, which was led by the Centre of Expertise for Aquatic Risk Assessment, DFO. This study also supports the AIS objectives under DFO’s “Sustainable Fisheries and Aquaculture” strategic outcome.

The methodology adopted for the study’s analysis is the Total Economic Valuation technique. This methodology has been used for both valuation of activities on the Canadian side of the Great Lakes basin, and for Net Present Valuation for discounting purposes. In order to estimate the economic values of identified activities, the study arrived at best estimates of the expenditures made and of the consumer surplus generated by the activities in Canada. For the purposes of estimating the impact to Canada, the study has excluded Lake Michigan. In alignment with DFO (2012), it was assumed that following the arrival of Asian carp, it would take 7 years for the impact to emerge in areas where the carp were present. Therefore, as the socio-economic study uses 2011 as the base year, it uses an adjusted base of 2018 from which to consider the 20 year and 50 year impacts.

The study used secondary source information, and was benefitted greatly from: (i) community profiles around the Great Lakes, primarily from Statistics Canada; (ii) the bi-national Ecological Risk Assessment (DFO, 2012), including supplementary reports; (iii) a workshop held on March 29, 2012, jointly organized by the Great Lakes Fisheries Commission and Policy and Economics, Central and Arctic Region, DFO;^{Footnote 1} and (iv) expert opinion exchanged between a group of science experts involved in the Ecological Risk Assessment and economists involved in analyzing this socio-economic study of the presence of Asian carp in the Great Lakes.

In selecting the scenario for the impact assessment, the study followed DFO (2012) and assumed that in the absence of additional preventive measures, Asian carp will arrive, establish populations, survive, and spread throughout the Great Lakes, due to the availability of suitable food, thermal and spawning habitats, and the high productivity of embayments in the Great Lakes basin. Since there is no feasible way to separate out the impact of an introduction of Asian carp into the Great Lakes from other influences in the economy such as urbanization and climate change, the analyses in the study were premised on scenarios both with, and without, the presence of Asian carp, holding other variables unchanged.

Based on a literature review, the study identified the following major activities for the development of the baseline: (i) water use; (ii) commercial fishing; (iii) recreational fishing; (iv) recreational hunting; (v) recreational boating; (vi) beaches and lakefront use; (vii) wildlife viewing; and (viii) commercial navigation. It estimated the annual value of economic contribution of these activities in and around the Great Lakes basin at $13.8 billion dollars (see the attached matrix). Of that total, expenditures made and imputed values/prices for these activities comprised $13.4 billion (96.9%), while consumer surplus made up the remaining $0.4 billion (3.1%).

The study recognized that the Great Lakes basin provides invaluable services to society through maintaining ecosystem health and biodiversity. Those intrinsic values are, however, difficult to quantify, because they are much more intangible than other benefits, such as commercial fish harvesting (Krantzberg et al., 2006). The study found a similar challenge in quantitatively capturing the benefits of option and non-use values based on the existing set of information. However, these total non-use values might fall in the range of 60% - 80% of the total economic value (Freeman, 1979).

The Great Lakes provide considerable subsistence, social, cultural, and spiritual benefits to the people residing in the region, and considerable benefit to the economy as a whole. Freshwater fisheries have contributed substantially to preserving traditional aboriginal life-styles in the study region. Socially, the Lakes’ beaches and shorelines provide a “sense of place” and unique source of community pride, and serve as key measures for public perceptions of environmental quality. The Lakes also provide opportunities for research and educational activities that result in a better understanding of the ecology.

The study estimated that the total present (economic) values of commercial fishing, recreational fishing, recreational boating, wildlife viewing, and beaches and lakefront use were $179 billion and $390 billion, in 20 years and 50 years, respectively, starting in 2018 (see Table below).^{Footnote 2}

Source: Fisheries and Oceans Canada staff calculation, Policy and Economics, Central and Arctic Region.

The study examined the risks presented by Asian carp to these values and found that the establishment of Asian carp in the Great Lakes would cause moderate to high damage to commercial fishing, recreational fishing, recreational boating, wildlife viewing, and the beaches and lakefront use sectors/activities during the periods covered, with the exception of the 20 year period for Lake Superior, where the damage would be low to moderate. Asian carp would likely have either negligible or no impact on recreational hunting, water use, commercial navigation, and oil and natural gas extraction activities.

Over time, the introduction of Asian carp to the Great Lakes basin could change the domination of lake ecosystems from native fish species to Asian carp, with the potential to damage the public image of these lakes regionally, nationally and internationally and to also harm the well-being of residents living close to this unique natural resource. The introduction of Asian carp species would damage subsistence harvests from the Great Lakes and reduce the social, cultural and spiritual values of the lakes and of lake-related activities. Quantitative assessments of these impacts, however, are not feasible due to a lack of pertinent information.

During the periods considered, there could be factors in the economy at work that might create counteracting forces on the impacts of Asian carp on communities, businesses, and individuals in the study area. Therefore, the net economic impacts could be counterbalanced at the regional and national levels, while remaining significant for the stakeholders (e.g. communities, harvesters, users), when taking into account the (re)distribution of income and employment as a consequence of change in the scale of activities in and around the Great Lakes basin.

The baseline values generated by activities in and around the Great Lakes basin should not be directly compared with those provided in the extant literature, because of differences in methodology followed by different studies. Methodologies varied in terms of scope, estimation procedures, time periods considered, and industries covered. Variances in estimations also arose due to considerations of whether to include both Canada and the US, and to secondary multiplier effects (indirect and induced) in appraising the baseline values, as well as the impacts.

The study had some limitations due to a lack of information. The most notable obstacles were: (i) lack of Great Lakes’ specific information by activity; (ii) forecasted values in 20 and 50 years were based on the values by activity for the most recent year assuming that the values would prevail for the time period covered if everything else remains the same; (iii) lack of a quantitative scale of ecological consequence that could directly link between ecological and socio-economic impacts, which could be applied to assess socio-economic impacts more accurately in a quantitative manner; and (iv) lack of adequate information to provide an incremental analysis showing a quantitative estimate or a range of estimates of the socio-economic impact of the presence of Asian carp.

These limitations were somewhat mitigated through the adoption of assumptions and the application of proxies from the extant literature, with suitable adjustments within the existing time constraints. However, the appropriate remedy would be further research. For example, in order to have a proper assessment of baseline value(s), a possible next step might be to undertake a comprehensive survey in the study area to obtain values being generated by activity and by lake (including willingness to pay and subsistence harvests). Similarly, for forecasting, estimation methodologies such as Computable General Equilibrium model, which try to identify parameters important to a decision or set of decisions in part to reflect welfare changes from complementarity and substitutability of key goods, may mitigate biases associated with forecasting.