Introduction: Economic and Policy Issues - Lecture Notes | ECON 122, Study notes of Economics

Download Introduction: Economic and Policy Issues - Lecture Notes | ECON 122 and more Study notes Economics in PDF only on Docsity! 2/13/2008 1 Fisheries Introduction: Economic and policy issues Population dynamics Sustainable catch-effort diagram Bio-economic equilibrium • Free access. • Sole owner Fishery management • Traditional regulation • ITQs, private harvester agreements, TURFs Topics: Optimal size limits, recreational fisheries, … . 2/13/2008 2 Components of stock dynamics Recruitment during year t Growth of individuals during year t Catch during year t Mortality during year t Change in stock during year t 2/13/2008 5 Natural growth Stock S(t), tons tons per year K Logistic growth model 2/13/2008 6 Sustainable catch, Q Stock S, tons tons per year K Sustainable yields Note: dS(t)/dt = f(S(t)) - Q(t), so if Q(t) = f(S(t)), the stock is constant. MSY 2/13/2008 7 Sustainable catch, Q tons per year Sustainable catch-effort curve Effort E Stock S EC MSY Note: With some growth functions and harvest technologies there may be a critical effort level, EC, beyond which positive yields cannot be sustained. 2/13/2008 10 3. Solve for Steady State Catch as Function of Effort (cont.) (iii) Finally, substitute the expression for S from step (ii) into the relationship between steady state Q and S from step (i). Solve the resulting equation for steady-state catch, Q, as a function of effort, E. Example: ⎥ ⎦ ⎤ ⎢ ⎣ ⎡ ⎟ ⎠ ⎞ ⎜ ⎝ ⎛−⎟ ⎠ ⎞ ⎜ ⎝ ⎛=−= E Q E QSSQ 101001001.)100(01. , which implies: ⎟ ⎠ ⎞ ⎜ ⎝ ⎛−= E QE 110 , or QEE −= 102 . Rearrange this to get the catch-effort relationship: 210 EEQ −= . Question: • What level of effort results in the maximum sustainable yield? 2/13/2008 11 4. Bioeconomic Equilibrium under Free Access Additional notation: P price per unit C cost per unit effort Assumptions: Demand is perfectly elastic, hence P is fixed. Supply of E is perfectly elastic, hence C is fixed. Free Access Equilibrium: Profit = PQ - CE. If Profit>0 E increases; if Profit<0 E decreases. In long run equilibrium with free access, Profit=0, or PQ = CE. This implies: E P CQ = . 2/13/2008 12 Sustainable catch, Q tons per year Free access equilibrium (vertical axis stretched up for easier viewing.) Effort E( Stock S) Note: With free access PQ - CE = 0, therefore Q = (C/P)E. (C/P)E QF EF 2/13/2008 15 Sustainable catch, Q tons per year Free access: effect of C increase on Q Effort E ( Stock S) (C0/P)E (C1/P)E C2>C1>C0 Q0 Q1 E0E1 (C2/P)E Q2 E2 2/13/2008 16 tons per year Maximum profit equilibrium Effort E( Stock S) (C/P)E Profit/P EP QP Note: At max. profit equilibrium PdQ/dE = C, or dQ/dE = C/P. 2/13/2008 17 5. Bioeconomic Equilibrium: Max. profit per year. Example: Use growth and production functions from preceding example. Assume: P = 1, C = 2. Profit = (10E - E2) - 2E. Maximum profit: dProfit/dE = 10 – 2E – 2 = 0. Solution: E = 4. Questions: • What is catch? • What is stock? 2/13/2008 20 Traditional Fisheries Management • Government dictates when, where, and how to fish. • Tools: Gear restrictions, trip limits, minimum size, seasonal closures, area closures etc. • Has gone from open access to restricted access. • Data from Alaska Halibut case follows. 2/13/2008 21 Changes in Catch and Season Length, 1970 to 1994 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 19 70 19 72 19 74 19 76 19 78 19 80 19 82 19 84 19 86 19 88 19 90 19 92 19 94 C at ch (m et ri c to ns ) 0 20 40 60 80 100 120 140 160 180 200 Season L ength (days) Catch Season Length Access open and seasons shortened in Alaska Halibut Fishery, 1970-1994 2/13/2008 22 Halibut Season: Two to Three 24-Hour Openings • Harvest waste (1/3 catch spoiled on boats in 1991) • Market gluts (depressed prices) • Ghost fishing (fish caught by lost or abandoned gear) • Hazardous fishing (“perfect storm”) • Actual catch often exceeded target (guessing wrong on fishing power) 2/13/2008 25 Vessel Consolidation In Alaska's Halibut fishery 0 500 1000 1500 2000 2500 3000 3500 4000 1992 1993 1994 1995 1996 1997 1998 1999 year Ve ss el N um be r ITQs introduced 3,412 1,612 2/13/2008 26 Dramatic Rise in value of Halibut ITQs • In 1995, aggregate value of the quotas was just over $295 million. • In 1998, aggregate value of the quotas had grown to nearly $495 million--a 67 percent increase in 4 years 2/13/2008 27 Safety improved: Number of search and rescue missions 109971528* 19991998199719961995Pre-ITQ * Annual average 1991-1994 2/13/2008 30 Private Harvesting Agreements: Government facilitates … • By identifying individual sectors that share a common trait • By limiting the number of license holders in each sector • By determining each sector’s share of the TAC • By exempting it from antitrust 2/13/2008 31 Fishermen within a sector. . . • form a harvesting cooperative • allocate harvest shares among themselves • monitor and enforce shares. • trade shares among themselves, if desired. 2/13/2008 32 Preexisting conditions • Relatively small number of participants who share common trait • Participants see clear benefits of cooperating to rationalize the fishery • Benefits of rationalization can be protected from outsiders • Clear signal that government will not overturn 2/13/2008 35 Total Product Recovery and Mix. Processed Products shown in metric tons per 100 metric tons round pollock harvest. Source: Pollock Conservation Cooperative (2001). 2/13/2008 36 Financial impact • Prior to co-op, revenues ran about $800 per ton. • Under co-op, 2002 revenues in the $1200 to $1400 per ton. • Recent raw pollock CDQ leasing for $500 to $800 per ton of quota • Pre co-op CDQ leasing for $300 per ton • J. Wilen estimates co-op generating ½ billion dollars in rent. 2/13/2008 37 Angling Management Organizations (AMOs) • Modeled after community development quotas in Alaska halibut. • Example: A group of charter-boat operators receives a quota for an area. • Given exclusive right to manage use of it. • Responsible for not exceeding share. • AMO can trade quota with other AMOs or commercial ITQ holders.