Assessing the Willingness to Pay in the Pacific Northwest for Salmon Produced by Integrated Multi-Trophic Aquaculture by Winnie Wing Yan Yip B.B.A. (Hons.), Simon Fraser University, 2008 RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF RESOURCE MANAGEMENT in the School of Resource and Environmental Management Faculty of Environment Winnie Wing Yan Yip 2012 SIMON FRASER UNIVERSITY Spring 2012 All rights reserved. However, in accordance with the Copyright Act of Canada, this work may be reproduced, without authorization, under the conditions for “Fair Dealing.” Therefore, limited reproduction of this work for the purposes of private study, research, criticism, review and news reporting is likely to be in accordance with the law, particularly if cited appropriately. Approval Name: Winnie Wing Yan Yip Degree: Master of Resource Management (Planning) Report Number: 530 Title of Research Project: Assessing the Willingness to Pay in the Pacific Northwest for Salmon Produced by Integrated Multi-Trophic Aquaculture Examining Committee: Chair: David Kyobe MRM Candidate, School of Resource and Environmental Management, Simon Fraser University Duncan Knowler Senior Supervisor Associate Professor, School of Resource and Environmental Management Associate Dean, Faculty of Environment Wolfgang Haider Supervisor Professor, School of Resource and Environmental Management Date Defended/Approved: March 12, 2012 ii Abstract Integrated Mutli-Trophic Aquaculture (IMTA) combines the culturing of fish and extractive aquaculture species at one site to simulate a balanced natural system and reduce some environmental issues of monoculture systems. The study explores consumer preferences for IMTA and Closed Containment Aquaculture (CCA). Two questions are posed: (1) how do salmon consumers in the US Pacific Northwest perceive IMTA and its products compared to other salmon aquaculture methods and products; and, (2) what are salmon consumers in the US Pacific Northwest willing to pay for salmon produced by IMTA compared to its potential close substitutes? Results of a discrete choice experiment revealed a willingness to pay price premiums of 9.8% and 3.9% for IMTA and CCA, respectively, over conventionally produced Atlantic salmon. Results of the survey also revealed that 44.3% and 16.3% of the respondents preferred the adoption of IMTA and CCA to conventional salmon farming, respectively. Results using a decision support system further confirmed a stronger market for IMTA salmon than for CCA and conventionally produced salmon. Keywords: Integrated Multi-Trophic Aquaculture; Close-Containment Aquaculture; salmon aquaculture; British Columbia aquaculture; discrete choice experiment; willingness to pay iii Acknowledgements I would like to thank my senior supervisor, Dr. Duncan Knowler, for providing his guidance and knowledge throughout the project. His dedication to the project helped make this project so successful. I would also like to thank Dr. Wolfgang Haider for providing his insight and expertise on surveying and discrete choice modelling. I would also like to express my gratitude to Dr. Thierry Chopin, Dr. Gregor Reid, Dr. Steve Cross, Dr. Roberto Martínez-Espiñeira, and other researchers in the Canadian Integrated-Multi-Trophic Aquaculture Network for their input, and The Natural Sciences and Engineering Research Council for providing the project’s funding. I also thank Patrick Kitchen, who has been my mentor at REM and gave me countless input and advice, both about the project and the program, throughout the last three years. Special thanks to Nina Mostegl, who not only contributed significantly with her expertise in the analysis phase, but also encouraged me continuously with her kind words. Chapter 5.4 of this paper is based on the results of Nina’s analysis of the discrete choice experiment. I am blessed by many other friends and family throughout my time at REM. I would like to thank the professors and the administrative staff at REM. Special thanks to David K., Courtney, Jessica, and my peers at REM, who made my studies more enjoyable. To Sandra, Adam, and David A., thanks for your input and help in the choice model and website. I am also blessed by my family, who extended their support from overseas. I am more than simply grateful for Hugo, who was a true blessing in my life and supported me with prayers, patience, and help. Most of all, I would like to give thanks to the One who truly blesses. I would not be in this program without Him opening the way for me, and surely I would not be able to finish my race here without His faithfulness and blessings. iv Table of Contents Approval...................................................................................................................................... ii Abstract...................................................................................................................................... iii Acknowledgements .................................................................................................................... iv Table of Contents ........................................................................................................................ v List of Tables ........................................................................................................................... viii List of Figures ............................................................................................................................. x Glossary..................................................................................................................................... xi Chapter 1: Introduction ............................................................................................................... 1 1.1 Introduction ...................................................................................................................... 1 1.2 Problem Statement........................................................................................................... 1 1.3 Research Questions ......................................................................................................... 2 1.4 Research Methods and Approach .................................................................................... 3 1.5 Scope of the Study ........................................................................................................... 3 1.6 Report Organization ......................................................................................................... 4 Chapter 2: Background .............................................................................................................. 5 2.1 The Canadian and BC Salmon Farming Industry ............................................................. 5 2.2 Environmental Impacts of BC Salmon Aquacultures ......................................................... 8 2.3 Closed Containment Aquaculture (CCA) .........................................................................10 2.4 Integrated Multi-Trophic Aquaculture (IMTA) ...................................................................11 Chapter 3: Literature Review .....................................................................................................12 3.1 The Economics of IMTA & CCA ......................................................................................12 3.2 Willingness-to-pay for Food and Sustainable Food..........................................................15 3.3 WTP Estimation Methods for Food Products ...................................................................18 3.3.1 Contingent Valuation Method ...................................................................................20 3.3.2 Conjoint Analysis & Discrete Choice Experiments ....................................................21 Chapter 4: Research Methods ..................................................................................................25 4.1 Identification of the Appropriate Study Method ................................................................25 4.2 Discrete Choice Experiment (DCE) .................................................................................26 4.2.1 Theoretical Background ............................................................................................27 4.2.2 Design of the DCE ....................................................................................................29 4.3 Survey Design .................................................................................................................34 v 4.4 Recruitment of Survey Respondents ...............................................................................37 4.5 Sample Splitting Exercise ................................................................................................37 4.5.1 Sequence of the Descriptions of Production Technologies .......................................38 4.5.2 Nature of the Descriptions of the Production Technologies .......................................38 4.5.3 Common Set ............................................................................................................39 4.6 Data Analysis ..................................................................................................................39 4.6.1 Principal Component & Cluster Analysis ...................................................................40 4.6.2 The Multinomial Logit Model .....................................................................................41