Choke species, discards and quota prices in multispecies fisheries

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Myles Griffin Hunt
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1 Choke speces, dscards and quota prces n multspeces fsheres Aaron Hatcher Unversty of Portsmouth, UK IIFET Conference, Aberdeen, July 2016 Hatcher (Portsmouth) Choke speces and quota prces IIFET / 11

2 Introducton What determnes quota (lease) prces n multspeces fsheres? Jontness n producton (harvest) - ndvdual quota prces not separable? Not straghtforward - mwtp may depend on (expected) costs assocated wth dsposal (dscardng, over-quota landngs) Quota prces then depend on behavour Quota demand/supply mbalances - excess demand and the problem of choke speces Only lmted possbltes for ncreased targetng/selectvty Context: EU TAC allocaton system and the landng oblgaton for demersal fsheres Quote: skppers wll pay anythng [for choke speces quotas] n order to keep fshng Hatcher (Portsmouth) Choke speces and quota prces IIFET / 11

3 Harvest patterns and TACs (quotas) Hatcher (Portsmouth) Choke speces and quota prces IIFET / 11

4 Multspeces harvest model Representatve frm harvest (catch) model Assume complance wth quotas on landng Fxed proportons technology wth zero harvestng costs where max p [β h,q,d h d ] r q ω d, s.t. h h; q β h d, d β h, = 1, 2,..., N. β s the proporton of the th quota stock n the harvest h ω s an expected (here unt) penalty for dscardng d > 0 quota q has a rental prce r Hatcher (Portsmouth) Choke speces and quota prces IIFET / 11

5 Multspeces harvest model The proft-maxmsng condtons are for h h and [p r ] β = λ 0 p + ω = r, for dscardng d > 0 We then expect quota prces to satsfy = 1, 2,..., N r [0, p + ω] Thus ] r = 0 p + 1 β [ [p j r j ] β j p + ω j = Hatcher (Portsmouth) Choke speces and quota prces IIFET / 11

6 Two speces example: zero dscard cost Consder two quota speces: Sp1 and Sp2 Assume Sp1 quota bnds frst: quota prce bd up to the margnal opportunty cost of dscardng r 1 = p 1 Sp2 quota lmts total harvest (at h margnal proft goes to zero) p 2 β 2 = r 2 β 2 r 2 = p 2 Or, Sp2 quota not bndng at h (r 2 = 0) p 2 β 2 = λ > 0 Hatcher (Portsmouth) Choke speces and quota prces IIFET / 11

7 Two speces example: postve dscard cost Sp1 quota bnds frst: quota prce bd up to the margnal opportunty cost of dscardng r 1 = p 1 + ω Sp2 quota lmts total harvest (at h margnal proft goes to zero) r 2 = p 2 1 β 2 ωβ 1 Or, Sp2 quota not bndng at h (r 2 = 0) p 2 β 2 ωβ 1 = λ > 0 Hatcher (Portsmouth) Choke speces and quota prces IIFET / 11

8 Two speces: speces 1 chokes harvest (no dscards) Assume harvest restrcted (choked) by Sp1 quota No dscards: arbtrarly hgh ω, or psychc cost? Sp1 quota bnds frst and lmts harvest: Sp2 quota s slack at h (excess supply) and r 2 = 0 Sp1 quota prced at margnal value of harvest r 1 = p β 1 p 2 β 2 Here the 2nd term on RHS can be nterpreted as the shadow prce of dscardng Hatcher (Portsmouth) Choke speces and quota prces IIFET / 11

9 Note: non-lnear dscard penaltes What f margnal (expected) dscard costs are ncreasng? Let ω = ω ( d ), wth ω ( ) > 0, ω ( ) > 0 The dscard condton becomes p + ω = r, = 1, 2,..., N Quota prces then satsfy ] r = 0 p + 1 β [ [p j r j ] β j = p + ω j = Example: choke speces quota prce now ncreasng n dscards, wth r 1 = p β 1 p 2 β 2 = p 1 + ω Hatcher (Portsmouth) Choke speces and quota prces IIFET / 11

10 Margnal value of harvest and margnal dscard penalty (2 spp) Hatcher (Portsmouth) Choke speces and quota prces IIFET / 11

11 Conclusons How much are fshermen wllng to pay for choke speces quota? If they behave ratonally, the prce celng s set by the opportunty cost of dscardng - the ex-vessel prce plus the expected margnal penalty (f any) Or the margnal value of the harvest, f ths s smaller These are equalsed n the non-lnear case Chokng the fshery mples no dscardng and choke speces quota bd up to the margnal value of the harvest Analyss can be extended to nclude the expected cost of landng over-quota fsh What nformaton do we then get from quota (lease) prces? Hatcher (Portsmouth) Choke speces and quota prces IIFET / 11

Appendix 6.1 The least-cost theorem and pollution control

Appendix 6.1 The least-cost theorem and pollution control Appendx 6.1 The least-cost theorem and polluton control nstruments Ths appendx s structured as follows. In Part 1, we defne the notaton used and set the scene for what follows. Then n Part 2 we derve a