Resource Economics - Fall Christian Traeger. September Christian Traeger Resource Economics, UiO, Fall Renewable Resources

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1 Resource Economics - Fall 217 Christian Traeger September 217 Christian Traeger Resource Economics, UiO, Fall Renewable Resources Fishery Economics Christian Traeger Resource Economics, UiO, Fall 217 2

2 Natural Resource Classifications Natural resources can be classified as Renewable Resources: can regrow (replenish themselves). Usually biotic (living) resources. Fish, timber,... Non-renewable Resources: cannot regrow (at least within timescale relevant to human activity). Usually geological resources. Oil, coal, minerals,... Another classification Exhaustible: Scarce resources are exhaustible. Mostly used for non-renewables. Yet, also fish stocks are exhaustible. Inexhaustible: Resources that are available in (almost) unlimited supply (e.g. sunlight, wind,..) Christian Traeger Resource Economics, UiO, Fall Fisheries We analyze fisheries as an example of renewable resources a resource with particularly interesting dynamic behavior an economically important renewable resource a resource inviting substantial improvement in its management If we had more time, we would next study forestry economics Both are important because of sustainable use value and preservation value. We focus on use value. We discuss some aspects of valuation and preservation of tropical forests in ECON491 - Environmental Economics (spring). Christian Traeger Resource Economics, UiO, Fall 217 4

3 FISHERIES - What are we talking about? How much do we catch and what do we use it for? 214 Total World Capture: 93 (Marine: 82; Inland: 12) 214 Total World Aquaculture: 74 (= farmed) source: FAO s SOFIA 216 report ( SOFIA = The State of World Fisheries and Aquaculture Christian Traeger Resource Economics, UiO, Fall MARINE FISH CATCHES A word of caution - numbers and uncertainty Pauly and Zeller (216)

4 FISHERIES - What are we talking about? Where do we catch (most) fish? source: wk fangmengen regionen Christian Traeger Resource Economics, UiO, Fall FISHERIES - What are we talking about? Who is catching (most) fish? source: FAO s SOFIA 216 report ( Christian Traeger Resource Economics, UiO, Fall 217 8

5 FISHERIES - What are we talking about? Which species? source: FAO s SOFIA 216 report ( Christian Traeger Resource Economics, UiO, Fall FISHERIES - What are we talking about? State of world fisheries source: FAO s SOFIA 216 report ( Christian Traeger Resource Economics, UiO, Fall 217 1

6 FISHERIES Some questions we will address 1 What is overfishing? 2 Why does overfishing occur? 3 How to regulate marine fisheries to prevent overfishing? Christian Traeger Resource Economics, UiO, Fall Economic analysis of (over)fishing in a nutshell Benefits of catching fish revenue from selling fish on market consumer surplus employment opportunities in fishery Costs of catching fish direct cost of fishing effort (capital, labor) opportunity costs ( shadow price ) of catch: no further growth of individual fish reduced future stock size decreases future fishing benefits When overfishing usually second item falls short in benefit-cost analysis. Christian Traeger Resource Economics, UiO, Fall

7 FISHERIES - What are we talking about? Norway is a major fish exporter source: FAO s SOFIA 216 report ( Christian Traeger Resource Economics, UiO, Fall FISHERIES - What are we talking about? Norway s catch in 216 source: Christian Traeger Resource Economics, UiO, Fall

8 FISHERIES - What are we NOT talking about? Value from keeping the fish in the sea! Example: Whale watching source: Christian Traeger Resource Economics, UiO, Fall FISHERIES - What are we NOT talking about? Value from keeping the fish in the sea! Example: Snorkling & Diving. Guesstimate by DEMA: Contribution of industry to US GDP: 11 Bill. USD source: Christian Traeger Resource Economics, UiO, Fall

9 The Biomass Model of Fish(eries) Christian Traeger Resource Economics, UiO, Fall The Biomass Model of Fish(eries) Biological resources in general and fish in particular reproduce Key requirement for optimal management is understanding of resource s regeneration capabilities We model fish as biomass: tonsoffish It is our state variable S t In particular We neglect age structure We neglect interactions across species (or at least do not model them explicitly) More advanced models do not... Christian Traeger Resource Economics, UiO, Fall

10 Net Growth Growth rate of biomass S t constant r > for small stock sizes (exponential growth) decreasing with stock size: Density dependence (competition, predation, etc.) simplest assumption: growth rate decreases linearly with S t S t+1 S t = r r ( S t K S t = r 1 S ) t (1) K r: growth rate at S t = K: carrying capacity (for S t = K no more growth) This prominent example is called the logistic growth model (Net growth = difference between fish (in tons) born minus fish (in tons) dying Christian Traeger Resource Economics, UiO, Fall GROWTH OF FISH STOCK fish stock growth St+1 St ( rs t 1 S t ) K rs t S fish stock S t r: intrinsic growth rate (growth rate at S t =) K: carrying capacity Christian Traeger Resource Economics, UiO, Fall K

11 GROWTH OF FISH STOCK fish stock St K S time t S t S t S t Christian Traeger Resource Economics, UiO, Fall BIOMASS MODELS In general: S t+1 = S t + g(s t ) biomass growth function g(s t ) assumption 1: the growth function is positive for stocks that are not too small or too large: an S min andan S max > S min exist such that g(s min )= g(s max )= g(s t ) > foralls t (S min, S max ) assumption 2: the growth function is globally concave: g (S t ) < foralls t (S min, S max ) Christian Traeger Resource Economics, UiO, Fall

12 WESTERN AND CENTRAL PACIFIC BIG EYE TUNA source: Froese and Pauly (211) Christian Traeger Resource Economics, UiO, Fall WESTERN AND CENTRAL PACIFIC BIG EYE TUNA growth of big eye tuna [1 t] current biomass of big eye tuna [1 t] g(s t )= ρ S t 1+β S t κ S t [ 1 e ψ ( S t κ ) ζ] source: Grafton et al. (27), Hampton et al. (23) Christian Traeger Resource Economics, UiO, Fall

13 WESTERN AND CENTRAL PACIFIC YELLOWFIN TUNA source: Froese and Pauly (211) Christian Traeger Resource Economics, UiO, Fall WESTERN AND CENTRAL PACIFIC YELLOWFIN TUNA growth of yellowfin tuna [1 t] current biomass of yellowfin tuna [1 t] g(s t )= ρ S t 1+β S t κ S t [ 1 e ψ ( S t κ ) ζ] source: Grafton et al. (27), Hampton et al. (23) Christian Traeger Resource Economics, UiO, Fall

14 ATLANTIC MENHADEN source: Froese and Pauly (211) Christian Traeger Resource Economics, UiO, Fall ATLANTIC MENHADEN g(s t )=r 1 S t + r 2 S 2 t r 3 S γ t r 1 =4.36, r 2 =.8, r 3 =.38, γ =1.36. source: Tahvonen (28) Christian Traeger Resource Economics, UiO, Fall

15 PACIFIC HALIBUT source: Froese and Pauly (211) Christian Traeger Resource Economics, UiO, Fall PACIFIC HALIBUT ( g(s t )=rs t 1 S ) γ t K γ =1.7 source: Tahvonen (28) Christian Traeger Resource Economics, UiO, Fall

16 Minimum Viable Population Definition The minimum viable population (MVP) is the smallest possible size at which a biological population can exist without facing extinction Previous growth functions exhibit positive net growth for all < S t < S max Immediate implication: no minimal viable population Not necessarily the case critical depensation Christian Traeger Resource Economics, UiO, Fall Critical Depensation A net growth function exhibits critical depensation if there exists a minimum viable population S min > For example, extension of logistic growth model: ( )( St g(s t )=rs t 1 1 S ) t, r >, K 2 > K 1 > K 1 K 2 The minimum viable population is given by S = k 1 : K 2 if S > K 1 lim S t = K 1 if S = K 1 t if S < K 1 Christian Traeger Resource Economics, UiO, Fall

17 Harvesting Biomass (capturing fish) Christian Traeger Resource Economics, UiO, Fall BIOMASS AND HARVEST Harvest H t = biomass taken away from the fish stock Formulation 1: harvest after growing season S t+1 = S t H t + g(s t ) Formulation 2: harvest before growing season S t+1 = S t H t + g(s t H t ) Notation: stock left after fishing X t S t H t escapement Then stock dynamics can be written as S t+1 = X t + g(x t ) Consider stock dynamics under constant harvest H, then X t+1 = X t H + g(x t ) Next slide s graph identical between 1 & 2 with S X on horizontal Christian Traeger Resource Economics, UiO, Fall 217 3

18 BIOMASS AND HARVEST growth g(x )/harvesth constant harvest H growth g(x ) X X MSY escapement X X + K Christian Traeger Resource Economics, UiO, Fall BIOMASS AND HARVEST growth g(x )/harvesth constant harvest H growth g(x ) X X MSY escapement X X + K Christian Traeger Resource Economics, UiO, Fall

19 BIOMASS AND HARVEST growth g(x )/harvesth constant harvest H growth g(x ) X X MSY X + escapepemt X K Christian Traeger Resource Economics, UiO, Fall BIOMASS AND HARVEST growth g(x )/harvesth H MSY maximum sustainable yield H MSY growth g(x ) X MSY escapement X K Christian Traeger Resource Economics, UiO, Fall

20 BIOMASS AND HARVEST growth g(x )/harvesth unsustainable harvest growth g(x ) X MSY escapement X K Christian Traeger Resource Economics, UiO, Fall Maximum Sustainable Yield Definition The maximum sustainable yield is the maximum level of resource that can be harvested per period for an indefinite future. In general: H MSY =max X g(x ) Example: logistic growth function Christian Traeger Resource Economics, UiO, Fall

21 Maximum Sustainable Yield Definition The maximum sustainable yield is the maximum level of resource that can be harvested per period for an indefinite future. In general: H MSY =max X g(x ) Example: logistic growth function H MSY = rk 4 (independent of whether escapement X t or stock S t formulation) We sometimes refer to biological overfishing if S t < S MSY Christian Traeger Resource Economics, UiO, Fall Fishery Production Function In fishery harvest itself is not decision variable of resource manager This is different to, for example, forestry! In general, we consider a fishery production function H t = h(s t, e t ) depending on resource stock S t and fishing effort e t in period t Assumptions: h(s t, e t )/ S t >, h(s t, e t )/ e t > 2 h(s t, e t )/( S t e t ) 2 h(s t, e t )/( S t ) 2, 2 h(s t, e t )/( e t ) 2 Christian Traeger Resource Economics, UiO, Fall

22 Fishery Production Functions: Examples Often the catch-per-unit-effort production function (CPUE) is used: h(s t, e t )=qs t e t, q > With CPUE catch-per-unit-effort is proportional to stock S t Other often used production functions are: h(s t, e t )=qs α t e β t, q,α,β > h(s t, e t )=[1 exp( qe t )] S t, q > q is called catchability coefficient Christian Traeger Resource Economics, UiO, Fall The Yield-Effort Function Consider a resource with net growth function g(s t )and production function h(s t, e t ): S t+1 S t = g(s t ) h(s t, e t ) In steady state S t+1 = S t = S : g(s )=h(s, e ) Solving for S = ψ(e ) and inserting into production function gives yield-effort function: H = h ( ψ(e ), e ) Yield-effort function characterizes relationship between yield (harvest) and effort in steady state Christian Traeger Resource Economics, UiO, Fall

23 The Yield-Effort Function: Example Example: ( g(s t )=rs t 1 S ) t logistic growth function k h(s t, e t )=qs t e t CPUE production function Solving for S in steady state (using catch after growth) ( rs 1 S ) = qs e k S = k (1 q r e ) Inserting in CPUE production function: H(e )=qke ( 1 q r e ) Christian Traeger Resource Economics, UiO, Fall Open Access Christian Traeger Resource Economics, UiO, Fall

24 Open Access Definition An open-access resource is a resource which can be extracted without restrictions or barriers. Fish in high sea is an open-access resource Fish in high sea does not belong to anyone You can privatize high sea fish by catching it Open-access resources are common goods in the terminology of rivalry and excludability: rival but non-excludable rival non-rival excludable private goods club goods non-excludable common goods public goods Christian Traeger Resource Economics, UiO, Fall Froese, R. and Pauly, D. (211), Fishbase, World Wide Web electronic publication. version (2/211). Grafton, R. Q., Kompas, T. and Hilborn, R. (27), Economics of overexploitation revisited, Science 318, 161. Hampton, J., Kleiber, P., Takeuchi, Y., Kurota, H. and Maunder, M. (23), Stock assessment of bigeye tuna in the western and central pacific ocean, with comparisons to the entire pacific ocean, Standing Committee on Tuna and Billfish, SCTB16, Working Paper BET-1. Pauly, D. and Zeller, D. (216), Catch reconstructions reveal that global marine fisheries catches are higher than reported and declining, Nature Communications 7, article number Tahvonen, O. (28), Harvesting age-structured populations as a biomass. does it work?, Natural Resource Modelling 21(4), Christian Traeger Resource Economics, UiO, Fall