Questions from Last Time?

Transcription

1 Questions from Last Time? Efficiency requires that marginal costs of generation be equalized across all sources (energy efficiency, renewables, coal, gas) Efficient: MB=MC, MB i =MB j, MC i =MC j Efficient: The goal that will maximize the size of the economic pie Cost-effective: MC i =MC j Reaching a given goal at least cost MCi=MCj Efficient cost-effective Potential confusion: the cost effective solution is more efficient than other ways of reaching the same goal Efficient: absolute vs. relative

2 Environmental Economics in the News A loophole in the housing system Before housing is assigned to returning students, it is generally first assigned to another type of student the crafty or difficult student, depending on whom you ask. Alternative to drawing for the most-attractive houses: differential prices Better places would have higher housing fees (rent), worse places lower rents By not charging higher rents for better places, Stanford allows those rents to be gained by students But the availability of rents leads to rent-seeking behavior: Time & mental energy spent on figuring out ways to use the draw to best advantage Cultivate interest in themes, develop certain food alergies Tradeoff of Efficiency & Equity

3 Fisheries The Ecological & Economic problem Modeling the open-access & efficient solutions Fisheries policy: the ugly, the bad, and the good Policies for other wild species

4 Fish as percentage of total animal protein intake World 15.8 Developing Countries 18.3 Developed Countries 11.9 South Am erica North & Central America Oceania 9 Europe 10.3 Africa 16.2 Asia Source: FAO 2001.

5 Global Seafood Per Capita Has Been Falling 16 Seafood per person 14 kg per person Projection Less than half the seafood per person available at the peak in R. Watson and P. Tyedmers,

6 Fisheries in Trouble Atlantic bluefin tuna British Columbia Lingcod

7 FAO Classification of Marine Fisheries 100% 80% 60% 40% 20% 0% Undeveloped Developing Fully exploited Overfished Collapsed Analysis by R. Froese, IfM, Kiel, Germany

8 (t/km 2 ) Biomass of table fish in 1900 (map: V. Christensen, SAUP)

9 (t/km 2 ) Biomass of table fish in 1900 Biomass of table fish in 1999 (map: V. Christensen, SAUP)

10 Sources of Stock Decline Habitat destruction harm to coral reefs (breeding area, source of nutrients) harm to estuaries (reduction in freshwater flows) Eutrophication link, pollution Tragedy of commons overharvesting Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons. Freedom in a commons brings ruin to all. ~Garret Hardin Everybody s property is nobody s property ~H. Scott Gordon

11 Modeling the problem of open-access 1. Gold rush model I know we would all be better off if we harvested less, but I can t rely on others not harvesting, so I might as well 2. Stock externality

12 Constructing the model: Dynamics of fish stock S = Fish Stock (Population) S t+1 =S t + F(S t ) F(S) = Augmentation of Fish Stock In equilibrium: S t+1 =S t =S F(S)=0

13 Constructing the model: Incorporating fishing E: fishing effort (e.g. of boats) S t+1 =S t + F(S t ) G(E,S t ) G(S,E) = Fish Catch In equilibrium: S t+1 =S t =S F(S)=G(E,S) E 0 =0 < E 1 < E 2 < E MSY < E x

14 Constructing the model: Prices and Wages Total revenue (TR) = G x P = Social total benefit (STB) Total cost (TC) = E x w = Social total cost (STC)

15 Constructing the model: Prices and Wages Total revenue (TR) = G x P = Social total benefit (STB) Total cost (TC) = E x w = Social total cost (STC) MR=SMB MC=AC (flat) PMB=GxP/E=Avg Rev=SAB incentive to excess effort Stock externality similar to congestion

16 Summary of Model Open-access dissipates scarcity rent but doesn t necessarily lead to extinction (not quite a Tragedy ) Maximum sustained yield unlikely to be maximum net benefits Efficient stock is actually greater than MSY stock Extensions: Endogenous price (varies with catch) greater likelihood of extinction Uncertainty in growth function decreases optimal level of effort Environmental externalities decreases optimal level of effort Discounting (Dynamic Efficient Sustainable Yield) increases optimal level of effort towards competitive level

17 Fisheries Policies Counter-productive: subsidize employment Command & Control: regulatory limits on catch or effort halt season when total allowable catch (TAC) reached ( fishing derbies ) technology restrictions (restrictions on gear, boats, ) Non-tradable quotas on E or G Incentive-based: sole ownership (private or public) tax on E or G tradable quotas Individual transferable quotas (ITQs) Limited Access Privilege Program Other marine reserves boycotts aquaculture common-property

18 Pros & Cons of Derby Fisheries Pros: -- No need for regulator to allocate quota (permits) -- Easy to monitor Cons: -- risks to crew -- investment in huge motherships -- excessive investment in fish processing -- limited availability of fresh fish during much of year

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20 Technology Restrictions

21 Individual Fishing Quotas (IFQs) and Individual Transferable Quotas (ITQs) Set a total allowable catch Allocate quota (permits to land given amt. of fish) to individual operators If allow trading of quota -> Individual transferable quota (ITQ) Formally similar to emissions cap and trade Who might oppose ITQs?

22 Potential Benefits of Quotas Gains from ownership Internalize problems with open access Reduce the race to fish Gains from trade Rationalize the fisheries via market forces Gains for fish stocks (if TAC set appropriately)

23 Potential problems with Quotas Efficiency Transactions costs Information problems Uncertainty and decision-making complexity Distributional Consolidation and concentration Windfall gains Biological Bycatch discarded Highgrading

24 Experience with IFQs New Zealand is world leader in IFQs About 16 other countries also have IFQs -- apply to over 75 species US has 4 ITQ programs covering small portion of fisheries, but gains in those fisheries impressive Reduced bycatch by 40% Used 20% less gear to catch the same amount of fish Increased revenues per boat by 80% Doubled safety

25 Taxes on effort or catch

26 Marine Reserves No-Fishing Zones in Tropics Yield Fast Payoffs for Reefs

27 Incentives for preservation: Common Property Pacific islands Swiss alpine meadows Maine harbor gangs Zimbabwe: Communal Areas Management Program for Indigenous Resources

28 Incentives for preservation: Conservation/Mitigation Banking & Tradable Permits Mitigation banking Quino checkerspot butterfly Red-cockaded woodpecker Gopher tortoise Tradable hunting permits Walrus hunt in Northern Canada

29 Incentives for preservation: tying development to preservation Goldman Prize winner: Hammerskjoeld Simwinga North Luangwa Wildlife Conservation and Community Development Programme