An Adjustment Restriction on Fish Quota: Resource Rents, Overcapacity and Recovery of Fish Stock

• Published in: Environmental & resource economics Vol. 67; no. 2; pp. 203 - 230
• Main Authors: van Dijk, Diana, Hendrix, Eligius M. T., Haijema, Rene, Groeneveld, Rolf A., van Ierland, Ekko C.
• Format: Journal Article
• Language: English
• Published: Dordrecht Springer Netherlands 01.06.2017; Springer Nature B.V
• Subjects: Adjustment; Bismuth; Capital; Capital stock; Decision analysis; Decisions; Dynamic programming; Economic conditions; Economic Policy; Economics; Economics and Finance; Environmental Economics; Environmental Law/Policy/Ecojustice; Environmental Management; European Union; Financing; Fish; Fish harvest; fisheries; Fisheries management; Fishermen; Fishing; Harvest; Industrial development; Investment; Investment behavior; Investments; issues and policy; marine fish; Net present value; North Sea; Present value; Probability theory; Quota adjustment restriction; Raw materials; Recovering; Recovery; Rents; Resource management; Shock; Stochastic dynamic programming; Sustainability; North Sea; Stochastic dynamic programming; Investment behavior; Fisheries management; Quota adjustment restriction
• ISSN: 0924-6460; 1573-1502
• DOI: 10.1007/s10640-015-9983-0

Management objectives of the European Union for North Sea fish stocks are shifting towards considering both biological sustainability and economic benefits. As part of multiannual management plans, an adjustment restriction on fish quota has been introduced. Its objective is to obtain an efficient fish stock and to reduce overcapacity for the fishing industry. We develop and apply a bi-level stochastic dynamic programming model to study the effect of a quota adjustment restriction on the net present value of resource rents, overcapacity and fish stock, when the system is recovering from a downward environmental shock. At level one, a policy maker sets the quota, considering fishermen behavior, stochastic fish stock dynamics, capital stock dynamics and a quota adjustment restriction. At level two, fishermen harvest myopically and make long-term investment decisions, assuming that fish stock and quota do not change over time. The two levels are linked by the quota, which is optimized by the policy maker at level one and becomes a restriction for myopic harvest and long-term investment decisions of fishermen at level two. Our analysis suggests that in the long run, overcapacity can be reduced by 54 % at modest costs, namely at a 1 % reduction in the net present value of resource rents. Long and short run sustainability of the fish stock is not affected.