Marine resources - remote electronic monitoring (REM): business and regulatory impact assessment

Partial Business and Regulatory Impact Assessment: Remote Electronic Monitoring (REM) on Pelagic Vessels in Scottish Waters

Title of Proposal

Remote Electronic Monitoring (REM) on Pelagic Vessels in Scottish Waters

Purpose and intended effect

Background

As announced as part of the Future Fisheries Management (FFM) Strategy^[2], the Scottish Government intends to introduce legislation making it a legal requirement that all pelagic vessels in Scottish waters will have a fully operational Remote Electronic Monitoring (REM) system installed on board. Pelagic vessels for the purposes of this policy are defined as: defined as Refrigerated Sea Water /Chilled Sea Water (RSW/CSW) and freezer vessels, over 12 metres, fishing for small pelagics and blue whiting. The Scottish Government has a similar commitment in place to make REM mandatory on board scallop vessels (a programme of work is already underway on a voluntary basis) and we have also committed to considering appropriate and proportionate REM for other segments of the fleet (e.g. large whitefish and mixed whitefish/Nephrops trawlers) as part of our Future Catching Policy^[3].

REM as a monitoring and data collection tool was first trialled in Scotland during 2008. At the time it was utilised as part of a large scale monitoring scheme in the Scottish fishing industry during the time that the Cod Recovery Plan (CRP) (2009-2016) was in place, offering a Fully Documented Fishery (FDF) monitoring scheme. Vessels took REM on-board in return for incentives, namely additional cod quota and an increased days at sea allowance. The FDF scheme enabled Marine Scotland officials to build up a considerable level of expertise and experience of operating an REM scheme successfully, and provided a clear demonstration that REM can work as an effective enforcement tool. It also acted as the catalyst for comprehensive development of REM technology in a scientific context^[4], with ongoing research into best practice for extracting accurate scientific data from CCTV footage, developing methodologies for the assessment of fish and shellfish stocks using REM, and investment and development of ML software which can deliver automated image recognition of fish caught as they are processed on on-board conveyor belt systems.

Objective

To deliver confidence and accountability in the activities of fishing vessels at sea, to ensure compliance with key legislation such as the landing obligation and to enhance our understanding and knowledge of pelagic fisheries and stocks.

There is a growing call from retailers and consumers around the need for sustainability in fishing activities and a growing call for fishers to demonstrate that the activities they are undertaking align with sustainability and transparency principles. Although the Scottish Government has well established compliance and scientific programmes, the remote nature of sea fishing means that there are limits in our ability to monitor activity at sea and deliver the confidence which is increasingly being sought. The introduction of the landing obligation, or 'discard ban' has also brought additional challenges, and there is a need to enhance our current capabilities to demonstrate that discarding is not taking place. Pelagic vessels have a significant catching capacity and evidence gathered as part of our existing compliance programme has demonstrated the significant levels of waste that can occur in this fishery for those vessels not complying with the landing obligation rules.

The consequence of not pursuing this policy is that we will not be able to deliver the optimum level of confidence and accountability in the activities of fishing vessels at sea. It would also be more challenging to enhance our understanding, knowledge and the marketability of pelagic fisheries and stocks.

From a compliance perspective, a REM compliant fleet will allow for monitoring of what quantity and species of fish have been:

• Caught
• Retained
• Landed

Where currently this is derived from Elog declarations, landing declarations and production figures (as well as surveillance and boardings), REM will serve an additional tool to verify the information submitted where required. REM systems will also be capable of proving discarding if there is a significant difference between these three observations.

REM offers the opportunity to significantly enhance the quantity of scientific data currently collected as well as collect new types of data. In particular it will allow for comprehensive data collection on catches of the pelagic fleet as opposed to landings which is the only catch component currently sampled. Examples of the types of data that could be collected include;

• Individual fish lengths and weights
• Weight of fish caught
• Catch composition and BMS
• Bycatch of listed species
• Acoustic data

Consumers are increasingly requesting products which are sustainable and want confidence that the products they are buying meet this requirement. In turn, this often drives retailers to seek assurance of the sustainability of products they are sourcing. Environmental groups are also clear that the entire supply chain must be transparent, accountable and auditable – a sentiment shared by retailers who have noted specifically that activities at sea must be properly monitored. A number of large retailers have all made various promising commitments that any fish products they sell are sustainable. Sustainability goes further than merely setting fishing limits at sustainable levels – it requires us to demonstrate compliance with those fishing limits and to demonstrate that practices are accountable and not wasteful.

Going further, research^{[5] [6] [7]}conducted in this area has shown:

• Demand for sustainably caught seafood increases around the world.
• Traceability to a sustainable source remains high on consumers' and buyers agenda.
• Credible eco-labelling is one of the most effective tools to communicate sustainability to consumers.
• Recognition of MSC eco-label now at a 33% average - up from 25% in 2010.

It is therefore evident that increased public consciousness regarding the sustainability of seafood products has driven retailers to make explicit pledges concerning the products they stock. Given increased public consciousness more generally regarding sustainability and environmental impacts, this is only likely to further increase industrial demand for products which are caught responsibly.

A REM compliant fleet will go a significant way to addressing this demand – demonstrating to consumers that from the very point of origin, pelagic stocks are harvested sustainably and in keeping with the landing obligation and wider technical conservation legislation.

Rationale for Government intervention

This is a situation of asymmetric information which can lead to market failure. Current landing monitoring methods might result in misreporting of catch which negatively influences the sustainable management of the fishery. Introducing REM devices would ensure a symmetric information flow, support a sustainable management of the stocks and compliance with current legislation.

In addition, there are a number of positive externalities that could be gained by wider implementation of REM. In particular, raising Scotland's reputation as pursuing more sustainable practices, through more rigorous monitoring of bycatch. And raising Scotland's reputation in technological adoption by incorporating wider use of REM within current business practices. Both of these should support, and potentially boost, Scotland's standing in the seafood industry.

With the above noted objectives in mind, it should be noted that government intervention via legislation appears the most likely means of delivery. Historically, attempts have been made to engage with the industry to introduce REM on a voluntary basis, but there has been widespread reluctance to participate

As part of the ongoing consultation work, Marine Scotland will be taking on board feedback from industry on this point, as their expectations and hopeful participation as the policy gains shape, will be most beneficial.

Consultation

Within Government

Consultation has been undertaken with colleagues within Marine Scotland, including policy (Sea Fisheries), Compliance, and Marine Scotland Science.

We have also engaged with DEFRA and other Devolved Administration departments on overlapping areas of interest.

Public Consultation

A full public consultation will take place from 15^th March 2022.

Business

Views on REM were sought as part of the National Discussion Paper on Future Fisheries Management, which was published in March 2019.

Engagement with industry representatives through the Fisheries Management and Conservation Group (FMAC)

Options

Option 1: Do nothing

Option 1 is the 'Do nothing' option; this is the baseline scenario. Under this option, the proposed REM requirement would not be rolled out to pelagic vessels in Scottish waters. Accordingly, no additional management measures would be required.

Option 2: Introduction of legislative requirement for REM on applicable vessels

Option 2 involves introducing a legislative REM requirement. This can vary in terms of the system spec – i.e. just sensors or cameras and sensors, but the option is broadly the same.

Sectors and groups affected

The following sectors have been identified as groups who will be affected by the proposal:

• Scottish pelagic fishing industry
• Wider UK and International pelagic fishing industry operating in Scottish waters
• REM suppliers
• REM maintainers/repairers
• Internal Scottish Government – Marine Scotland Compliance and Science
• Courts – if criminal enforcement/ legal challenges are pursued.

Benefits

Option 1: Do nothing

No change would be required from an industry perspective, with no additional benefits being incurred.

Option 2: Introduction of legislative requirement for REM on applicable vessels

Introduction of a REM compliant fleet will principally allow for full documentation of catches, presenting a variety of benefits covering two main areas:

1) REM technology offers a range of scientific benefits, by supporting and enhancing existing fisheries-dependent data collection methods such as independent fishery observers, vessel monitoring systems (VMS) and logbooks.

REM technologies can improve the timeliness, quality, cost-effectiveness and accessibility of scientific data to ensure the data utilised for fisheries management decision making is of high quality. If used on a large scale, and as more tools are developed and implemented such as Artificial Intelligence (AI), REM data streams can be integrated with existing data collection programmes to support stock assessments, with data derived for one purpose often having utility to support other scientific research interests.

Consequently, this should help deliver benefits in relation to fisheries stock management, which in turn can help lead to more responsible, traceable and sustainable fishing. Scientific involvement in developing and deploying REM technology is therefore of significant importance.

Implementing REM systems that generate information on a vessel's location, fishing effort, gear, and most importantly from a fully documented fisheries management perspective, the types and quantities of retained or discarded catch. Therefore, the implementation of REM of fishing vessels could, in the future, ease the reporting burden and duplication of effort on behalf of fishers and fisheries compliance organisations.

2) REM can enhance our abilities to demonstrate accountability in our fishing practices, to deliver confidence that fishers are complying with the rules and regulations which are in place, and to supplement our existing enforcement tools used as part of our world-class compliance system. REM can also be used to prove compliance with existing regulations.

Fisheries, fishers and both fishery-dependent and fishery-independent data collection have all been severely impacted by the COVID-19 pandemic. In many fisheries this has resulted in a combination of sampling programmes being suspended, and when operational, only a very limited observer availability due to quarantine rules. Globally however REM programmes have been only marginally impacted demonstrating the resilience of remote monitoring in its ability to provide continued uninterrupted data collection regardless of external extenuating factors. Therefore, these benefits highlight the advantages of having multiple monitoring methods to ensure an evidence base for continued fisheries management in unprecedented situations.

REM can also act as a deterrent to any non-compliant activity, such as discarding or high grading, and can create a level playing field for all vessels that use it within a fishery as long as rules are applied fairly and consistently and where there is appropriate levels of monitoring and analysis.

Summary of Benefits

Option 1: Do nothing

• No additional costs for the fishing industry

Option 2: REM

• Scientific benefits including enhanced sustainability of fishing practices
• Fishing accountability and increased consumer confidence Improved reputation for Scottish catch, potential improvement in competitiveness of the product
• Reduction in time and effort of reporting
• Potential reduction in discarding/unlawful practises due to increased compliance – leading to improved health of fish stocks, in turn improving catch yields and future economic gains.

Costs

Option 1: Do nothing

This option is not predicted to create any additional costs to the sectors and groups outlined above.

However, failure to introduce REM among the fleet would mean that existing challenges around enforcing compliance with existing legislation (particularly the landing obligation) would continue.

In 2019 pelagic species represented 60 per cent by tonnage (234 thousand tonnes) and just over one third of value (£195 million) of the total landings by Scottish vessels. Over ten years 2010-2019, the industry has grown as the tonnage of pelagic landings increased by nearly one quarter (24 per cent) with real terms value rising by 29 per cent.^[8]

By doing nothing, the product could become less attractive to consumers and potentially lose market share or price premium if competitors prove the sustainability and compliance of their fisheries.

Option 2: Introduction of legislative requirement for REM on applicable vessels

The exact costs for REM will vary depending on the system specifications put in place, the different costs charged by commercial operators, and the number of cameras and / or sensors which are deployed.

Systems will vary across fleet segments. Moreover, exactly how data is stored and transferred for analysis can affect the final cost of a REM system.

Item: Estimated costs for pelagic vessels for a camera system (based on link)

• Estimated system cost: £6,300 - £9,000
• Estimated installation cost: £1,000- £3,000
• Estimated Annual running cost: £700 - £2,500

Data Transfer costs

Costs will depend on system specification.

Payment of these costs

Costs can be broadly split into three categories: 1) the initial upfront cost of hardware (system and installation), 2) the cost of data transfer and system software / licences, 3) the ongoing maintenance of hardware and replacement kit. It should be noted that these are estimates only.

In addition to the varying costs of REM systems, different parts of the fishing fleet will have different financial capabilities, and the affordability of REM systems will vary from vessel to vessel and business to business. It may be appropriate in some cases for public funding to be provided to support the upfront purchase cost of REM equipment (for example, Marine Scotland is providing £1.5 million under the Modernisation of the Inshore Fleet Programme), and possibly in the form of grant funding via the Marine Fund Scotland. Any grant funding provided would be for Scottish vessels only although foreign vessels may wish to engage with their relevant authorities regarding potential funding avenues which may be available.

The UK pelagic (>40m) fleet has been consistently profitable^[9], with 27 large-scale trawlers making a net profit of around €140 million in 2017. The estimated net profit margin increased significantly from 36% in 2016^[10] to 50% in 2017 as weight of landings increased and costs decreased^[11]. As the majority of the UK fleet consists of Scottish vessels, it is expected that the cost of installing and maintaining the REM device (see above) will not detrimentally impact the profits of the subjected businesses.

Enforcement costs

As explored above, it should be stressed that this policy does not primarily seek to punish people breaking the rules. It should be emphasised that if fishers are adhering to the landing obligation and other rules and regulations, then a REM system will not identify any breaches of legislation. This policy will ensure existing Compliance efforts are supplemented with REM data, but otherwise will continue as at present.

To supplement existing Marine Scotland Compliance efforts, the REM system will be able to detect non-compliance (while it's very presence may deter in the first instance), and deal with it appropriately and proportionately if it occurs

This would also be applied to foreign vessels fishing in Scottish waters. These foreign vessels, if at any time they are present in Scottish waters, would be required to provide all of the fishing trip's data for analysis – otherwise these vessels could behave exactly as desired once having left Scottish waters.

Public Sector costs:

The decision to introduce a legislative requirement for REM, would result in costs being incurred by the public sector in the following areas:

• Preparation and delivery of this policy proposal
• Preparation of Statutory Instruments
• Development of voluntary instruments
• Software and licensing costs
• Compliance and enforcement – including additional staff
• Promotion of public understanding
• Regulatory and advisory costs associated with licensing decisions

Summary of Costs

Option 1: Do nothing

• No additional costs for the fishing industry or public purse

Option 2: REM

• Cost of REM systems – broken down to up front and ongoing costs (regardless of who pays)
• Data transfer costs – final system dependent
• Increased enforcement costs within Marine Scotland

Scottish Firms Impact Test

This section will be informed by evidence gathered during the consultation phase.

Businesses affected include some small and micro-sized firms. Additional costs imposed by the classification of the site have the potential to fall on small businesses.

Competition Assessment

Introduction of REM across the board (the level playing field) will ensure Scottish pelagic boats are not out-competed by non-Scottish vessels not having the same requirement.

With increased reputation of Scottish pelagic seafood by being demonstrably within fishing legislation (and therefore more in line with public demand), this will make the competitiveness of these products more favourable.

In 2019 pelagic species represented 60% by tonnage and just over a third by value (£195 million) of total landings by Scottish vessels. Most of these landings are landed by 19 vessels (2018 count) employing over 200 people^[12]. Mackerel was the most valuable specie landed accounting for 27% of the total value of Scottish landings. Pelagic species also make up the majority of landings abroad by Scottish vessels at 95% by tonnage. The UK over 40 metre pelagic trawler fleet of 27 vessels has been consistently profitable, with the net profit margin in 2017 estimated at 51%.

Pelagic fisheries are seasonal - in 2019, the first catching season peaked during the first six weeks of the year, then started again late summer. The fishery has a consistently high quota uptake for both the West Coast and North Sea. For example, in 2019 the uptake exceeded 100% for both mackerel and herring.

It should also be noted that should Scottish vessels receive support for the up-front costs, they would have an advantage over affected non-Scottish vessels.

Competition Filter Questions

Will the proposal directly limit the number or range of suppliers? e.g. will it award exclusive rights to a supplier or create closed procurement or licensing programmes?

No. Any supplier with the capabilities to meet the technical requirements of the REM system will be able to do so.

Will the proposal indirectly limit the number or range of suppliers? e.g. will it raise costs to smaller entrants relative to larger existing suppliers?

Limited / No Impact. New entrants to the pelagic fishing sector already face significant pressures to entry – not least because of the costs associated with commissioning and building a new pelagic vessel from scratch. This requirement will not make access for new entrants more difficult.

For suppliers, scale should not affect the competitiveness of larger suppliers over smaller. If the modest technical requirements can be met, this will be the only consideration.

Will the proposal limit the ability of suppliers to compete? e.g. will it reduce the channels suppliers can use or geographic area they can operate in?

No. Introduction of REM will not directly affect firms' route to market or the geographical markets they can sell into.

Since the proposal covers the whole fleet it assures a level playing field as long as the uptake of the REM devices does not affect the costs and profitability of any vessel disproportionately.

Will the proposal reduce suppliers' incentives to compete vigorously? e.g. will it encourage or enable the exchange of information on prices, costs, sales or outputs between suppliers?

No. Introduction of REM is not expected to reduce suppliers' incentives to compete vigorously.

Test run of business forms

As the policy is still under development, no business forms have yet been produced.

Legal Aid Impact Test

It is not expected that the REM requirement will have any impact on the current level of use that an individual makes to access justice through legal aid or on the possible expenditure from the legal aid fund as any legal/authorisation decision impacted by the proposed legislation will largely affect businesses rather than individuals.

Enforcement, sanctions and monitoring

As described in more detail above, this policy will be a method of enforcing compliance with existing fisheries legislation. Penalties will be applied in instances of non-compliance in line with existing offences.

Marine Scotland will remain the relevant competent authority with responsibility for scientific studies, compliance, monitoring and enforcement of the requirement to have REM on board.

Implementation and delivery plan

Consultation timescales

Launch consultation, running March 2022-June 2022

Preparation of draft legislation

Incorporating feedback from the consultation, legislation to be drafted April-July 2022.

Anticipating a lead in time for implementation it is roughly estimated that the requirement will come in to force in 2023.

Summary and recommendation

Option 2 introduction of legislative requirement for REM on applicable vessels is the preferred option.

As explored in detail above, this policy is fully supportive of the strategic context and outcomes of the Future Fisheries Management strategy^[13], namely:

• Overarching principles of sustainability – the policy will deliver full accountability of catch from the pelagic fishing sector, allowing for long term sustainability and growth.
• Environmental outcomes – further from the above, the policy will allow for more accurate calculation of catching limits, based on certainty that the amount of fish being extracted in known and accurate.
• Economic outcomes – thorough management of this fishery will ensure it remains productive and resilient, allowing for long term economic growth.
• Ensuring high level compliance safeguards the health of fish stocks which in turn reflects in potential long term growth in the industry. Additionally, signalling sustainable fishing practices adds value to the landed product and maintains international competitiveness.
• Social outcomes – further from above, as the policy supports the sustainable growth of this fishery, the wider benefits that flow from this industry will be realised in the communities the workforce and processing facilities are drawn from.

Declaration and publication

I have read the Business and Regulatory Impact Assessment and I am satisfied that (a) it represents a fair and reasonable view of the expected costs, benefits and impact of the policy, and (b) that the benefits justify the costs. I am satisfied that business impact has been assessed with the support of businesses in Scotland.