North-east Lewis Marine Protected Area: business and regulatory impact assessment

Rationale for Government intervention

Scotland's marine environment provides: food; energy sources (wind, wave and tidal power, minerals and fossil fuels); harbours and shipping routes; tourism and recreational opportunities; and sites of cultural and historical interest. Scotland's seas contain important distinctive habitats and support a diverse range of species that require protection in order to be conserved or for recovery to be facilitated. There are a number of market failures evident in the ways in which the marine environment is utilised. These relate to:

• Public goods: A number of the benefits of the marine environment, such as the non-use value of biological diversity, have 'public good' characteristics; they are non-excludable (no-one can be excluded from enjoying the benefits) and non-rivalrous (enjoyment of the benefits they provide by one person does not diminish the benefits that are available to others). These characteristics of the benefits from the marine environment mean that private individuals do not have an incentive to voluntarily ensure the continued flow of these goods, which can lead to their under-provision.

• Negative and positive externalities: externalities occur when actions of marine users affect other parties positively or negatively, and this is not reflected in market prices. In many cases, the market does not account fully for the value of benefits and costs of the activities of marine users. In the case of negative externalities (positive externalities) this can lead to more environmental damage (fewer benefits) occurring from economic activity than would occur if the full cost (benefits) of economic activity was accounted for. For example, for marine harvestable goods that are traded, such as wild fish, market prices often do not reflect the potential damage caused to the environment by that exploitation.

Due to the competing demands placed upon Scotland's marine resources, market failures related to public goods provision and externalities will lead to insufficient protection of the marine environment if left to the market. This provides rationale for government to intervene to protect the marine environment.