1.7 Costs and Financing
- MCA Field Guide
- MCA Field Guide Checklist
- Phase 1: Feasibility Analysis Checklist
- 1.1 Conservation targets are established
- 1.2 Threats and strategies are determined
- 1.3 Owners, managers, and users are known
- 1.4 Laws and policies are supportive
- 1.5 Organizational capacity is sufficient
- 1.6 Stakeholders and their issues are identified
- 1.7 Costs and financing are assessed
- 1.8 Reporting has been completed
A principal criterion for determining if a Marine Conservation Agreement (MCA) is a viable option at a given site is cost, and the ability to finance that cost over the long-term.
- Is the cost of an MCA affordable in terms of the incentives required and project financing prospects?
- How do the costs of an MCA at a particular site compare to other possible conservation approaches at the same site and to other MCA sites of similar ecological importance?
- Is there current funding available or are there donors willing to cover the costs?
Assessments at this phase of the feasibility analysis provide only an initial indication of costs and financing options, as negotiations and long-term management and financial planning will ultimately determine all MCA project costs. An assessment of the right-holder's alternatives for the land, resources or ecosystem services will greatly inform the conservation organization's negotiating position, and will help determine whether an MCA is likely to be affordable in the first place. Factors that will affect negotiations may reach beyond a cost assessment and include the ability of a conservation group to coordinate other players to assist in developing an incentive package that meets stakeholder objectives. In the end though, conservation organizations must recognize that in some situations, the opportunity cost of conservation may simply be too high, or funding prospects too weak, to make an MCA affordable. In these instances, other strategies will be required. Nevertheless, regardless of the strategy selected, an understanding of the opportunity costs and incentives driving biodiversity loss will benefit the design of appropriate interventions.
Assuming financial needs related to the feasibility analysis for an MCA project are met, cost estimates should include, at a minimum:
- Costs for the “value of the MCA” itself
- Costs for Phase 2: Engagement
- Costs for Phase 3: Agreement Design
- Costs for Phase 4: Implementation
MCA Costs
A primer on direct costs associated with MCAs is found in Valuation. For practitioners unfamiliar with MCA costing, the primer should be consulted at this time. In summary, direct costs associated with MCAs can include one-time and reoccurring payments for items such as contracts, leases, land acquisition fees, and community benefits to offset the opportunity costs (see below). These direct costs can be determined by appraisals, socioeconomic analyses, policy guidelines, fair-market value and, ultimately, negotiations. In many situations practitioners tend to focus on project costs of MCAs themselves when in fact the most significant costs will be incurred during Phase 4: Implementation.
Opportunity Cost: A critical feature of MCA costs that practitioners should keep in mind is the opportunity cost of foregone resource use. An important aspect of the opportunity cost of conservation reflects the value of what right-holders give up by not utilizing their land, resources and ecosystem services under the business-as-usual scenario. This is the balance of:
- The income that would be derived from uses such as destructive and unsustainable commercial fishing; and
- The costs, such reduced artisanal fisheries and tourism, degraded water quality and loss of culturally significant resources, which would be imposed by the destructive uses.
The sum of foregone income from the land, resource or ecosystem service use minus the sum of avoided environmental and social costs is the opportunity cost of foregone resource use. In some cases, the right-holders may not recognize the environmental and social costs of the land, resource or ecosystem service use, resulting in a difference between actual and perceived opportunity cost. During Phase 2: Engagement, the MCA lead can try to enhance the right-holders' understanding of environmental and social costs to reduce this difference. In any case, to secure an MCA, the benefit package must be designed to offset the opportunity cost that right-holders believe they incur.
Costs for Phase 2: Engagement
Project costs related to initial right-holder Engagement can be relatively low and straight-forward to determine in more developed countries where infrastructure, transportation, and communication systems are good. The minimal costs of setting up and holding one or more meetings are relatively easy to estimate. In less developed countries, however, right-holder engagement can be substantial and less straight-forward. Arranging and holding in-person meetings with right-holders that are represented by several people or communities, may only speak local languages and are remotely located can be logistically difficult and expensive. Costs for interpreters, transportation (planes or boats), cultural or social traditions (i.e., gifts) should all be considered. A review of the engagement process should be undertaken and considered in terms of the specific MCA project being contemplated to estimate costs associated with this phase.
Engagement activities that will have costs associated with them include, but are not limited to:
- Selecting and potentially paying for engagement team members
- Developing the engagement plan
- Exchanging ideas with right-holders
- Verifying the agreement
Costs for Phase 3: Agreement Design
Costs for Phase 3: Agreement Design are an extension and expansion of the engagement costs (i.e., meeting logistics and materials, travel, additional studies) since additional stakeholders and process will be involved. The agreement design costs may also include legal and other professional fees associated with formal contract negotiations, documentation and registration. A review of the agreement design process should be undertaken and considered in terms of the specific MCA project being contemplated to estimate costs associated with this phase.
Agreement design elements that will have costs associated with them include, but are not limited to:
- Documentation
- Conservation commitments
- Recipient benefits
- Compliance
- Sanctions
- Regulatory permits
- Final actions
Costs for Phase 4: Implementation
Costs for Phase 4: Implementation can be significant depending on the role of the lead conservation organization and status (including vulnerability) of the conservation targets. While long-term management and financial planning for the MCA project will likely be required to best understand implementation costs, an initial estimate during the feasibility analysis phase is needed to get an idea of what to expect in the future. Financial management tools are available to assist in this effort, such as the MPA Financial Management Tool and the Property Analysis Record. A review of potential implementation activities should be undertaken and considered in terms of the specific MCA project being contemplated to estimate costs associated with this phase.
Implementation activities that will have costs associated with them include, but are not limited to:
- Administration
- Management Planning
- Outreach
- Science
- Enforcement
- Public Uses
- Livelihoods
- Habitat Management
- Maintenance
- Funding
Funding Considerations
Conservation organizations must eventually ensure funding is available for all aspects of MCA projects. Options to consider include bilateral and multilateral institutions, corporate and private donors, foundations, aid agencies, and payments for ecosystem services. Aid and development institutions tend to make commitments with short time frames, foundations may vary from one to many years, and corporations follow in this regard. One solution is to continuously raise funding, but another more robust solution is to create a trust fund with enough money to endow the funding needs of the MCA project. As a rule of thumb, endowments should be 20 times the size of the annual funding need, which may present a fundraising challenge. Sources and tips on grant seeking can be found in Funding.
Grant Agreements: Unless conservation organizations will use cash reserves or take out internal organizational loans, additional grant agreements may be needed for MCA projects. Grant agreements should clearly identify the iterative nature of MCAs, the uncertain nature of intertidal and subtidal projects, and include contingency plans for prolonged negotiations.
Ocean and Coastal Issues: Many funders do not readily understand the MCA concept. Also, many grant criteria do not directly include MCA-like transactions related to intertidal or subtidal lands, resources and ecosystem services. As such, conservation organizations may have to actively reach out to potential funders to help them understand the strategy and to help them understand how funder goals will be met.
Lease Issues: If the lands, resources or ecosystem services will be leased from a public entity, conservation organizations may be required to ensure they have the financial means to carry out the project. Also, funders may not understand that public lands need to be encumbered (or leased) to ensure their long-term protection. As such, conservation organizations may have to actively reach out to potential funders to help them understand the need for leasing.
Next Sub-step
After assessing costs and financing, a feasibility analysis report should be developed.