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Framework for integrating socio-economic analysis in the marine protected areas designation process

Framework for integrating socio-economic analysis in the marine protected areas designation process

Framework for integrating socio-economic analysis in the marine protected areas designation process (PDF 1.2 MB)

Foreword

The Framework for Integrating Socio-Economic Analysis in the Marine Protected Areas Designation Process outlines the national guidance for assessing the socio-economic impact of designating Oceans Act Marine Protected Areas (MPAs). It is based on the Marine Planning and Conservation (MPC) directorate’s process for establishing new Marine Protected AreasFootnote 1 and incorporates regional experiences in conducting such analyses. In addition, the Framework also draws on experiences implementing regulatory initiatives under other Acts administered by Fisheries and Oceans Canada (DFO). Every effort was made to develop a Framework that is consistent across the Department and adheres to the basic principles of Cost-Benefit Analysis (CBA).

The Framework has been aligned with the federal regulatory policy encapsulated in the Cabinet Directive on Regulations (CDR) and the accompanying policy and guidance documents developed by Treasury Board of Canada Secretariat (TBS). This is a living document and will be updated as necessary by DFO to incorporate any significant changes that may be needed as the MPA designation process is updated. Finally, as work progresses on MPA network design and the associated socio-economic analysis, appropriate updates will be undertaken.

This Framework was developed in collaboration with all the DFO regional economic analysis groupsFootnote 2 responsible for departmental economic analyses.

Table of contents

Acronyms
AOI(s)
Area(s) of interest
AV
Annualized value
CBA
Cost-benefit analysis
CDR
Cabinet Directive on Regulation
DFO
Fisheries and Oceans Canada
EGS
Ecosystem goods and services
GDP
Gross domestic product
GIC
Governor in Council
HOTO
Health of the Oceans
MPC
Marine Planning and Conservation Directorate
LQ
Location Quotient
MA
Millennium Ecosystem Assessment
MO(s)
Ministerial Order(s)
MPA(s)
Marine Protected Area(s)
OAP
Oceans Action Plan
PV
Present value
RIAS
Regulatory Impact Analysis Statement
SA(s)
Study Area(s)
SEOA-AOI
Socio-Economic Overview and Assessment of the Area of Interest
TBS
Treasury Board of Canada Secretariat
TEEB
The Economics of Ecosystem and Biodiversity
UK NEA
United Kingdom National Ecosystem Assessment
UNEP-WCMC
United Nations Environment Program’s World Conservation Monitoring Centre

1.0 Introduction

In 1997 the Oceans Act came into force, giving authority to the Minister of Fisheries and Oceans to establish by regulation Marine Protected Areas (MPAs) for the conservation and protection of one or more of the following:

The Oceans Act was followed by the comprehensive Canada’s Oceans Strategy in 2002.  As part of the implementation of the Oceans Strategy, the Government of Canada launched the Oceans Action Plan (OAP) in 2005 in an effort to coordinate and implement oceans activities, and to provide for the sustainable development and management of Canadian oceans. One of the key elements of the OAP is the Health of the Oceans (HOTO) initiative, which identifies several activities to maintain healthy and productive ocean ecosystems and allow Canadians and Indigenous communities to realize the full economic, environmental, cultural, and recreational benefits that oceans have to offer. Under HOTO, key initiatives included the development of a Federal Marine Protected Areas Strategy, and development of the National Framework for Canada’s Network of Marine Protected Areas (2011). The national MPA Network Framework provides strategic direction for the design of a national network of MPAs that will be composed of a number of bioregional networks. The Framework was approved in principle by the Canadian Council of Fisheries and Aquaculture Ministers in 2011.

Marine Protected Areas have since been established through Governor in Council (GiC) regulations – hereinafter referred to as ‘MPA regulations’. However, as part of its plan to meet Canada’s marine conservation targets, in 2017 the Minister of Fisheries and Oceans tabled a Bill to amend the Oceans Act. The Bill received Royal Assent in 2019, introducing, amongst other amendments, a new way for establishing MPAs through Ministerial Order (MO) – hereinafter referred to as MO MPAs.

Recognizing that achieving sustainability in the harvest of living ocean resources ultimately depends on healthy, productive ecosystems, the Government of Canada works with other countries to address concerns about the marine environment. Internationally, Canada made a commitment to establish a network of MPAs at the 2002 World Summit on Sustainable Development, and in the 2004 United Nations Convention on Biological Diversity Program on protected areas. In addition, the Government of Canada has demonstrated its commitment by endorsing conventions that pursue the goals of conservation and protection, including the Global Programme of Action for the Protection of the Marine Environment from Land-Based Activities.

1.1 Scope of the Framework

The establishment of an MPA requires a cost benefit analysis (CBA) as part of the federal regulatory analysis process set out by the Treasury Board of Canada Secretariat (TBS). This process applies both to MPA regulations and MO. Meeting this requirement is the primary focus of this Framework for Integrating Socio-Economic Analysis in the Marine Protected Areas Designation Process (henceforth referred to as the Framework). The process to establish new MPAsFootnote 3 identifies the stages in the development of MPA regulations where socio-economic analysis is particularly useful to inform the process. In order to address client needs in a consistent and efficient manner, the Framework identifies three key points in the MPA designation process where economic information may be required:

The Framework then describes the scope and content of the following socio-economic reports corresponding to each stage. While there may be some variation in scope, the reports are common to both MPA regulations and MO processes. As the content of the socio-economic analysis for the AOIs and the SAs would be similar, the framework does not differentiate between the guidance for the AOIs and SAs.

The socio-economic reports mentioned above required as part of either an internal or external process. The CBA-MPA report is a required product for establishment of the regulation, and its content is driven by TBS policy and guidance on regulations. It cannot be completed until the final boundaries of the MPA and regulatory management measures are known. The SEOA-AOI report is more flexible and it is optional from a regulatory point of view. However, it is important to note that the flexibility for this report relates more to the decision to undertake the assessment and the time required to complete the report rather than the scope and purpose of this document as outlined above. The decision of whether the SEOA-AOI report will be developed or not will be taken in consultation between the MPC directorate and the regional economic analysis group. The structure and timing suggested in the framework for this document should serve as the default approach, which will be assumed throughout this document. However, the regional MPC and the regional economic analysis group may negotiate alternative work plans as appropriate in any given case.

The structure and scope of the socio-economic documents suggested in this Framework was developed in consultation with MPC in order to:

The SEOA-AOI report provides background information to conduct the incremental impact assessment in the CBA-MPAreportFootnote 8 once the regulatory intent for the proposed MPA GiC Regulations or MO has been developed. Furthermore, the CBA-MPA report provides information to fulfil the Cabinet Directive on Regulation (CDR)Footnote 9 requirements for the RIAS. The CBA-MPA report represents one part of the advice to inform decision makers during the MPA designation process, along with the ecological assessments and results of the consultations with stakeholders and other interested and affected parties, including Indigenous peoples.

It is important to emphasize that the term socio-economic analysisFootnote 10 is used in this Framework to refer to the analysis of incremental costs and benefits of regulatory requirements that affect the economic welfare of Canadians and Canada’s economic activity and the potential distributional impacts of these policies.

1.2 Purpose of the Framework

The Framework has been developed in order to support integrated decision making and reporting within DFO, with a nationally-consistent analytical approach. It presents guidelines and principles for conducting socio-economic analysis to support the MPA designation process and meet the requirements of the CDR. The Framework is intended for use by economists, and provides guidance on processes for developing an analysis (including roles and responsibilities) as well as specific technical guidance for the socio-economic analysis required for MPA designation. To the extent that it represents a companion piece to the process for establishing new, or amending existing, MPAs, its contents are also of interest to MPA program staff.

In this framework, economists are provided with the following guidance materials:

1.3 Structure of the Framework

Section 1 outlined the purpose and scope of the Framework. Section 2 provides procedural guidance, illustrating how and where socio-economic analysis fits into the MPA designation process. This section begins by outlining the MPA designation process for both GiC MPA regulations and MOs, while highlighting the linkages to socio-economic analysis throughout. This is followed by outlining the role socio-economic analysis plays in policy analysis and highlights the usefulness of the information generated through the socio-economic analysis for decision making. Next, a description is provided of the guiding principles for socio-economic analysis that influenced the development of the Framework. Section 3 provides a description of the socio-economic documents that will be developed in support of the MPA designation, including the socio-economic components of the regulatory documents required under the CDR; followed by a discussion of the review and publication of the socio-economic reports. Finally, section 4 focuses on the more technical aspects, based on TBS requirements for conducting the socio-economic analyses in support of the regulatory MPA designation process.

2.0 Context and principles of analysis

This section describes the MPA designation processes, both for MPA GiC regulations and MOs. The aim of this section is to illustrate the relevance of socio-economic analysis and to highlight the required inputs to the analysis that depend on the work of scientists and MPA managers/practitioners. Principles to guide overall scope and approach are also presented.

2.1 Overview of the MPA designation and management process

The amendments to the Ocean Act in 2019 allow for the establishment of MPAs either through GiC regulations or MO. The purpose of establishing a MPA by MO is to allow for interim protection of an area until a more permanent measure, such as a GiC regulation, is implemented. This process is often referred to as “freezing the footprint”. The designation of an MPA by MO can (but does not have to) precede a GiC regulation, however, this is not a mandatory requirement for the establishment of an MPA through GiC regulations. Further, as the validity of the MO is five years, the MO will need to either be replaced by a GiC MPA regulation or repealed.  Figure 1a outlines the steps of a MPA designation and management process through GiC regulations, whereas Figure 1b outlines the steps of a MPA designation process through a MO. Based on information provided by MPC, five steps are followed throughout a GiC MPA designation process (Figure 1a), and three steps are followed for a MO MPA (Figure 1b).

Figure 1a: Process to establish and manage Oceans Act MPAs by GiC regulations

MPA designation Process

Source: Marine Planning and Conservation Directorate

Figure 1a long description

Figure 1a illustrates the five step process used to establish and manage Oceans Act MPAs through Governor in Council (GiC) regulations.

Step 1 is the pre-panning step. It involves identifying ecologically and biologically important areas, ideally from conservation networks; gathering existing or preliminary information on the site; and initiating preliminary dialogues with stakeholders and partners. The outcome of Step 1 is the selection and the announcement of the AOI.

Step 2 is the feasibility assessment and policy development step. It involves conducting biophysical, socio-economic, traditional knowledge overviews and risk assessments; developing the proposed boundaries, conservation objectives, and protection measures (i.e. regulatory intent); establishing an Advisory Committee; and consulting with interested or affected parties. The outcome of Step 2 is a decision to proceed with the regulatory process.

Step 3 is the regulatory development step. It involves developing a draft for the MPA regulations and associated regulatory documents; pre-publishing the MPA regulations in Canada Gazette Part I for 30-day public comment; publication in Canada Gazette Part II, as well as registration and final MPA designation. The outcome of Step 3 is therefore the MPA designation.

Step 4 involves MPA management. During this step, the Advisory Committee construct is adjusted to support ongoing management efforts; compliance, education, and outreach materials are developed; monitoring and management plans are created, as well as surveillance and enforcement approaches. The outcome of Step 4 is developing a management approach for the MPA.

Step 5 involves the MPA ongoing management. During this step, the MPA progress is evaluated against its conservation objectives; management and monitoring plans are implemented; the site progress is reported; and the surveillance and enforcement approach is implemented. The outcome of Step 5 is the implementation of the management approach.

Consultation and engagement occurs throughout all five steps. Adaptive management measures means measures are reassessed and adapted as necessary.

Figure 1b: Process to establish Oceans Act MPAs by MO

MPA designation Process

Source: Marine Planning and Conservation Directorate

Figure 1b long description

Figure 1b illustrates the three step process used to establish MPAs through Ministerial Order under the Oceans Act.

Step 1 is the pre-panning step. During this step, ecologically-important areas facing an immediate threat are identified and basic scientific, economic, social, and cultural information and data on the study area are collected. Meanwhile, partners and stakeholders are identified, and preliminary dialogue occurs. All ongoing activities occurring within the study area are identified. The outcome of Step 1 is the selection and the announcement of the Study Area.

Step 2 is the analysis and policy development step. During this step, activities within the study area are analyzed to develop a list of ongoing and prohibited activities for the MPA, while feedback is gathered through consultation with partners and stakeholders. Further, continued dialogue with partners is undertaken to inform the socio-economic review and support decision-making on the boundaries, conservation objectives, and conservation measures for the Ministerial Order MPA. The outcome of Step 2 is a decision to proceed with the regulatory process.

Step 3 is the Ministerial Order regulatory development step. It involves developing regulatory documents (Regulations, Regulatory Impact Analysis Statement). During this step, Canadians have the opportunity to comment on the proposed MPA during a public comment period following the pre-publication of the proposed Ministerial Order MPA Regulations in Canada Gazette, Part I. Finally, the MPA is designated and the final Ministerial Order MPA Regulations are published in Canada Gazette, Part II. The outcome of Step 3 is therefore the Ministerial Order MPA designation.

Consultation and engagement occurs throughout all three steps.

Following MPA establishment by Ministerial Order, the establishment process is reinitiated at the Feasibility Assessment and Policy Development step of the Governor-in-Council regulatory process.

Additional analysis is conducted to build upon information collected during the Ministerial Order process, including the refinement of the site’s proposed boundary, conservation objectives, and conservation measures using science and consultation. Biophysical, socio-economic, resource assessments, and Inuit and Indigenous knowledge studies, continue and support the determination of an appropriate long-term conservation tool. When this includes a decision to permanently establish the MPA under the Oceans Act, the Ministerial Order MPA goes through a second Regulatory Development step to establish the site under Governor-in-Council regulations.

The need for socio-economic analysis described in the Framework stems primarily from the requirement to fulfill the regulatory development process as outlined under the CDR. However, the requirement for socio-economic analysis is highlighted throughout the MPA designation process, for both the GiC MPA regulations and the MO. Further, as shown in Figure 1a and 1b, consultation and engagement occurs throughout the MPA designation and management process.

MPAs established by GiC regulations go through a five step establishment and adaptive management process (Figure 1a). As such, in the regulatory process for GiC MPA establishment, consideration is given not only to regulatory development, but also to the implementation, monitoring, evaluation, and review of regulations. The five steps of the MPA establishment and management process are described below and represented in Figure 1a:

The adaptive management approach creates a responsive environment that improves the effectiveness, efficiency, and accountability of the regulatory system to support the government's commitment to protect 30 per cent of the ocean by 2030.

Marine Protected Areas designation through MO follows a three step approach (Figure 1b), similar to the one outlined above. While management efforts for MO MPAs would be undertaken to ensure that the conservation objectives are met, these efforts would be high level and would not require any economic analysis. Therefore, the framework does not discuss them any further. In addition, unlike GiC MPA regulations, MO MPAs have a sunset clause of five years – that is they are only enforceable for a period of five years after the coming into force date. After this period, when the MO MPAs are either repealed or replaced by a GiC MPA regulation and would need to follow the MPA designation process outlined in Figure 1a.

2.2 Socio-economic linkages with the MPA designation process

The SEOA-AOI report is developed between Step 1 and 2 of the MPA designation process for both GiC MPA regulations and MOs. The report contextualizes the socio-economic analysis, while also summarizing information from the biophysical, and traditional knowledge overview documents (along with risk assessments, which are completed for MPAs advancing by GiC regulations).

Once the draft regulatory text for the MPA regulation or MO have been drafted (during Step 3), the economic analysis for the CBA-MPA report can be initiated. The regulatory measures that prohibit or restrict human activities define the scope of the CBA required for the regulatory process. It is important to note here that because MO MPAs are focused on freezing the footprint, all activities that had been occurring before the MO MPA designation would be allowed to continue once the MO MPA is established (except for activities that have been assessed as compromising the achievement of the conservation objectives).

The CBA-MPA report is finalized during Step 3 of the GiC MPA regulations and MO designation process, in order to provide the necessary information required for regulatory documents, such as the triage and RIAS for publication in Canada Gazette, Part I and Part II.

The Triage statement, can be completed early in the process and it is informed by Step 2 of the GiC MPA regulations and MO designation process, as well as by the outcomes of the SEOA-AOI report. The final CBA-MPA report is not essential for completing the triage statement. Preliminary analysis is sufficient to inform the triage as the purpose of this document is to set up the level of analysis and serve to indicate the level of detail that would be required for the CBA-MPA report. Therefore, a full CBA is not required for completing the triage statement. The CBA is designed to satisfy the requirements of federal regulatory process, particularly the requirements set out in the TBS’ Cost-Benefit Analysis Guide for Regulatory Proposals and the information required for the RIAS.

MPA management plans are intended to describe the implications of the MPA designation and responsibilities of regulators and non-regulators in managing the MPA, including planning, monitoring and reporting. These MPA management plans may include socio-economic indicators for monitoring and evaluation purposes, thus requiring some socio-economic analysis at this stageFootnote 11 to be determined in collaboration with MPC. Finally, ongoing management consists of collecting, analysing, and evaluating MPA progress against the conservation objectives previously established. These management measures are adaptive, meaning that they can and will be reassessed as necessary.

2.3 Socio-economic analysis and decision-making

The socio-economic analysis of MPAs takes economic and social aspects into consideration either qualitatively or quantitatively. In this framework, the term economic is used to refer to the costs and benefits that will affect economic welfare and economic growth. The term social refers to the potential distributional impacts of policies being evaluated. The value of socio-economic input when establishing a MPA goes beyond the fact that federal regulatory policy requires an assessment of net benefits (benefits minus costs) and distributional impacts of the MPA designation within a RIAS. Establishing an MPA is about achieving the conservation objectives, and there are a number of reasons why economic analysis can provide useful information for MPA decision-making, including but not limited to:

In a nutshell, socio-economic analysis has more to offer than a simple check mark in the regulatory process for MPA designation. Integrating basic economic principles throughout the MPA planning process can increase stakeholder acceptance and the probability of conservation success as it allows the fundamental relationship between the environment and the economy to be taken into account.

2.4 Guiding principles for socio-economic analysis

The following six principles guide the approach to socio-economic analyses presented here:

  1. The scope and level of detail in socio-economic analysis should align with the magnitude of expected impacts. Resources allocated to conducting the socio-economic analysis should be commensurate with the economic activities and expected impacts of the proposed regulatory management measures (i.e. the principle of proportionality). For this purpose TBS developed the “triage statement”Footnote 13 to assess regulatory proposals at an early stage to determine where resources should be focused and where federal regulatory approval processes can be streamlined. The triage statement may indicate a low impact, in which case the analysis may not need to quantify or monetize all benefits and costs. Even in the case of high expected impacts, it may not be possible to monetize all costs and benefits, and some level of qualitative assessment of the magnitude and importance of the impacts will be necessary.
  2. Analysis should be defensible, understandable, and practical. This means that technical information will need to be assembled in a format that is easy to communicate. The underlying data and analytical assumptions used in developing the expected outcomes must also be presented in a clear and concise format.
  3. Analysis should consider both the quantitative and qualitative aspects. The analysis should identify all expected benefits and costs using an appropriate mix of qualitative and quantitative information. The focus of the analysis is not solely on developing economic information that monetizes costs and benefits, but is instead on presenting a mix of information to illustrate expected ecological, economic, and social outcomes.
  4. Identify important uncertainties. Uncertainties dominate any analytical effort to forecast future impacts, and effort should therefore be made to identify the major uncertainties and how they affect outcomes. Notably, the net benefit rule in the CDR that requires that benefits exceed costs is an example where major uncertainties may change an important outcome, and these should be identified. The cost impacts are generally easier to estimate given the availability of information with respect to the regulatory management measures. Benefits on the other hand are usually more difficult to evaluate due to the lack of scientific data and appropriate economic information with respect to ecosystem goods and services (EGS) being targeted by the proposed regulations. Therefore, for quantified or monetized costs and benefits, the key variables such as the expected ecological outcomes, levels of human uses and subsequent costs and benefits should be examined for uncertainty and subjected to sensitivity analysis.
  5. Adopt an open and inclusive approach, including elements of external and internal review and input where appropriate. Analytical effort is always improved when others have a chance to review and provide comments. Soliciting input early in the scoping of the analysis allows for major drivers and relationships to be identified and included in the analysis. If this input comes after the analysis is prepared, there may not be sufficient resources left to adequately address the gaps or concerns. Comments provided early in scoping the analysis help to avoid surprises at later stages of the analytical process. Whenever input is solicited, it is important to clearly communicate to reviewers the purpose and scope of the document under review so that the review and comments are appropriately focused.
  6. Adopt an Innovative Approach. The methodologies and practices for cost-benefit analyses are evolving continuously. Socio-economic analysis should allow for the adoption of such innovative approaches. Efforts are being made at DFO for continuous improvement in methods, and in particular, in efforts to measure the benefits of ecological protection for maintaining biodiversity and associated ecosystem goods and services (EGS).

2.5 Foundations of the socio-economic analysis and interdisciplinary linkages

Socio-economic analysis, in its broad sense, is relevant throughout the MPA designation process from AOI identification to development of the regulatory approach for the MPA. Cost-benefit analysis is a specific type of socio-economic analysis, conducted primarily in support of the TBS regulatory analysis process for MPA designation. The different types of socio-economic analysis discussed in this framework require communication among disciplines (science, economics, management), but the CBA requires very specific and refined interdisciplinary inputs in order to assess the level of impact of the specific regulatory proposal.Footnote 14 This requires that:

  1. the regulatory proposal is developed, such that the new regulatory management measures are described in detail
  2. the expected socio-economic and ecological outcomes of the new regulatory management measures are described, such that the level of impacts can be assessed

In other words, while the MPA designation process requires socio-economic input at several stages, the CBA itself cannot be initiated until such time as the required regulatory and ecological information – the foundation of the CBA - is available. Once the information has been collected, it is the analytical needs of the regulatory process (i.e., either MPA regulations or MO) that will dictate the level of effort and the scope of socio-economic analysis.

To quantify and monetize incremental costs, information is required primarily on regulatory management measures that may prohibit some economic activities, or require modifications to current practices. Estimating incremental benefits primarily requires the determination of the effects of regulatory management measures on biological and ecological outcomes. The assessment of both the incremental costs and benefits is undertaken as comparison between the baseline and regulatory management scenariosFootnote 15. In general, information required for estimating the incremental costs is straightforward and well understood. However, benefits valuation is more complex and requires an assessment of the impacts of regulatory management measures on biological outcomes linked to ecosystem services. Although demand is placed on economists to assess these benefits, it must be recognized that the assessment of ecological outcomes is a necessary prerequisite to the economic work. Ideally, the ecological and economic outcomes of the proposed MPA regulations would be hypothesized through formal modeling efforts and reflected in the “regulatory management scenario”. However, a variety of methods may be used according to the availability of resources.

In addition, the CBA of a proposed MPA designation must be conducted in comparison to a situation in the absence of the proposed MPA regulations/MO referred to as “baseline scenario”. Cost-benefit analysis embodies the concept of incrementality by comparing the “with (regulatory management scenario)” and “without (baseline scenario)” the proposed MPA regulations. The outcomes of biological and economic models for these two scenarios provide the basis for economic valuation.

The proposed regulatory management measures, plus the expected ecological and economic outcomes together provide the information needed to estimate the incremental costs and benefits of the proposed MPA regulations. Figure 2 provides a general overview of the relevant pieces of information that combine to produce a coherent socio-economic analysis for decision making purposes.

Figure 2: Interdisciplinary bridging

Figure 2 long description

Figure 2 highlights interdisciplinary linkages between Marine Planning and Conservation, Science, and Economics to illustrate the information needed for socio-economic analysis. The information provided by Marine Planning and Conservation directorate  includes the public policy issue and objective, the current management scenario and the proposed management scenario. The Science information compares the current state of the ecosystem services without an MPA designation over time, and the modeled or hypothesized state of ecosystem services with MPA designation. Lastly, Economics uses this information to provide an assessment of the incremental costs (i.e. the compliance and administrative costs) and incremental benefits (i.e. the value of ecosystem services) of MPA designation. These three disciplines combine and interact to provide a socio-economic analysis, for decision making purposes.

Economic valuation of an ecosystem service is entirely dependent on the availability of interdisciplinary data and information as outlined in Figure 2. In the absence of such information, economic impact analysis – whether in qualitative or quantitative metrics – may not be possible.

2.6 Valuing ecosystem services

Benefits valuation of final ecosystem services (ES) is a challenging aspect of CBAs. As such, before delving into the next sections, it would be useful to develop some understanding of ES, in order to provide a basis for the information requirements for benefits analysis.

Ecosystem services are the benefits that humans derive from natural ecosystems. These can include, for instance, provisioning services like food and water; regulating services, such as climate regulation and flood control; cultural services including recreational and spiritual benefits; and supporting services like nutrient cycling.

There are numerous definitions for ES, for example the United States Environmental Protection Agency (US EPA) Office of Research and Development (ORD) has adopted the concept of “Final Ecosystem Goods and Services”Footnote 16 which comprises of the “components of nature, directly enjoyed, consumed or used to yield human well-being”. Similarly, the UK National Ecosystem AssessmentFootnote 17 (UK NEA) defines EGS as “the outputs of ecosystems from which people derive benefits” and further states that “The final ecosystem services are the outcomes from ecosystems that directly lead to good(s) that are valued by people. The full value is not just from the ecosystem, but depends on the additions of inputs from society (other capital inputs) and the value is often context dependent. The final value of the good(s) is, therefore, attributable to both the ecosystem and human inputs. For a fair valuation of ecosystem services, both the separation of final ecosystem services from underpinning processes and the accounting for other capital inputs is necessary”.

The Millennium Ecosystem AssessmentFootnote 18 (MA), The Economics of Ecosystems and BiodiversityFootnote 19 (TEEB), and the UK NEA, outline the basic framework for identifying EGS for purposes of benefits valuation. Figure 3 below reproduces the conceptual framework for ecosystem benefits valuation outlined in the UK NEA, which provides “a schematic diagram of a small selection of ecosystem processes and services to illustrate how ecosystem services are linked to final ecosystem services and the goods and values they generate for people”.Footnote 20

Figure 3: UK NEA conceptual framework for ecosystem services valuation

Source: UK NEA Chapter 2: Conceptual Framework and Methodology

Notes:

*: The term “good(s)” includes all use and non-use, material and non-material outputs from ecosystems that have value for people.

£: Represents monetary values of the EGS.

+/-: Represents a quantitative assessment of the EGS in non-monetary metrics.

Happy/Sad: Represents a qualitative evaluation of the EGS.

Figure 3 long description

Figure 3 provides a diagram outlining the Ecosystem Processes or Intermediate services and how they are linked with final ecosystem services, the goods they produce and the values they generate for people. The first example provided is the Ecosystem Processes or Intermediate service “Soil Formation Process” that leads to “Nutrient Cycling”, which leads to the Final Ecosystem Service “Clean Water Provision”. This process creates the good of “Drinking Water”. The next example shows the biodiversity process of Pollination resulting in the Final Ecosystem Services of “Food Production” and “Trees”. Food Production is linked with the Final Goods such as “Cereal and Meat”, Whereas Trees are linked with the Final Good “Timber”. The final example shows the Ecosystem Processes or Intermediate services “Primary Production” and “Biomass”, correlating to the Final Ecosystem Service “Water Regulation”. The Water Regulation service is linked with the Final Good “Flood Protection”. All of the EGS are evaluated qualitatively and quantitatively, based on the value people receive. Quantitatively the goods are represented in the monetary value of Euros. Qualitatively the goods are represented in two ways, “Positive or negative” symbols representing a quantitative assessment of the EGS in non-monetary metrics, while “Happy or sad” symbols represent a qualitative evaluation of the EGS.

This approach distinguishes between:

Another aspect of this approach is that it provides flexibility to represent EGS values in both monetary and non-monetary metrics.

In the MPA context, it is the impact of designating an MPA on final EGS (as depicted in Figure 3 above) that is the focus of benefits valuation in this framework. Thus, economic assessment of EGS would begin at the final service(s) stage and end with estimating the value that is attributable to the designation of the MPA. Once the biological outcomes have been estimated, the relevant EGS can be valued through established benefits valuation methodologies (such as revealed preference, stated preference, and benefits transfer methods).

3.0 Procedural guidance

This section further elaborates when the socio-economic products are developed and how they address the clients’ needs at each stage of the MPA designation process outlined in Figure 1a (GiC MPA regulations process) and Figure 1b (MO MPA process), Section 2.1.

The time and other resources required for socio-economic analysis should be integrated into all forward planning related to development of the regulation, to ensure that the necessary inputs are available and that the socio-economic products are ready when required. To this end, ongoing communication and work planning between MPC and the regional economic analysis group is essential.

3.1 Documents supporting the MPA designation process

As part of the MPA designation process, a number of regulatory and socio-economic analysis documents will be developed. Figure 4 highlights the outcomes resulting from the MPA designation processes. Importantly, Figure 4 identifies when socio-economic analysis is undertaken as well as the links to the regulatory development process. Regulatory documents developed in the regulatory process (Triage and RIAS) draw on the outputs and documents developed as part of the MPA regulatory development phase of the designation process, including ecological assessments, stakeholder consultations, regulatory intent for the proposed MPA regulations, and socio-economic analyses.

A brief description of the main socio-economic and regulatory documents is provided in this section to highlight the points at which the socio-economic analysis is undertaken to inform the MPA designation and the regulatory analysis processes. It is important that each of these socio-economic documents be appropriately identified and titled to clearly communicate the scope and intent of each document, manage expectations about the level of analysis, and avoid confusion.

Figure 4: Socio-economic input into the MPA designation process

Figure 4 long description

Figure 4 outlines socio-economic input into the MPA Designation Process. The figure uses the MPA designation process outlined in figure 1a and figure 1b above and illustrates the socio-economic analysis documents that are developed to inform the MPA designation process as well as the regulatory documents that use the socio-economic information.

The MPA Designation process begins with the selection and announcement of the Area of Interest during Step 1. At this stage, the Socio-Economic Overview and Assessment of the AOI report is drafted for this larger geographical area. The information contained in this report is simultaneously used during Step 2 and 3 policy and regulatory development.

Following the drafting of the MPA regulatory intent, the Cost-Benefit Analysis is undertaken. The information generated during Step 1, 2, and 3 is used to complete the Triage. During Step 3, when the MPA Regulations are finalized and the Cost-Benefit Analysis is completed, the Regulatory Impact Analysis Statement (RIAS) can be then drafted. The regulatory package comprising of the MPA regulation and the RIAS is finalized and published in the Canada Gazette. After these 3 steps are completed, the MPA is designated.

3.1.1 Socio-economic documents

As illustrated in Figure 4 and as described below, socio-economic analysis is undertaken at two distinct stages of the MPA designation process. Each socio-economic analysis is driven by the need to inform consultations and decisions, but the scope of the analysis varies as per the requirements of each stage of the MPA designation process, the regulatory requirements and the federal regulatory process.

i) Socio-Economic Overview and Assessment of the Areas of Interest (SEOA-AOI)

The selection of the area to be designated as an MPA from amongst a number of potential candidate sites is based primarily on ecological and feasibility criteria.Footnote 21 The purpose of the SEOA-AOI report is to supplement the ecological information and inform the consultations with the interested parties. The report may be used in some instances for the selection of the AOI, in conjunction with the ecological and other relevant information.

The scope of the SEOA-AOI report is to provide a profile of the key interested parties, information on the socio-economic activities that are currently taking place or are dependent on the resources in the geographic area within which the candidate MPA may be located, and economic activities that are linked to ecosystem services. The data and information is detailed and, where possible, quantitative and it describes key economic indicators such as GDP, fishing landed value, employment, number of establishment or other entities, revenue, trade, demographic profile of the area, etc. at the appropriate geographical scale for the selected boundaries of the AOI.

Regarding future potential economic activities, economists should only include those for which business plans are in place and for which evidence of intent (e.g. leases, permits, submission of plans for approvals, etc.) to undertake the activity can be established. This information must be included both for MPAs established by GiC regulations and by MO. It is important to note that in the case of the latter (i.e., MO MPAs), only ongoing activities and activities for which a license to carry out such activities has been issued within the one year prior to establishment of the MO MPA, will be allowed to continue. However, such activities may be prohibited or regulated once a more permanent measure, such as a GiC MPA regulation, is enacted.

The SEOA-AOI report should also include a brief summary of the unique ecological characteristics of the AOI and the reason for conservation; an outline of the existing threats and the protections currently in place; and a discussion of the existing national and international commitments. The bulk of the ecological information would draw primarily on the Biophysical and Ecological Overview of the AOI or other documents prepared by MPC in support of the MPA designation. The SEOA-AOI report, in conjunction with the Ecosystem Overview, serves as the policy and economic baseline for the CBA and for informing the triage statement in the subsequent steps of the MPA designation process.

It should be noted that at this juncture an assessment of the potential costs and benefits of MPA designation will not be undertaken as part of this analysis.

As the process for finalizing the MPA is iterative; the socio-economic analysis also needs to be flexible to accommodate the process. However, due to resource constraints, socio-economic analyses cannot be carried out for each iteration of the AOI boundary. Therefore, the AOI for which the socio-economic overview and assessment is conducted needs to be determined in consultation with MPC prior to conducting the analysis. The geographic boundary of the selected AOI should be formally communicated to the regional economic analysis group by MPC at the Director level. In the event that it is not possible to finalize the geographic boundary for the AOI, MPC could develop two or three potential AOI boundary scenarios for socio-economic assessment to facilitate the finalization of AOI geographic boundary during consultations with the interested parties.

ii) Draft and final cost-benefit analysis of the proposed MPA regulations

The CBA is a mandatory requirement of the federal regulatory process and is one of the key documents prepared in support of the decision to enact regulations of the MPA designation process. The purpose of the CBA-MPA report is to serve as a key background document for the RIAS (discussed below) which summarizes the results of the CBA conducted for the proposed MPA regulations (developed in Step 3 of the MPA designation). The scope of the CBA-MPA report, as outlined in the CDR, is to assess the incremental impacts on the interested parties (identified in the SEOA-AOI report) as a consequence of the proposed regulatory management measures. The focus of CBA-MPA report will be on evaluating the net incremental benefits (benefits minus costs) and distributional impacts of the MPA regulations. The scope of the CBA-MPA report will differ depending on the level of expected incremental costs of the proposed MPA regulations as assessed through the triage statement (see section 3.1.2 below). If low incremental costs are expected the depth of the analysis is of a qualitative nature, while a more quantitative analysis will be undertaken if the incremental costs are expected to be significant. Treasury Board Secretariat specifies these differences in their guidelines for the triage statement and developing the RIAS (see Section 3.1.2 below).

The CBA will be carried out after the draft regulatory intent for the proposed MPA regulations (Step 3 of the MPA designation) have been developed and communicated to the regional economic analysis group in writing at the Regional Director level.

Subsequent to the publication of the RIAS in Canada Gazette, Part I, the CBA may need to be revised to account for any significant changes made to the proposed regulatory management measures in response to public comments received, which would then inform the revisions to the RIAS for publication in Canada Gazette, Part II.

3.1.2 Regulatory documents

The regulatory documents (namely the triage statement and the RIAS) inform the regulatory process and are mandatory under the CDR. These documents are required at two key points of the regulatory process:

Both these regulatory documents draw on a number of other documents including the Biophysical and Ecological Overview, consultations, and the socio-economic documents as illustrated in Figure 4.

i) Triage statement

Once the AOI has been selected and the draft regulatory intent for the proposed MPA regulations is available, the triage statement can be completed and submitted to TBSFootnote 22 for preliminary review and approval. The triage statement can be completed subsequent to the identification of the regulatory management measures (these are identified and outlined at the end of Step 2 of the MPA designation process).

One of the main purposes of the triage process is to facilitate early involvement of TBS and assess the level of effort to be expended for the CBA. The triage statement is based on readily available information and does not require detailed information to be collected at this stage. The information on stakeholders needed to complete the triage statement can in part be gleaned from the SEOA-AOI report. However, preliminary estimates of incremental costs and benefits – which are not part of the SEOA-AOI report – would need to be estimated by the regional economic analysis group separately. These preliminary estimates would be back of envelop type calculations based on readily available information and do not require a full CBA. As such, the triage for the proposed MPA regulations will be based on the overview documents (ecological and socio-economic), draft regulatory intent, consultations, and preliminary estimates of incremental costs and benefits.

The triage statement facilitates an early assessment of the expected impacts of regulatory proposals and determines where analytical resources should be focused. The assessment of the impact level (i.e. no cost, low cost, or significant cost) in the triage statement is based primarily on incremental cost impacts of the regulation under consideration. Once the regulatory impact level is determined and agreed upon in consultation with TBS, the more detailed regulatory CBA may be undertaken. In keeping with the principle of proportionality, a quantitative analysis is only carried out for proposals that are assessed in the triage statement as having significant cost impacts on businesses, government and/or Canadians, including Indigenous peoples. For low cost impact proposals a qualitative analysis will be conducted.

ii) Regulatory impact analysis statement

After the decision has been taken to propose the MPA regulations, work on writing the RIAS is initiated and finalized in Step 3 of the MPA designation process. The RIAS summarizes the results of the MPA-CBA report and other supporting documents. It provides a concise, non-technical synthesis of information that allows the various RIAS audiences to understand the reason for the regulation, the government's objectives, the costs and benefits of the regulation, who will be affected, who was consulted in developing the regulation, and how the government will evaluate and measure the performance of the regulation against its stated objectives. The RIAS is, in effect, a public accounting of the rationale for regulations.

3.1.3 Review and publication

The review of the SEOA-AOI report and of the CBA-MPAreport can be undertaken through multiple means, including stakeholder, academia and/or internal or inter-departmental review. The purpose of the review is to ensure the information is accurate and the methodology used is appropriate given the scope of the analysis. A review of these reports, especially significant impact CBAs, would be particularly useful if a new approach or methodology is adopted.

Academic or peer review and departmental review of the socio-economic analysis ensures that the analysis follows a sound methodology, analytical techniques and uses valid data, and provides a set of clearly articulated conclusions and their associated caveats that inform the decision-making process. Through such reviews, the analysis is subjected to rigorous scrutiny by those who, on the basis of their knowledge and experience in the relevant field, can perform an impartial review of the reports.

Review of the socio-economic analysis can also be undertaken as part of the AOI and MPA consultation processes. However, it is important to note that the review of socio-economic analysis is a quality control process and should not be construed as formal consultation for meeting the regulatory requirement.

It should also be noted that the CBA-MPA report presents the incremental impacts without making any recommendations with respect to decisions.

The publication of the SEOA-AOI report is not required. However, by TBS directive, the publication of the CBA-MPA report is required for significant impact proposals but not for low impacts proposals. If published, all publications will need to meet the Official Languages Act as well as the accessibility requirements.

4.0 The socio-economic analytical framework

This section develops the analytical framework to be used to conduct the socio-economic analysis throughout the designation process for both GiC MPA regulations and MOs and includes guidance on the scope of the SEOA-AOI report and the CBA-MPA report.

Although two distinct socio-economic reports will be developed as part of the MPA designation process, this section provides high level guidance on the scope of the socio-economic analysis in its entirety. The SEOA-AOI and CBA reports should be viewed as iterations of one document that is developed and updated as the MPA designation process moves through the various stages of development and economic analysis work progresses from a high level overview to a detailed CBA.

The analysis will be developed in a manner such that the focus becomes specific to a more refined geographic area as the MPA designation process progresses from the identification to selection of the AOI to MPA designation.

4.1 Analytical guidance

The sections presented below closely follow the TBS Cost-Benefit Analysis Guide but have been tailored to meet the particular needs for MPA decision-making. The Marine Planning and Conservation program would determine the roles and responsibilities of other DFO programs (such as Science, Compliance, Promotion and Enforcement) and engage them accordingly to ensure the information required to undertake the socio-economic analysis is provided to the economists on the agreed schedule.

4.1.1 Ecological characteristics, associated risks and the objectives

This section should provide a summary overview of the ecosystem services that are of interest and the risks posed to these by natural processes and human interaction related to the conservation objectives of the MPA. This information can be summarized from existing documents such as the Biophysical and Ecological Overview report. Some of the key questions that would be addressed could include, but are not limited to:

4.1.2 Socio-economic overview and assessment of the areas of interest

This section should describes the socio-economic activities of the relevant parties that are linked to the use or management of the ecosystem goods and services (section 4.1.1) within the AOI or MPA. This provides insight into the regional distribution of the economic activities and ecosystem goods and services within the AOI or MPA. Responding to the following helps in identifying the key socio-economic activities being undertaken:

4.1.3 Baseline management measures

This section, for clarity, is divided into two parts to: (i) describe the existing or baseline management measures in place; and (ii) describe the ecological and economic outcomes as they relate to the baseline conditions.

  1. Baseline Management Measures: outline the regulatory and non-regulatory management measures that are currently in place, or are proposed and approved for implementation. A description of international commitments should also be included if the MPA designation helps meet those obligations. The following helps in clarifying the scope of this section:
    • What management measures (federal, provincial and territorial) are already in place or are proposed and approved for implementation in the MPA?
    • Is Canada part of any international agreements and conventions that relate to Canada’s commitments for MPA designation or any other commitment with respect to habitats or species to be found in the MPA?
  2. Baseline Scenario: describe the ecological and economic outcomes, starting with the year in which the MPA regulation is proposed to come into force. The baseline scenario is a projection of the state of ecological and economic outcomes in the absence of the proposed MPA regulations. Ideally, the ecological and economic outcomes should be estimated for a minimum period of 10 years for GiC MPA regulations and a minimum period of 5 years for MOs. It is recognized that due to data and modeling constraints, it may not always be possible to provide quantitative estimates of the ecological and economic outcomes. In these instances, a qualitative description should be included to facilitate the assessment of incremental impacts. Where possible, the impacts of existing and potential management measures (outlined in section 4.1.3(i)) that have high likelihood of being implemented should be accounted for in the baseline forecasts of ecological outcomes. The baseline would also include the implication of likely changes to economic activity on the ecosystem goods and services. The timeframe for the baseline and management (see 4.1.4 below) scenarios has to be similar so that the incremental impacts can be evaluated. The following questions help develop the baseline outcomes:
    • What is start and end date of the timeframe?
    • Are there any economic or technological trends/developments that could impact on-going economic activity or natural resources of interest?
    • What are the expected ecological outcomes under the baseline scenario without the MPA?
    • What will be the level of economic activities without the MPA, including those that depend on the ecosystem goods and services?

4.1.4 Proposed MPA regulations and ministerial order

This section is divided into two parts to: (i) describe the proposed regulatory management scenario; and (ii) describe the ecological and economic outcomes as they relate to such regulatory management scenario.

  1. Regulatory Management Scenario: outline the regulatory management measures under the proposed MPA  regulations or MO. The following helps in clarifying the scope of this section:
    • What is the date on which the proposed MPA regulations or MO come into force?
    • What management zones are proposed to be established within the MPA?
    • What are the prohibitions and exceptions for each of these management zones?
  2. Outcomes of Regulatory Management Scenario: outline the ecological and economic outcomes, starting with the year in which the proposed MPA regulations or MO come into force. The ecological and economic outcomes are estimated for a minimum period of 10 years (similar to the baseline scenario) for  MPA regulations and a minimum period of 5 years for MOs. The timeframe for the baseline and management scenarios needs to start and end at the same point in time so that the incremental impacts can be evaluated. The regulatory management scenario is described in response to the following questions:
    • What is start and end date of the timeframe?
    • What are the expected ecological outcomes under the regulatory management scenario?
    • How do the ecological outcomes compare with the proposed conservation objective to be achieved?

The regulatory management scenario and the associated ecological outcomes will be used by the regional economic analysis group to estimate the incremental costs and benefits (see section 4.1.6 below). This information is essential for developing the rationale for the proposed MPA regulations.

As mentioned earlier, it is important to remember that for MPAs established by MO, pre-existing economic activities are allowed to continue, until a more permanent measure such as an MPA regulation is enacted. In these cases, there would be no impact on these activities from the establishment of an MPA. However, there could be cases where MOs would prohibit certain fishing activities. In those instances, those costs would need to be accounted for.

4.1.5 Incremental costs and benefits

This section identifies, quantifies and monetizes, or qualitatively assesses, the incremental costs and benefits that are attributable to the change resulting from the management scenarios (GiC MPA regulations or MO) over and above the baseline scenario. The response to the following questions would help assess the incremental impacts of the proposed GiC MPA regulations or MOs:

It should be noted that as per TBS guidance, the estimate of incremental costs should not include the cost of developing the regulatory proposal. Similarly, developing regulatory proposal to fulfil international commitments, meeting international or national commitments, or avoiding corporate risks do not constitute incremental benefits.

The regional economic analysis group is primarily responsible for evaluating the incremental costs and benefits of the proposed MPA designation. The estimates of the incremental costs and benefits are based on the baseline and on the regulatory management scenarios. In the absence of the requisite information on regulatory management measures and the ecological and economic outcomes, it will not be possible to conduct a comprehensive CBA of the proposed MPA designation.

4.1.6 Distributional impacts

A number of diverse interested parties will be impacted by the proposed MPA GiC regulations or MO. The distributional analysis attempts to identify the degree to which the interested parties would be impacted by the incremental costs and benefits and how much they stand to gain or lose as a result of the proposed MPA GiC Regulations or MO. For example, while an industry may bear the incremental costs up front, they may be able to pass a portion of these on to consumers in the form of price increases, such that the impact may also be felt by consumers. Similarly, the incremental benefits of knowing that an ecosystem service will continue to exist accrues not only to current but to future generations and not just within the region in which it is found.

Response to the following can help identify the associated distributional impacts on the interested parties:

The distributional analysis is carried out by the regional economic analysis group and will be based on the incremental costs and benefits assessed in section 4.1.5.

4.1.7 Net Benefit statement

Establish if incremental benefits exceed incremental costs, quantitatively or qualitatively, as a response to the following question:

This section does not only require a net benefit statement (i.e. benefits minus costs), but the rationale to demonstrate how the costs and benefits balance. The responsibility for this section lies with the regional economic analysis group.

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