Ecosystem intercomparison between Nordic Seas and NW Atlantic
Sustainable Economics in the Management of Fisheries and Natural Resources in the North Atlantic...
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Sustainable Economics in the Management of Fisheries and Natural
Resources in the North Atlantic
Nordic conference on the protection of the sea and living marine resources in the North Atlantic
Tórshavn 21-22 June 2001
Ragnar Arnason
Content of Talk
1. How natural resources should be utilized- All natural resources - not just living marine ones
- General principles of optimal utilization
- Fairly theoretical but (hopefully) still practical
2. Two dimensions:
- Resources under national jurisdiction
- Resources co-utilized by foreign nations
North Atlantic Communities
• Six main communities:– Northern Norway, – Shetland, – Faroe Islands, – Iceland, – Greenland – Newfoundland
• Small and isolated• Similar cultural background (except Newfoundland)
• Various degrees of political independence
• Heavily dependent on natural resources
• For production activity (industry)– Living marine resources (all)– Farmland (all)– Forest and forestry (Northern Norway, Newfoundland) – Oil and minerals (N. Norway, Shetland, Greenland, Newf.l, Faroes)– Hydro- and geothermal energy (N. Norway, Iceland, Newf.l)
– Tourism (all)
• For the quality of life– Pristine and clean natural environment– Maintenance of cultural traditions and identity
Dependence on Natural Resources
• New industries depend on natural resources directly and indirectly
– Power intensive industries– Tourism (pristine environment and culture)
– Services and commerce (partly based on natural resource activities)
– Even high tech industries (people environment)
• Without their unique natural resources the North Atlantic communities could hardly exist
Dependence on natural resources has not diminished substantially
Optimal use of natural resources
• Social importance implies the need for optimal use
• Optimal use = maximization of flow of benefits from the resources over time(Nota bene: market and non-market benefits)
• Optimality is crucial– Anything else implies social waste
Optimal use and Sustainability
• Optimal use may or may not imply sustainability– Renewable resources only– Optimality sometimes implies depletion
• However…..– Maximum present value of benefits usually implies sustainability– Communities’ desire to last implies sustainability– International pressure for sustainable resource use
In a sense North Atlantic communities are custodians of their natural resources on behalf of the global community
Sustainability!
Good Resource Use
• Optimal utilization paths– Not constant utilization over time
• Identification of optimal paths– Science (geology, biology, engineering, economics, mathematics,
statistics, sociology etc.)
• Implementation of these paths– The art of resource management (system design, politics,
administration, management, enforcement technology, judicial processes)
Identification of optimal paths
• Find feasible utilization paths– Science, biology, geology etc.
• Select the optimal path – I.e. the one that maximizes present value of
benefits over time– Economics, mathematics, statistics
Time
QuantityLong termsustainableextraction
rate
Extractionpaths
Optimal renewable resource use:An example
Implementation of optimal paths
• Management system– Rules influencing resource use (E.g. turfs, quotas,
taxes, licences etc.)
• Enforcement system– Methods to enforce the management system
(monitoring, inspection, policing)
• Judicial system– A system for sanctioning violators
(courts, penalties etc.)
The Management System
1. Quantity constraints (commands)
2. Corrective taxes/subsidies (price
corrections)
3. Property rights
Three categories of methods
Quantity Constraints
• Aim: Alter natural resource use by commands
• Examples:– Restrictions on investments– Equipment requirements– Material restrictions– Restrictions on operating days– Production restrictions
• Generally economically inefficient– Do not generate social benefits– Costly to implement– But may conserve natural resources
The Simplest Natural Resource Model
Resource use
Values, $
Marginalcosts
Marginalbenefits
Q* Q0
MaxmumBenefits
Quantity Constraints
Resource use
Values, $
Marginalcosts
Marginalbenefits
Q*=Qrestricted Q0
New marginalbenefits
Corrective Taxes/Subsidies(Green taxes/subsidies)
• Aim: Alter incentives for natural resource use
• Examples– Tax on pollution (green taxes)– Tax on fish catch– Subsides for pollution abatement equipment– Subsidies for reduction of land improvement
• Can be economically efficient in theory– But difficult to administer correctly
Nota bene: Increased government revenues?
Property Rights
• Aim: Alter incentives for natural resource use
• Examples– Mining rights– Territorial use rights (land use)– Fish quotas (IQs/ITQs)
• Economically efficient in theory (... and practice)– But often administratively demanding– Sometimes not feasible to implement
Nota bene: Property rights are in many ways socially natural Property rights are foundation for the market system
Effects of property rights
Resource use
Values, $
Marginalcosts
Marginalbenefits
Q* Q0
Property price
Property Rights and Equity
• The institution of property rights is often assumed to be inequitable
• However, property rights are compatible with any desired distribution of benefits– Initial allocation of property rights– Taxation and redistribution of resource rents
Influences from other countries
• None of the North Atlantic communities has full control over their natural resources
• Examples of external impacts:– Water and airborne emissions (pollution)– Fishing from common stocks– Mining (from common resources)– Competing uses of resources (transport, military
activities, turism etc.)
International shared resources
• Lead to common property problems
• Just like unmanaged use of domestic resources
Potential huge losses(of all possible economic gains)
Other international influences
• Political pressure for utilization of resources– Often induced by environmental organizations
• Amounts to extortion– Either you do it right, or else
• Extortion is generally economically inefficient• Much better to “purchase” conservation
(….from harvesters)
Or, for that matter, “purchase extraction rights (….from conservationsists)
How do deal with international resources: ?
• Particularly difficult because lack of management authority (unlike within nations)
need super-national authority that unifies management responsibilities
• If so, we are essentially in the single country management framework
Similar management solutions
International resource management
• National property rights as widely as possible – Benefits the whole – But note problems with distribution of benefits Often difficult bargaining games
• But technical (and perhaps political) limits to property rights Need also commonly managed areas common property rights, international taxes
Conclusions
• North Atlantic communities are heavily dependent upon continued use of natural resources
• May also be regarded as custodians of a global natural resource heritage
Morally obliged to utilize these resources as efficiency as possible
This implies two things:
• Implement sensible resource management system domestically(i) Property rights(ii) Corrective taxes/subsidies
• Work toward international agreement on the sensible use of shared resources– This should be based on the same general
management principles