Assume we know: the growth curve for biomass and the behaviour of individuals in the industry.

Transcription

1 3.3 Renewable resources (continued) Regulation of the Fishery Assume we know: the growth curve for biomass and the behaviour of individuals in the industry. B. Optimal taxes tax on the harvest Can we impose a tax on a fishery that would convert an OAE to one that is socially optimal? Consider the condition we derived earlier for the optimal stock when price is constant. TC TC TC F ( X) P = δ P h X h (3.1) Rearranging: TC F ( X) P TC h X TC = P δ δ h (3.2) The LHS is: The RHS is: LHS is also known as the user cost. Under OAE, fishers ignore the user cost so that: Ec655, 3.3. Renewable Resources, continued 1

2 P TC = h 0 (3.3) If we impose a tax equal to the user cost we could in theory get the efficient amount of effort. In our examples we have had a constant MC of effort. If MC increases with effort, (congestion costs), then the appropriate tax would also include a term to reflect congestion costs. Under open access as fishers operate as if the discount rate is infinite. Demonstrate in a graph showing the supply curve for the OAE and PP. The tax is levied on harvest, so that every kg of fish now yields (P-t) to the fisher, where t is the per unit tax rate. Total revenue is now: (P-t)H Show the tax in a graph of TR and TC versus effort. We seldom see a tax on catch applied in practice. Why? 1. Difficult to determine the right level Ec655, 3.3. Renewable Resources, continued 2

3 2. Difficult to change a tax as conditions change. 3. Difficult to implement incentive to evade the tax 4. May generate unemployment some will have to exit the industry very difficult politically C. A tax on fishing effort An industry license fee - a fee that must be paid before harvesting begins in any period - each firm pays an equal share of the total industry fee Total costs are now: TC = ce + t - show the impact in a diagram Tax on each unit of effort Total costs are now: TC = ( c + t ) E Sketch this new TC curve and show the effect on effort. Problems with a tax on effort: - how do you define effort - unless all types of effort are taxed, there will be an incentive to substitute non-taxed effort for that which is taxed. - Eg. What if you levied a tax on fishing boats? - Taxes may have unpredictable effects on the amount of effort people are averse to leaving the fishing business Ec655, 3.3. Renewable Resources, continued 3

4 C. Quotas C.1 A quota on total catch - at the beginning of the fishing season a quota or total allowable catch (TAC) is established for the fishery - once the TAC has be caught, the fishery is closed - Will this lead to the efficient level of effort in the industry? Sustainable harvests, F(X) Biomass, X Under a quota set at H MSY effort will be expended until the quota is reached. If quota causes the price of fish to rise, more fishers may enter the industry, expending even more effort. The quota of fish will be harvested with greater effort and likely in a shorter time. Congestion externalities as firms compete to get their share of the quota. C.2 Individual catch quotas Ec655, 3.3. Renewable Resources, continued 4

5 - we need a means of allocating the total quota amongst firms - suppose the gov t apportions the quota equally amongst all existing firms: h=h/e - Would this yield an efficient result? - For efficiency we need quotas to be divisible and transferable (ITQ s individual transferable quotas) - Alternately ITQ s can be auctioned off to the highest bidder C.3 Quotas on effort - could work in theory, but in practice it is extremely difficult to measure and restrict each component of effort D. Sole ownership in the fishery: the cooperative - self administration of the fishery by those doing the fishing - can manage fishery optimally - how many member should the co-op have and how should quota be distributed E. Case Study: The Pacific Halibut - commercially harvested off the west coast of the U.S and Canada since the late 1880s - stock depleted in southern portion of the region fishery concentrated off BC and Alaska - a long lived large flat fish 20 year old fish can weigh more than 100 pounds - reproduce only when the male is 7-8 years and female is 12 or older vulnerable to overfishing s the International Fisheries Commission was established renamed the International Pacific Halibut Commission in 1953 objective was to maintain the MSY stock and harvest - used quotas on total harvests, equipment restrictions and closures on nursery areas to control harvest -regulations did increase the stock to about the MSY level, but as our economic model predicts the catch was very inefficient too much effort Ec655, 3.3. Renewable Resources, continued 5

6 - technological advances ( circle hooks, snap-on gear, and automatic baiting machines) made it easier to catch fish - time to catch the allowable harvest was greatly reduced. - management of British Columbia s halibut fishery prior to 1990: (1) limited entry, introduced in 1979 when 435 commercial licenses were issued; (2) a total allowable catch (TAC) set for each year; and, (3) a fishery closure when the TAC was reached. - the TAC was often exceeded - very short fishing seasons, unsafe harvesting conditions, large quantities of by-catch being wasted, poor product quality, gluts in supply and low prices for the landed fish. - Individual quota system was established in 1991 on a 2 year trial basis, and then extended - Main features: Individual quota allocations calculated using a formula based on license holders vessel length and historical catch. Resulting 435 individual vessel quotas were expressed as fixed percentages of the annual TAC. Although transferability was not permitted during the first two years of the program, transferability (with some restrictions) was later implemented - Individual quotas introduced by Alaska in 1995, following Canada s success - Generally considered a success - Fishing season has lengthened, stock recovery has been noted, inefficient race for the fish has been eliminated - some concerns over fairness of quota distribution Figures taken from An Intelligent Tale of Fish Management, Fraser Institute, March 3, Ec655, 3.3. Renewable Resources, continued 6

7 Ec655, 3.3. Renewable Resources, continued 7