Publication - Research publication

Management Of The Scottish Inshore Fisheries; Assessing The Options For Change

Published: 7 Jan 2015
Part of:
Marine and fisheries
ISBN:
9781785440427

An analysis of the impacts from different options for the management of the Scottish Inshore fisheries. In particular, the report provides an appraisal of scenarios related to restrictions on the use of mobile fishing gears within one and three nautical m

375 page PDF

8.9 MB

375 page PDF

8.9 MB

Contents
Management Of The Scottish Inshore Fisheries; Assessing The Options For Change
21 THE MODEL

375 page PDF

8.9 MB

21 THE MODEL

21.1 Introduction

In Sections 4 and 5 the two economic approaches of Economic Impact Analysis ( EIA) and Net Economic Value / Cost-Benefit Analysis ( NEV/ CBA) were outlined. An essential characteristic of both is the monetisation of economic concepts such as Net Economic Value, Gross Value Added ( GVA) and Full-Time Equivalents ( FTEs) so that they can be added and subtracted to identify the net effects of a policy initiative.

In order to evaluate a policy proposal, forecasts about policy impacts are required. Unfortunately most of the key forecasts are not available. As an example, there is no concrete evidence about the likelihood and speed of marine ecosystem recovery if a 0-1 or 0-3 NM restriction is implemented. Similarly we only have the informed opinion of local Fishery Officers on which to base estimates of the numbers of mobile operators who will give up fishing and the likely destinations of their licences. At a more mundane level the extra costs for those mobile operators continuing to fish but outside the restricted area is not known, neither are the associated displacement effects.

Various scenarios were created to deal with this uncertainty. These have been constructed to encapsulate the different possible policy impacts and how these might alter the outcome of the economic evaluations. As well as a sensitivity analysis, this study goes further and presents a model designed to enable users of the model to vary the assumptions themselves, produce their own sensitivity analysis and explore how changes affect the balance of estimated costs and benefits.

21.2 Economic Impact Analysis

A key element in the EIA analysis is the multipliers. These capture the direct, indirect and induced effects. In 2002, the Fraser of Allander Institute carried out extensive research into the forward and backward supply chains in the fishery sector and the resulting multipliers (Fraser of Allander, 2002). The key relationships linking employment in the sector and the resulting employment in processing and in supply are given below

Table 21.2 Employment Multipliers

Employment Effect* ( FTEs) Employment Multiplier+
Demersal 14.2 15.63 2.1
Shellfish 45 11.14 1.25
Pelagic 4 14.28 4.56
Sea 17.9 14.34 1.8
Fish Processing 12.8 14.05 2.1

The figures in the first column indicate the employment generated per £1 m output of the fish catching sector. Thus additional landings of shellfish worth £1 m would, on average, be associated with 45 full time jobs on board shellfish vessels. The figures in the second column show the associated employment in the supply of services and materials to the sector plus those employed in processing the output of that sector. The table above informs us that there would be 11.14 jobs elsewhere in the shellfish supply chain. Thus each job in the shellfish catching sector would be associated another 0.25 FTEs elsewhere. The ratio of the total jobs (56.14) to the initial employment (45) is known as the employment multiplier. Thus if a creel boat employs, on average, 1.8 men then the total number employed as a result of an extra creel boat will be 1.8*1.25 (the shellfish employment multiplier).

The multiplier for Pelagic is very high. Output per head in the catching sector is high, hence the small number of jobs created by £1m of landings. In the modern pelagic fleet a haul valued at £1m is not uncommon. Such a haul consists of 4-5million fish all of which need to be gutted and a high percentage filleted. Despite highly mechanised/automated plants the labour required is still substantial. Hence we have a high ratio of processing employment to catching sector employment.

The figure for shellfish is low because creel and pot caught langoustines, lobsters and crabs are normally live and are shipped direct to the tables and fresh markets throughout Europe and beyond. Trawled Nephrops tend to be smaller and dead on arrival in port where they are processed locally as Scampi. As a result, any move from trawl to creel is likely to reduce the shellfish employment multiplier.

In the absence of further research, for this project we are using the 1.25 multiplier for creels and divers and the average 1.8 multiplier for trawls and dredges and the demersal employment multiplier 2.1 for the developing line industry.

The Fraser of Allander estimates capture the induced effect on employment. They may overestimate employment effects if income is saved. Also, the multiplier for small areas is generally less than for large areas such Scotland as a whole, as reported in the above table. Without defining what is meant by an IFG area and extensive further research on the processing power and induced effects in each of the IFG area it is not possible to improve on the Fraser of Allander estimates for Scotland. Consequently we use the Scotland values as discussed above.

For the recreational activities the multipliers used for the IFGs are specific to the local areas (see Radford et al 2009) and cover both indirect and induced effects.

21.3 The Model

The model is designed to enable the analysis of any combination of:

  • IFG
  • Type of restriction (0-1 NM or 0-3nm)
  • Status quo scenarios
  • Policy impact scenarios
  • The timing of marine ecosystem recovery
  • Reaction of mobile operators will react to each restriction (e.g. fish outside the restricted zone, retire from fishing, convert to static gear)
  • Inclusion or exclusion of Options Value
  • Inclusion or exclusion of GPNUV

21.4 Reporting Results

The model generates results over two time horizons. The first time horizon is 20 years. This means that policy benefits or costs arising after 20 years are completely discounted. This introduces a bias because the policy costs are incurred from year 1, but some significant policy benefits (recreational and general public benefits) are conditional on ecosystem recovery. If ecosystem recovery takes 15 years, only 5 years of these benefits would be captured. The second time horizon which captures all the policy costs and benefits is unlimited. The discussion below focuses on the 20 year time horizon.

The model reports its summary results for EIA in the form of the change in FTEs generated for 1year, 10 years and 20 years ahead. Income changes were also estimated but are considered less reliable and are not reported.

The NEV estimates is the discounted flow of NEV for the whole 20 year period. The discount rate is the Treasury recommended rate of 3.5%. All figures are "real" (projected inflation is not included) and prices, in real terms, are assumed to be constant. For the Discounted Cash Flow calculations, estimates of value in years 2-9 and 11-19 are obtained by interpolation.

21.5 The Sectors and Model Assumptions

The model is split into 4 sections reflecting the four broad stakeholder groups.

21.5.1 Commercial Fishing in the Model

Within the commercial fishing section there are separate but linked sub-sections relating to nephrop trawlers, demersal trawlers, dredgers, creel boats, professional divers and line fishermen. In each case the benchmark for total activity in the sector is calculated using the current estimates of catch value within 12 NM. Although the IFG territory extends only to 6 NM, the 1 NM or 3 NM restrictions will have consequences for local fleets' revenue and costs in the 6-12 NM zone. In effect the impact boundary is the 12 NM limit and the assumption is that the proposed restrictions will have negligible impact of revenue and costs of fishing effort beyond 12 NM. The detailed catch and revenue benchmark estimates for 0-12 NM for each IFG were presented in previous sections of this report.

The following protocols and assumptions were used in the EIA and CBA/ NEV analysis of each IFG.

  • The reactions of the mobile operators (trawlers and dredgers) are defined in three options. These are to retire, to convert to creels or to continue fishing outside the zone. There were three responses which are outlined in the Table below
Response 1 ("Carry on") Response 2 ("Mix") Response 3 ("Change")
Year 1 Year 10 Year 1 Year 10 Year 1 Year 10
Trawlers Convert 5% 10% 10% 15% 15% 25%
Retire 5% 10% 7% 15% 10% 10%
Continue 90% 80% 83% 70% 75% 65%
Dredgers Convert 0% 8% 5% 5% 10% 20%
Retire 5% 5% 7% 7% 10% 10%
Continue 95% 87% 88% 88% 80% 70%
  • The impact on the mobile operators is modelled by an estimated change associated with each option. Those converting to creels were assumed to generate earnings equal to full-time creel vessels. The average capital cost of converting was calculated at £33,500. Vessels continuing were assumed to experience a 10% increase in running costs.
  • The change in the number of vessels determines the catching sector jobs lost (or gained) and, together with the multipliers discussed above, the total number of jobs lost (or gained).
  • It is necessary to assume that all relationships and therefore all ratios are constant. In the absence of specific research, this assumption is unavoidable. It is recognised that this assumption may not always be ideal. For example, vessels that leave the industry are probably less efficient than those that remain.
  • For reasons explained in Section 4, with respect to commercial activities the change in Net Economic Value approximates to the estimated change in profit, except if there is substantial unemployment in the IFG. In which case, current wage rates may overestimate the benefits from reductions in the opportunity cost of using labour on trawlers and dredgers. In practice, as reported in Section 7, fishing communities do not face exceptional unemployment problems, and in some segments recruitment problems have required the use of migrant labour.
  • It is unreasonable to believe that those made unemployed, will be unemployed in perpetuity. It is therefore assumed there is re-employment and retirement and that this initial job loss impact declines quickly and the impact in year 10 would be zero (assuming no further redundancies).
  • As explained in Section 3, it is assumed that the baseline scenario of continued decline to zero for inshore shellfish catches and remaining inshore demersal stocks is not relevant and its use would over-inflate policy benefits.
  • It is assumed that the licences and sea area vacated by trawlers and dredgers will be taken up directly or indirectly by creelers and divers. This issue is discussed further in Section 23.
  • The removal of scallop dredgers from beds close to the shore provides major opportunities for scallop hand divers. This will grow gradually partly because of a shortage of small boat with shellfishing entitlement, mitigated in part by a contraction of the part time creelers. Within 10 years the model assumes around half of the value of scallops currently caught within 1 NM or 3 NM will be landed. It is expected that less than half the number will be landed, but these are expected to be larger, less damaged and more valuable.
  • It is assumed that the inshore hand lining catch will increase from year 10. The current proportion of demersals caught within 1 and 3 NM was estimated. It was assumed that under a major transformative effect demersal inshore stocks would return to 1983 levels. These two pieces of information were used to estimate the potential value of landings within 1 and 3 NM. It was assumed static gear would take between 2% of 10% of this potential. The associated jobs and value is then calculated from the revenue generated by the activity. Pro rata adjustments were made for the other impact scenarios
  • Imposing limits should reduce gear conflict. Conflicts are not spread equally between the 1 NM and 3 NM limits nor by IFG area (see Section 16). The model thus accounts for these differences.
  • Having estimated the change in jobs, incomes and NEV (i.e. profits) for the commercial fleet, the jobs, incomes and values for sea angling and sub aqua are then extracted from the tables according to the chosen environmental and response levels. These estimates are then added to those for commercial fishing. This is explained below.

21.5.2 Recreational Sea Angling in the Model

In Section 18, we estimated the following potential economic impact on Scotland and each of the IFG's of RSA. The table below presents these results for two baseline scenarios and three possible policy impacts

RSA's Potential Economic Impact on IFGs (2013 Prices)

Area Impact Scenarios: / Status Quo Scenarios: Major Transformative Effect (50%) Some Enhanced flow (25%) Minimal Enhanced Flow (10%)
Jobs Income (£'000s) Jobs Income (£'000s) Jobs Income (£'000s)
Scotland Continued Decline to zero 2,513 £59,371 2,094 £49,476 1,843 £43,539
Stability 837.5 £19,790 419 £9,896 168 £3,958
South West Continued Decline to zero 1640 £29,668 1366 £24,724 1202 £21,756
Stability 547 £9,889 273.3 £4,945 109 £1,978
North West Continued Decline to zero 122 £2,179 101 £1,815 89 £1,597
Stability 41 £727 20.3 £363 8 £145
Outer Hebrides Continued Decline to zero 176 £3,250 146 £2,709 129 £2,384
Stability 59 £1,083 29.3 £542 12 £217
MF& NC Continued Decline to zero 257 £5,139 214 £4,283 188 £3,769
Stability 86 £1,713 42.8 £857 17 £343
Orkney Continued Decline to zero 69 £1,263 58 £1,053 51 £926
Stability 23 £421 11.5 £211 5 £84
East Coast Continued Decline to zero 822 £20,173 685 £16,811 603 £14,794
Stability 274 £6,724 137.0 £3,363 55 £1,345
Shetland Continued Decline to zero 75 £1,393 63 £1,160 55 £1,022
Stability 25 £465 12.5 £232 5 £93

We also estimated the potential contribution to Scotland's and the IFGs NEV as described in the table below. These "user values" include consumers' surplus and option values.

Area Impact Scenarios: / Status Quo Scenarios: Major Transformative Effect (50%) Some Enhanced Flow (25%) Minimal Enhanced Flow (10%)
Scotland Continued Decline to zero £32,200,460 £26,993,327 £23,869,047
Stability £10,414,266 £5,207,133 £2,082,853
South West Continued Decline to zero £16,084,906 £13,481,723 £11,919,814
Stability £5,206,365 £2,603,182 £1,041,273
North West Continued Decline to zero £1,453,189 £1,218,057 £1,076,977
Stability £470,265 £235,133 £94,053
Outer Hebrides Continued Decline to zero £1,728,187 £1,448,505 £1,280,696
Stability £559,364 £279,682 £111,873
MFNC Continued Decline to zero £3,298,997 £2,765,797 £2,445,877
Stability £1,066,400 £533,200 £213,280
Orkney Continued Decline to zero £765,277 £641,444 £567,143
Stability £247,667 £123,834 £49,533
East Coast Continued Decline to zero £8,040,907 £6,742,948 £5,964,173
Stability £2,595,917 £1,297,958 £519,183
Shetland Continued Decline to zero £829,011 £694,864 £614,377
Stability £268,293 £134,146 £53,659

In considering the time frame it is clear that the benthic environment and stocks will take time to recover. In Year 1 the additional RSA will be minimal but it is then expected to grow in line with the recovery. However, we also allow for two different recovery rates; a 10 year and a 20 year recovery.

As far as the sea angler is concerned the major advantage of limit imposition is to protect nursery areas that will allow the development of a sizeable stock of mature fish. It is possible that the commercial sector will exploit these stocks before sea anglers have their opportunity. This is less likely than in the past. Compared with the early 1980's there is greater control over the number of vessels, the gear they can use, number of days they can fish and the amount of fish they can catch.

Whilst the biology is complex, a rough guide is the bigger the area the bigger the likelihood of success. We have allowed for this by assuming the options value for the 1 NM to be one third of the value assessed above. For sea angling we have assumed any growth in sea angling with a 1 NM limit to be 50% of that assessed in Section18 (which applies to the 3 NM area). Again it is easy to adjust for different assumptions

21.5.3 Recreational Diving in the Model

In Section 18 we estimated the following potential economic impact on Scotland and each of the IFG's of RSA. As it transpires the continued decline scenario was not relevant for RD, because stocks of fish or other living organisms are not a necessary ingredient of RD

Area Impact Scenarios: / Status Quo Scenarios: Major Transformative Effect (20%) Some Enhanced flow (10%) Minimal Enhanced Flow (5%)
Jobs Income) Jobs Income Jobs Income
Scotland Continued Decline to zero Not Relevant Not Relevant Not Relevant
Stability 85 £1,998,000 42.3 £999,000 21.2 £500,000
South West Continued Decline to zero Not Relevant Not Relevant Not Relevant
Stability 52.2 £883,377 26.1 £441,688 13.05 £220,844
North West Continued Decline to zero Not Relevant Not Relevant Not Relevant
Stability 4.8 £79,995 2.4 £39,997 1.2 £19,999
Outer Hebrides Continued Decline to zero Not Relevant Not Relevant Not Relevant
Stability 4.8 £82,102 2.4 £41,051 1.2 £20,526
MF& NC Continued Decline to zero Not Relevant Not Relevant Not Relevant
Stability 11 £206,076 5.5 £103,038 2.75 £51,519
Orkney Continued Decline to zero Not Relevant Not Relevant Not Relevant
Stability 6 £101,683 3 £50,842 1.5 £25,421
East Coast Continued Decline to zero Not Relevant Not Relevant Not Relevant
Stability 27.6 £635,805 13.8 £317,903 6.9 £158,951
Shetland Continued Decline to zero Not Relevant Not Relevant Not Relevant
Stability 0.2 £5,081 0.1 £2,541 0.05 £1,270

We also estimated the potential contribution to Scotland's and the IFGs NEV as described in the table below. These "user values" include consumers' surplus and option values.

RDs Potential Impact Net Economic Values ( IFG Areas

Area Impact Scenarios: / Status Quo Scenarios: Major Transformative Effect (20%) Some Enhanced Flow (10%) Minimal Enhanced Flow (5%)
Scotland Continued Decline to zero Not Relevant Not Relevant Not Relevant
Stability £1,089,971 £544,985 £272,493
South West Continued Decline to zero Not Relevant Not Relevant Not Relevant
Stability £55,360 £27,680 £13,839.90
North West Continued Decline to zero Not Relevant Not Relevant Not Relevant
Stability £45,286 £22,643 £11,321.55
Outer Hebrides Continued Decline to zero Not Relevant Not Relevant Not Relevant
Stability £137,096 £68,548 £34,274.10
MFNC Continued Decline to zero Not Relevant Not Relevant Not Relevant
Stability £63,918 £31,959 £15,979.35
Orkney Continued Decline to zero Not Relevant Not Relevant Not Relevant
Stability £262,291 £131,146 £65,572.81
East Coast Continued Decline to zero Not Relevant Not Relevant Not Relevant
Stability £3,134 £1,567 £783.42
Shetland Continued Decline to zero Not Relevant Not Relevant Not Relevant
Stability £268,293 £134,146 £53,659

For sub aqua we assume that with increased water clarity there will be a boost immediately and then growth. We estimate that initial increase will be 25% of the current activity and that the 3 NM gear restriction will produce the values above and that the 1 NM ban will be 50% as effective in helping sub-aqua grow and in the satisfaction that brings. As argued previously the options value associated with Sub-Aqua is probably zero for both 1 NM and 3 NM bans.

21.5.4 General Public preferences.

General Public Potential Net Economic Values

Impact Scenarios:21.5.4.1 / Status Quo Scenarios: Major Transformative Effect (£'000s) Some Enhanced Flow (£'000s) Minimal Enhanced (£'000s)
Scotland Continued Decline to zero £54,600 £54,600 £54,600
Stability £6,600 £6,600 £6,600
South West Continued Decline to zero £24,352 £24,352 £24,352
Stability £2,944 £2,944 £2,944
North West Continued Decline to zero £440 £440 £440
Stability £53 £53 £53
Outer Hebrides Continued Decline to zero £285 £285 £285
Stability £34 £34 £34
MFNC Continued Decline to zero £3,211 £3,211 £3,211
Stability £388 £388 £388
Orkney Continued Decline to zero £207 £207 £207
Stability £25 £25 £25
East Coast Continued Decline to zero £25,867 £25,867 £25,867
Stability £3,127 £3,127 £3,127
Shetland Continued Decline to zero £237 £237 £237
Stability £29 £29 £29

The value placed by the public to prevent further loss of biodiversity was £48m and only £6.6m of an improved marine environment. It was argued that there was probably significant scope insensitivity hence the values do not change across the rows. The status quo scenario is therefore quite crucial.

21.6 Running the Model

The Figure below shows the front page of the model. As can be seen a number of assumptions have been made about profit rates, the typical number of FTEs on each type of vessel, fuel costs, wage rates etc.

At this level the user can modify any of the parameters and select scenarios. Entry will generate output, specifically estimates of Jobs (the Impact) and of the Net Economic Value. The actual calculations occur in Sheet2 for the basic aggregation and DCF for the discounted cash flow calculations of the NEV. The sheet marked recreation contains the basic data on Angling and Sub-Aqua.

In an attempt to capture the main competing views a total of 72 permutations (36 for each limit choice) are available.

Fig 1: Section of Front Page of the Worksheet

Fig 1: Section of Front Page of the Worksheet

Fig 2: Key data on scenarios found on front page of the model.

Fig 2: Key data on scenarios found on front page of the model. These can also be amended


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