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Wednesday, May 22, 2019

Resource Rent

Session Chair: Sherry Larkin, University of Florida;

15:30 – 15:48  |  3569049

Economic and biological drivers of profitability in a limited entry fishery

Minling Pan1;
1Pacific Islands Fisheries Science Center, Honolulu, USA;

For effective commercial fisheries management, it is important to understand both economic and biological drivers of profitability. Such information enables policy makers to assess not only the actual profitability of fisheries in their existing state, but also their potential profitability in response to the changes of economic and biological conditions, as well as the changes in fisheries management regimes. This objective of the study is twofold. First, it assesses the economic and biological drivers of the profitability in American Samoa longline fishery (a fishery targeted South Pacific albacore and managed under a limited entry management regime) and identifies the key economic and biological drivers affecting its profitability and fleet dynamics. Second, by building a simulation model, the study conducts sensitivity analysis to evaluate the economic performance of the American Samoa longline fishery in response to changes of the key economic and biological drivers, as well as the Potential Target Reference Points for the South Pacific Albacore newly proposed by Western Central Pacific Fisheries Commission.

15:48 – 16:06  |  3580573

Taxation of resource rent in fisheries, theory and policy relevance

Peder Andersen1;
1Department of Food and Resource Economics, University of Copenhagen, Frederiksberg, Denmark;

Taxation of resource rent can reduce the distortion of taxes and have distributional benefit. At the same time, it is important that resource taxes give the right incentives to an efficient use of natural resources. This paper looks at taxation of resource rent in an optimal taxation policy framework and how taxation of resource rent in fisheries can work in practice. The empirical part of the paper is on the Greenlandic shrimp fishery, the most important fishery in Greenland. As more than 10% of the gross value added comes from the fishery in Greenland, it is from a macroeconomic point of view of key interest to have an efficient taxation of resource rent. Model work shows that there is possible to increase resource rent taxation without compromising efficiency and at the same time reduce income inequality.

16:06 – 16:24  |  3585401

Resource rent in Icelandic fisheries

Stefan Gunnlaugsson1; Sveinn Agnarsson2;
1Univeristy of Akureyri, Akureyri, Iceland; 2University of Iceland, Reykjavik, Iceland;

According to economic theory, introducing a management system based on the principles of individual transferable quotas (ITQs) into an over-capitalized fishery should over time lead to considerable efficiency gains. This has indeed been borne out as witnessed by developments in: Australia, Canada, Chile, Denmark, Iceland, Norway, Sweden and the United States, where the introduction of ITQs led to increased profits and smaller fleets. Some of these profits can be attributed to the creation of resource rent, which may be regarded as a special kind of economic rent. Although the concept of resource rent has attracted considerable attention in the literature, relatively few studies have purported to study empirically the ability of the ITQ systems to produce these results. This paper adds to that growing body of evidence by analyzing the development of resource rent in the Icelandic fisheries since a comprehensive ITQ system was put in place in 1990. Two methods are applied to calculate resource rent in the Icelandic fisheries. One is based on the weighted average cost of capital and the other on comparison of the return of capital in the fisheries to returns observed in other sectors of the Icelandic economy. The findings indicate that up until 2008, hardly any resource rent can be identified in the Icelandic fisheries but since then the rent has averaged 16%-19% of the export value of the fishing industry. The late appearance of the resource rent can mainly be attributed to the almost continuous decline in fish catches in 1990-2008 and the declining value of the Icelandic krona. Although the fleet underwent considerable rationalization during this period, the restructuring only managed to keep up with the ever-shrinking catches. It was not until catches of the most important species, above all cod, began to increase again that significant resource rent began to emerge. A substantial and growing part of the resource rent has been captured by the government through the levying of fishing fees that first came into effect in 2004. These fees have in recent years amounted to 15%-29% of the estimated resource rent of Icelandic fisheries.

16:24 – 16:42  |  3586216

Pacifying the public: Iceland’s coastal fisheries

Stefan Gunnlaugsson1; Sveinn Agnarsson2;
1University of Akureyri, Akureyri, Iceland; 2University of Iceland, Reykjavik, Iceland;

The ITQ system introduced in the Icelandic fisheries in 1990 is often regarded as a shining example of biologically sound and economically efficient management regime. As expected, the fleet has shrunk, profits have increased and the fishing fees levied have become an important source of government revenue. Despite this, many within and outside the industry remain very critical of the management system. Mostly because the transferability of quotas can strip precarious coastal villages of their most vital livelihood and the difficulties associated with entering the fisheries. In order to partially pacify these critics, a special kind of coastal fishery was set up in 2009. The fishery is only open to small boats operating hand line and restricted to the summer months. In 2018, the fishing grounds off Iceland were divided into four zones, with a total quota of 10 thousand gross tons set for the fleet as a whole. The fishing was then stopped once that catch ceiling had been reached. Unsurprisingly, the coastal fisheries have not been profitable and significantly less profitable than other parts of Icelandic fisheries. Low quality of the fish and its poor handling has also been a negative factor, but significant steps have been taken to address these problems. Hopes that young people would take their first steps into the fisheries have been somewhat dashed with most of those taking part in the coastal fisheries older than 51 years of age. However, the coastal fisheries have become a way of life and are likely to remain an integral part of Icelandic fisheries.

16:42 – 17:00  |  3586860

Value generation by gear-type: An analysis of U.S. West Coast sablefish

Melissa Krigbaum1;
1University of Washington / NWFSC NOAA / Lynker, Seattle, WA, USA;

Sablefish is a commercially important species with catch allocated across multiple sectors and gear types on the U.S. West Coast. Since 2011, the shorebased trawl fishery has been managed by an Individual Fishing Quota (IFQ) program, which importantly includes a gear-switching provision intended to allow trawl fishery participants the flexibility to use fixed gear (long lines or pots) to more specifically target Sablefish with minimal bycatch of other species. Comparatively, Sablefish landed with trawl gear is often caught in conjunction with under-utilized groundfish such as Dover sole. As such, the increased usage of the trawl fishery quota by fixed gear operations has created tension between user groups. The Pacific Fishery Management Council (PFMC) is actively exploring potential alternatives to the status quo to best achieve the stated program goals of maximizing the value of the fishery. This research seeks to contribute to the conversation surrounding the implications of allowing such a flexibility measure. A hedonic price analysis of ex-vessel prices for U.S. West Coast Sablefish using panel fish ticket data and linear mixed effect econometric models will be presented. After fitting the price model, data for a counter-factual scenario is generated where the use of fixed-gear is prohibited in the IFQ fishery, adjusting observed trips to reflect trawl gear, and altering the percent of catch in each size category to adjust for the size-effect of different gear selectivity. Utilizing the fit price model to generate predicted prices for the observed and counter-factual trips allows for the calculation and comparison of predicted revenues for each scenario. During this presentation, the process for counter-factualdata generation will be discussed, as well as preliminary results demonstrating the value generation difference between scenarios.


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