Assessing the Profitability of Integrated Multi- Trophic Aquaculture in Canada With and Without a Deposit Feeder Component by Mark A. Carras B.B.A., Saint Francis Xavier University, 2009 Project Submitted in Partial Fulfillment of the Requirements for the Degree of Master of Resource Management Report No. 671 in the School of Resource and Environmental Management Faculty of Environment Mark A. Carras 2017 SIMON FRASER UNIVERSITY Summer 2017 Approval Name: Mark A. Carras Degree: Master of Resource Management Title: Assessing the Profitability of Integrated Multi-Trophic Aquaculture in Canada With and Without a Deposit Feeder Component Report No. 671 Examining Committee: Chair: Matthew Bakker Master of Resource Management candidate Duncan Knowler Senior Supervisor Associate Professor Christopher Pearce Supervisor Research Scientist Pacific Biological Station Fisheries and Oceans Canada Date Defended/Approved: July 11, 2017 ii Abstract Integrated Multi-Trophic Aquaculture (IMTA) has been proposed as a sustainable aquaculture technology that can help offset some of the environmental impacts of fed finfish aquaculture. My study builds on a previous financial analysis of salmon monoculture and IMTA in Canada by using a discounted cash-flow analysis (DCF) to examine the financial implications for investors considering investing in either (i) Atlantic salmon (Salmo salar) monoculture, (ii) Atlantic salmon, blue mussel (Mytilus edulis), and kelp (Saccharina latissima) three-species IMTA, or (iii) Atlantic salmon, blue mussel, kelp, and green sea urchin (Strongylocentrotus droebachiensis) four-species IMTA. I found that three-species IMTA is more profitable than both Atlantic salmon monoculture and four-species IMTA, but that four-species IMTA has a lower net present value (NPV) than salmon monoculture if there is no price premium applied to IMTA salmon and mussels. Including a 10% price premium on IMTA salmon and mussels results in substantially higher NPVs for three-species and four-species IMTA compared to salmon monoculture. However, despite the positive indications of my study’s DCF and other IMTA-related financial analyses, ongoing uncertainty related to IMTA’s financial and environmental performance, and technological and managerial complexity, may be overriding barriers to IMTA adoption in Canada. Keywords: Integrated Multi-Trophic Aquaculture; green sea urchin; echinoculture; investment appraisal; financial; monoculture iii Dedication This is for Nicholas Carras, a good man who always picked me up. iv Acknowledgements I want to thank my senior supervisor, Dr. Duncan Knowler, and my supervisor, Dr. Christopher Pearce, for their patience and understanding throughout this project. I could not have done this without their support and guidance. Thank you to also to Simon Fraser University and the Natural Science and Engineering Research Council of Canada for their financial support. In no particular order, I want to thank Hossein Ayouqi, Adrian Hamer, Michael Wowchuk, Drs. Thierry Chopin, Shawn Robinson, Gregor Reid, Neil Ridler, and Stephen Cross, and the extended Canadian Integrated Multi-Trophic Aquaculture Network for their support. On the industry side, thanks to Brian Tsuyoshi (Urchinomics), Ashley Roulston (Industrial Plankton ™), and Ted Weaire, Michael Szemerda, and Steve Smith of Cooke Aquaculture for their contributions to the real-world industry data used to inform this study’s financial analysis. Thanks also to Matthew Bakker for chairing my defence, to my classmates, and to the staff and faculty of Simon Fraser University’s School of Resource and Environmental Management. I want to thank my partner, Marine Chéné, for her love and support throughout my graduate studies. Thank you to my parents, sisters, brother, aunts, uncles, cousins, nephews, and the whole French contingent who helped get me to where I am today. Also, a big thanks to my many wonderful friends and colleagues. You know who you are, and there are too many to name. Finally, I want to thank Apollo for guiding my eardrums. v Table of Contents Approval ............................................................................................................................. ii Abstract .............................................................................................................................. iii Dedication .......................................................................................................................... iv Acknowledgements ..............................................................................................................v Table of Contents ............................................................................................................... vi List of Tables ................................................................................................................... viii List of Figures .................................................................................................................... ix List of Acronyms .................................................................................................................x Chapter 1. Introduction & Literature Review .............................................................1 1.1. Problem Statement ......................................................................................................1 1.2. Literature Review........................................................................................................2 1.2.1. The Case for Sustainable Aquaculture ...........................................................2 1.2.2. Integrated Multi-Trophic Aquaculture (IMTA) .............................................6 1.2.3. Financial and Economic Analysis of Integrated Multi-Trophic Aquaculture (IMTA) .....................................................................................8 1.2.3.1. Market Analysis ....................................................................................................... 8 1.2.3.2. Socio-Economic Impacts of IMTA ........................................................................ 10 1.2.3.3. Economic and Financial Impacts of IMTA ........................................................... 10 1.3. Research Questions ...................................................................................................12 1.4. Study Approach ........................................................................................................13 1.5. Organization of the Study .........................................................................................14 Chapter 2. Comparing a Monoculture Salmon Farm and a Three-species IMTA Farm: a Discounted Cash-Flow Analysis of East Coast Canadian Aquaculture Operations ..........................................................15 2.1. Introduction ...............................................................................................................15 2.2. Background ...............................................................................................................17 2.3. Materials and Methods ..............................................................................................18 2.3.1. Technical and Biological Assumptions .......................................................21 2.3.2. Economic and Financial Assumptions .........................................................23 2.3.3. Investment Appraisal and Sensitivity Analyses ...........................................32 2.4. Results .......................................................................................................................34 2.5. Discussion .................................................................................................................36 2.6. Conclusions ...............................................................................................................41 Chapter 3. Three-species Integrated Multi-Trophic Aquaculture (IMTA) vs. Four-species IMTA: a Comparative Financial Analysis ..................43 3.1. Introduction ...............................................................................................................43 3.2. Background ...............................................................................................................44 vi 3.2.1. Benthic Species in IMTA .............................................................................44 3.2.2. Strongylocentrotus droebachiensis in aquaculture ......................................46 3.3. Materials and Methods ..............................................................................................47 3.3.1. Technical and Biological Assumptions .......................................................49 3.3.1.1. Green Sea Urchin Hatchery Production ................................................................. 52 3.3.1.2. Green Sea Urchin Grow-out .................................................................................. 54 3.3.1.3. Green Sea Urchin Finishing Diet ........................................................................... 55 3.3.2. Economic and Financial Assumptions .........................................................56 3.3.2.1 Investment Appraisal and Sensitivity Analyses .................................................. 67 3.4. Results .......................................................................................................................69 3.5. Discussion .................................................................................................................76