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Environmental economics > Lecture 4: CPR (fisheries) theory > Flashcards

Lecture 4: CPR (fisheries) theory Flashcards

1
Q

What are characteristics of a common property resource?

A
  • Non-excludable
  • Open access
  • Rival good
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2
Q

Through which 3 cases goes the product curve as the number of boat trips increases?

A
  • Constant returns to scale (enough supply - constant return to scale) - no rivalry
  • Diminishing returns - when an extra boat is put in, it reduces the amount of other fishers but increases the total catch of all fishers. - competition - RIVAL
  • Absolute diminishing returns: Increase in boats - decrease in total catch over time - Overfishing
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3
Q

What is the total cost of operating the fishery? TC

A

All the boats together - marginal cost is the cost of putting one more boat out there.

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4
Q

What is the open-access equilibrium?

A

The level of use of an open-access resource that results from a market with unrestricted entry; this level of use may lead to depletion of the resource.

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5
Q

What will happen in the region of diminishing returns?

A

The profits per boat will begin to decline, but as long as each boat is profitable, there is an incentive for more boats to enter the industry - even into the region of absolutely diminishing returns.

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6
Q

When is there no incentive to add an additional boat?

A

When the profits per boat fall to 0 (every boat is losing money) and there would be an incentive for fishers to leave the industry.

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7
Q

What is the market equilibrium for a fishery?

A

When there is no more incentive to enter or exit the market -> NOT economic efficient. Maximum amount of fishers where there is still profit per boat.

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8
Q

What is another downside of reaching an open-access equilibrium?

A

It is in the region of absolute diminishing returns, so the eventual collapse of the ecosystem is a likely outcome.

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9
Q

What is the tragedy of the commons?

A

The tendency for common property resources to be overexploited because no one has an incentive to conserve the resource while individual financial incentives promote expanded exploitation.

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10
Q

What is the economic incentive to add one more boat?

A

As long as the benefits of one more boat exceed the cost of one more boar, then it makes sense for the industry as a whole to keep increasing the numbers of boats. (marginal revenue exceeds the marginal costs)

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11
Q

What is an economic efficient situation?

A

When marginal benefits equal marginal costs.

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12
Q

What is an effective policy enforcement in a fishery?

A

A licence fee to discourage overfishing - Correct licence fee is the difference between average revenue and average cost at the efficient level of effort.

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13
Q

Besides a licence fee, what would be another policy for fisheries?

A

A (transferable) fishing quota or privatisation of fishing pools

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14
Q

What is the most important tool to manage a resource?

A

For users of a common property resource to devise their own agreements to prevent the tragedy of the commons.

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15
Q

What are the conditions und which a cooperative local management of a common property resource can be effective?

A
  • Most users should be involved in devising rules for managing the resource
  • There should be monitors of the resource, accountable to the resource users
  • There should be mechanisms to resolve conflicts that are responsive and low-cost
  • Rules for managing the resource should be adapted to local conditions
  • There should be graduated sanctions for resource users who violate the rules
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16
Q

What is a source function?

A

The ability of the environment to make services and raw materials available for human use.

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17
Q

What is the caring capacity?

A

The level of pollution and consumption that can be sustained by the available natural resource base

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18
Q

What is a stable equilibrium?

A

An equilibrium, for example, of the stock level of a renewable resource, to which the system will tends to return after short-term changes in conditions affecting stock level of the resource.

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19
Q

What are precautionary principles?

A

The view that policies should account for uncertainty by taking steps to avoid low-probability but catastrophic events.

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20
Q

What is the maximum sustainable yield?

A

The maximum amount of fish that can be harvested without depleting the fish population over the long term.

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21
Q

Why is fishing beyond the maximum sustainable yield inefficient?

A
  • Revenues and total catch decline: because the fish population can’t replenish itself quickly enough
  • Total costs increase: As fish become scarcer due to overfishing, it may become more expensive to catch them (more equipment needed, go further out in sea).
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22
Q

What is scarcity rent?

A

An extra amount that people are willing to pay for something that is scarce - when something is both valuable and not easily available.

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23
Q

What is the caring capacity or natural equilibrium?

A

The maximum population size that an environment can sustainably support over the long term. The balance between the resources available in the environment and the needs of the population relying on those resources.

24
Q

What is cap and trade?

A

A policy tool to control emissions of pollutants. It puts a cap (limit) on the total amount of a specific pollutant that can be emitted by industries

25
Q

How does a cap and trade policy work?

A

Everyone has a limited amount of emission allowed, companies that are more efficient in reduction of emissions may end up with excess allowances, they can sell these to other companies. -> cost efficient distribution of emission reduction.

26
Q

The open-access equilibrium is usually:

A

Economically inefficient and ecologically unsustainable!

27
Q

The efficient price of a licence fee is determined by the difference between…

A

Average revenue and marginal cost. This is because, at the point where average revenue equals marginal cost, there is no additional gain or loss in efficiency by producing or selling one more unit.

28
Q

What is the inflection point?

A

The point where the stable equilibrium is reached. This is the point on the curve where the growth rate is fastest, and it signifies the transition from rapid growth to slower, more stable growth as the population approaches the carrying capacity. -> represents the point where the population stabilises around the carrying capacity of the environment.

29
Q

What is the real between economic optimum (e), max. sustainable yield (EMSY) and open-access equilibrium (EO) (E=fishing effort)

A

EO is higher than Both E and EMSY

30
Q

What is the economic optimum?

A

Considers both the ecological sustainability of the fishery and the economic profitability for the fishing industry. -> maximise the net economic benefits accounting for both the revenue from fishing and the cost associated with it.

31
Q

What is the flow type?

A

Reflects the rate of production or regeneration of a renewable resource over time (fe:amount of energy generated by solar power)

32
Q

What is the stock type?

A

The total quantity of a renewable resource at a given point in time (fe: amount of trees in a forest).

33
Q

How much is the biomass fish in globally in relation to pre-historic levels?

A

10%

34
Q

What is the Gordon model for optimal fish catch?

A

A model for determining the optimal catch of a fishery that maximises the economic benefits over the long term while ensuring the sustainability of the fishery.

35
Q

Explain the Gordon model.

A

The model considers the natural fish growth of the fish population -> logistic growth: they grow rapidly at first but slow down as they approach their carrying capacity.
- The model incorporates the impact of fishing on the population growth rate: as the level of fishing increases, it reduces the population growth rate.
- The model aims at finding the maximum sustainable yield.
–> Balance the benefits of harvesting against the costs of reducing the fish population’s growth rate—-> rule is to harvest the fish at a rate of equal to the rate of natural population growth .

36
Q

What is the main goal of the Gordon model?

A

To make sure the harvesting level does not exceed the populations regenerative capacity, preventing overexploitation and depletion of the resource.

37
Q

The gordon model is not a great representation of reality because it is based on the following assumptions:

A
  • Model assumes non-migrating species
  • Model assumes there is no minimum viable population
  • Model ignores populations age structure
  • No uncertainty in model (no random events).
38
Q

Due to which 2 reasons does the stock size of fish change over time?

A
  • Net natural growth which depends on the stock size.
  • Harvesting by humans.
39
Q

What are 2 trade offs in harvesting fish?

A
  • The costs vs the benefits of the harvesting
  • Catching fish now implies less growth in the future
40
Q

What is defined as sustainable harvesting for fish?

A

Quantity harvested such that stock size does not decrease, if we harvest exactly the growth rate, it is defined as sustainable harvesting.

41
Q

What determines the harvest quantity?

A
  • The amount of effort (days of fishing, size of the ship, technologie, number of boats)
  • The size of the fish stock
  • Market demand
  • catch limits
  • env. conditions
42
Q

Where is the economic optimum of sustainable fishing in a graph?

A

Where the difference between total costs and total revenues is the largest

43
Q

What will happen if you fish on the line?

A

The population will stay the same

44
Q

What are examples of policy interventions that can manage a CPR that is far from the social optimum?

A
  • Create ownership in parts of the sea
  • Remove current structure of subsidies
  • Limit fleet sizes or technology
  • Establish quotas
  • Improve enforcement/compliance
45
Q

What are EEZ’s?

A

Exclusive economic zones: a party has special rights regarding the exploitation and use of the marine resources.

46
Q

What is a marine protected area (MPA)?

A

A clearly defined geographical space managed to achieve the long-term conservation of nature. (Reality: 5000 and 0,8% of the ocean).

47
Q

What was the plan of the Durban target?

A

To get 20-30% marine protected oceans of the world’s oceans by 2012 - (costs: 5-19 billion, but generate fish catch of 70-80 billion).

48
Q

What are downsides of technology?

A

You have a larger risk of overshoot because you have a:
- Higher maximum catch per ship
- Fish density needed to reach maximum catch is lower

49
Q

How much do we loose annually due to illegal ,unreported and unregulated fish catch? (IUU)

A

10-23 billion annually

50
Q

What is capacity enhancing spending?

A

Buying more and bigger boats or providing funds to increase the overall capacity to catch fish - good for economy because more fish caught and sold

51
Q

What is beneficial spending?

A

Investing in things that help the environment and assure a good future for fishing

52
Q

What is more beneficial for fisheries? Capacity enhancing spending or beneficial spending?

A

Beneficial spending because in the long run, we do not only want to invest in making the industry bigger but also ensure that we have enough fish for the future. - balance between making money now and ensure the future fish stock.

53
Q

What are causes of overshoot collapse? (biophysical)

A
  • ❖ Knowledge about growth rates of fish and total fish catch is incomplete
  • ❖ Poor understanding of the level and the causes of the limit (i.e. tipping point)
  • ❖ Dynamics in and network effects between fish populations
54
Q

What are causes of overshoot collapse? (Economic)

A
  • ❖ Property rights are often not well established or enforced
  • ❖ There is an incentive to over-invest in effort (boats)
  • ❖ Short term profitable actions lead to long-term losses
  • ❖ More effort needed when stock and growth decrease: vicious cycle
55
Q

What are causes of overshoot collapse? (Governance)

A

❖ Coordination between fishermen is difficult, and a small group of environmentally minded fishermen will hardly affect the outcome
❖ It takes strong leadership and cohesion to avoid collapse (perhaps compare Norway & Canada)
❖ Long delays in deciding, responding, and actually dealing with the problem

56
Q

What elements should an individual transferable quote system (ITQ) have (from an economic pov to be effective and efficient?

A
  • Exclusive
  • Transferable
  • Secure
  • Durable

Environmental economics (12 decks)

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