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

Chapter 8: Conclusion

The goal of this study was to provide a detailed socio-economic impact assessment of the potential impacts that would stem from the presence of Asian carp in the Great Lakes basin. The study, and in particular, the predicted impacts that are provided, is intended to complement the ecological risk assessment in attempting to quantify the socio-economic impact of a potential Asian carp establishment in the Great Lakes.

While additional secondary source information was used, the report heavily relied on the bi-national (Canada -US) ecological risk assessment to describe the Asian carp threat to the Great Lakes led by CEARA, DFO. The ecological risk assessment report, including the supplementary reports, provided a solid and defensible foundation for assessing the socio-economic impacts that would result from the presence of Asian carp in the Great Lakes basin.

The study estimated that the value of economic contributions of activities in and around the Great Lakes basin that are closely linked to the lakes themselves to the Canadian economy is in the amount of $13.8 billion dollars. Of that total, expenditures made as well as imputed values/prices for the activities in and around the Great Lakes comprised $13.4 billion (96.9%), while consumer surplus constituted 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. The intrinsic values of ecosystem health and biodiversity are, however, hard to define, because they are much more intangible than other benefits, such as commercial fish harvesting (Krantzberg et al., 2008, 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, it has been stated that the 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 to the economy as a whole. Freshwater fisheries have contributed substantially to preserving traditional aboriginal lifestyles in the study region. Socially, the Great Lakes beaches and shorelines provide a “sense of place” and a unique source of community pride and are the key public perception measures of environmental quality. The Great Lakes also provide opportunities for research and educational activities that result in a better understanding of the ecology.

The study estimated that, starting in 2018, the total present (economic) values of the activities (commercial fishing, recreational fishing, recreational boating, wildlife viewing, and the beaches and lakefront use) in 20 years and 50 years were $179 billion and $390 billion, respectively, which may be affected due to the presence of Asian carp in the Great Lakes basin (see Table 13 and Annex 6 for Heat-Maps on risk and uncertainties^{Footnote 116}).

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

Moreover, the study found that Asian carp would likely have either negligible or no impact on recreational hunting, water use, commercial navigation, and oil and natural gas extraction activities.

Finally, the study recognized that during the period 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. Therefore, the net economic impacts might 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.

As discussed in Chapter 4, the estimations of the economic contributions of the Great Lakes discussed in this report should be viewed as conservative estimates. The study attempted to ensure this by adjusting estimation variables where significant variations and uncertainties existed, and by using reasonable proxies based on literature review and experts’ opinions.

It was also noted that 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 have also arisen due to considerations of whether to include both Canada and the US, and secondary multiplier effects (indirect and induced) in appraising the baseline values as well as the impacts.

The study suffered from some limitations due to a lack of information, which focuses the areas for further research. While collecting and analyzing information for the purpose of this study, the most notable obstacles/limitations identified are:

1. Lack of Great Lakes specific information by activity;
2. The values by activity predicted in 20 and 50 years are based on the values by activity for the most recent year assuming that the values will prevail for the time period covered if everything else is remaining the same. In reality economic conditions or values (e.g. commercial fishing, recreational fishing) may change rapidly over time. Moreover, the presence of overlaps in some activities (e.g. recreational fishing and recreational boating) and/or complementarity and substitutability of goods/activities, predictions based on such specific (equilibrium) conditions may inflict upward and/or downward biases.
3. Lack of a more explicit linkage between the ecological consequences proposed in DFO (2012) and the socio-economic factors proposed in the current document. The study assumed linearity between ecological and socio-economic impact and uncertainty and drew conclusions based on the present values of the activities and cited the verbal ranking of the results from DFO (2012). A revision of the study based on a quantitative scale of ecological consequence that could be linked to socio-economic consequences would provide a more accurate socio-economic impact assessment in a quantitative manner.
4. Lack of adequate information to provide an incremental/marginal analysis showing a quantitative estimate or a range of estimates of the socio-economic impact of the presence of Asian carp.

These limitations have been mitigated to some extent through the adoption of assumptions and application of proxies from the extant literature, with appropriate adjustments as and when needed, within the existing time constraints. However, the appropriate remedy for these limitations 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 (including willingness to pay and subsistence harvests) being generated by activity and by lake. 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.