An Economic Analysis of FRDC Investment in Marine Protected Areas and Spatial Management (Cluster 12)

Background

Under international agreements the Australian Government committed to establishing a network of Marine Protected Areas (MPAs) in Australia by 2012 to ensure long-term ecological viability of existing biodiversity and the marine and estuarine systems. The Australian South East region boasts many species that are not found anywhere else in the world, and hence was a prime target for the establishment of MPAs. Also, there is an agreement between the Australian Government and the States to establish a National Representative System of Marine Protected Areas (NRSMPA) in Australian waters. Further information concerning the Australian development of MPAs is available in Anon (2007).

Marine Protected Areas (MPAs) are a form of spatial management of fisheries. It had been commonly argued that the development of no-take areas may be of benefit to fisheries management by rebuilding depleted stocks, protecting essential habitat and an insurance against fisheries stock collapse. It was argued that these benefits could potentially offset the cost of area closure in some cases.

In 2005, the Australian Government was attempting to reduce the pressure on many Australian fisheries and an adjustment package of $220 million (the “Securing Our Fishing Future” program) had been made available for reducing the catch in Commonwealth Fisheries. The South East fishery was to be included in this restructuring. This meant that considerable financial resources were available for industry adjustments where they were deemed necessary under the MPA development.

Planning by Government for the MPA network for the region had commenced in 2002 with a scientific inventory of relevant mapping and research. There were also a Scientific Reference Panel and a Scientific Peer Review Panel. However, in late 2005 there was some political urgency in developing the MPAs. The selection of the MPAs was undertaken according to a set of criteria established by the Australian Government. The MPAs were selected with boundaries identified to make compliance and management easier. While planning was largely conservation driven, there was a commitment by Government to maintain commercial access and sustainable use of the resource by industry. In this regard, a Fisheries Risk Assessment (FRA) was undertaken on the type of fishing activities that were suitable for multiple use management zones where fishing was proposed to be allowed.

The Australian Government decided to speed up the South East region MPA development in order to align it temporally with the “Securing Our Fishing Future” package. Hence, in December 2005 a detailed proposal by the Australian Government was released specifying a network of 14 MPAs for the oceans of South East Australia.

This first MPA initiative was aimed at producing a system of marine parks that was comprehensive, adequate and representative. Core data sets for the region were used to define the areas for the parks and their boundaries. The proposed areas were made available to the fishing industry and comment was sought on the proposal by the Australian Government.

The categories assigned to each MPA were:
1. Strict Nature Reserve. All commercial fishing, recreational fishing and charter fishing are disallowed.
2. Habitat Protection Zone. Recreational and charter fishing and commercial tourism are allowed. All commercial fishing operations are disallowed.
3. Managed Resource Protected Zone. Recreational and charter fishing are allowed, but only some specified commercial fishing methods allowed. Those not allowed were to be demersal trawl, Danish Seine, mesh netting, demersal longline and scallop dredge.

Lessons Learnt for Future Investment

Lessons learnt from this analysis include:

• Backgrounding emerging issues and preparing for change are important for FRDC in order to respond effectively and quickly to sudden external policy changes that affect the fishing industry.
• The inability to value with any confidence changes in biodiversity features of fishing areas should be noted. While it may be possible to value a marine species extinction through the community’s willingness to pay, it would be far more difficult to make credible assumptions about how the improvements to habitat features (e.g. more protection from fishing given to seamounts and shelfs) contribute to biodiversity and reduce extinction risk.

Conclusions

Investment was made in a total of three projects within the cluster with the FRDC contribution approximating 29% of the total costs involved.

Twelve benefits associated with this investment were identified. On the basis of equal weighting for each benefit, it could be concluded that public benefits to Australia could make up 60% of the total benefits, the remainder being industry benefits. If benefits were subjectively weighted, then public benefits would still contribute 60% of the total.

The principal benefit from the investment was its influence on the final boundaries and areas of the MPAs for the South East Region announced in 2007. The final MPAs provided a significantly lower economic impact on the fishing industry. The reduction in the displaced catch is linked to retention of profits in the industry, reduced unemployment, and a reduction in the flow-on economic impacts to fishing industry servicing businesses. The revised MPAs are more or less “owned” by industry compared to the original MPAs. Hence, compliance with the boundaries and conditions for the revised MPAs is likely to be high.

Supporting these studies was a relatively high priority for FRDC as the MPA issue was of high relevance to the Australian fishing industry. If FRDC had received restricted or zero funding from government, some of the projects would still have been funded by FRDC. Project 2003/073 was also low cost but was of a more strategic and less urgent nature. Project 1999/162 was the highest cost of the three projects but contributed significantly to the outcome in the South East Region as well as contributing more generalised benefits.

In the event of reduced public funding to FRDC, it is likely that two of the projects in the cluster would have still been funded at some level by FRDC, industry and state agencies, assuming an industry contribution was still in place. A proportion of the public benefits that have been identified would therefore still have been delivered.

Overall, the investment criteria estimated for the three projects in the cluster were positive with a net present value estimated at $91 million and a benefit-cost ratio of over 33 to 1 (discount rate 5% and benefits estimated over 30 years from the final year of investment). It should be noted that not all benefits identified in the analysis were valued so that the results are likely to be underestimates of the actual benefits derived from the investments.