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on Environmental Economics |
| By: | Ariaster Baumgratz Chimeli; Francisco de Assis de Souza Filho |
| Abstract: | We take small steps towards the approximation between economic analysis and the science of climate forecasting in the formulation of policies to alleviate the impact of climatic shocks. We do so by estimating the relationship between climate variables and corn production in Ceará, an important State in the Brazilian semi-arid. Using parametric and non-parametric regression models, we first estimate the relationship between contemporaneous sea surface temperatures (SSTs) for the Pacific and Atlantic oceans and the local rainfed corn market. Next, we investigate the forecasting potential of future corn production conditional on information on current SSTs. We find strong evidence that climate determinants are important in determining current and future corn production, a key indicator of the climatic stress to which a large number of small farmers are subject in the Brazilian semi-arid. Additionally, corn production in the region is negatively correlated with federal government transfers meant to mitigate the impact of local droughts. These resources have been subject to lethargic bureaucracies, corruption and economic inefficiencies in general. The observation and forecasting of corn production can be invaluable in the design of more efficient, expeditious and transparent policies to mitigate the effects of droughts in the region. |
| JEL: | I38 Q11 O13 |
| Date: | 2004 |
| URL: | http://d.repec.org/n?u=RePEc:anp:en2004:118&r=env |
| By: | V. Kerry Smith; Holger Sieg; H. Spencer Banzhaf; Randy Walsh |
| Abstract: | This paper demonstrates how a new framework, using the necessary conditions for a locational equilibrium, offers the potential to transform this policy landscape. We demonstrate in this paper that the framework can be used as part of a benefit analysis of current environmental policy alternatives. We use our earlier estimates of household preferences derived within a locational equilibrium framework for the Los Angeles area. These findings are combined together with the spatially delineated, air quality projections developed by EPA for the evaluation of the 1990 Clean Air Act Amendments reported in EPA's first Prospective Analysis. Our approach is capable of accommodating the levels of detail generated for this policy assessment. It uses the same projected spatial variation in ozone concentrations in the computation of general equilibrium price effects as was developed for the agency's benefit analysis. Our findings indicate that the estimated annual general equilibrium benefits in 2000 and 2010 associated with the ozone improvements due to continuing the policies mandated under the 1990 Clean Air Act Amendments will be dramatically different by income group and location within the South Coast Air Quality Management District. The gains range from $33 to about $2,400 per household (in 1990 dollars). These differences arise from variations in air quality conditions, income, and the effects of general equilibrium price adjustment. To date, existing methods have been unable to measure consistently all of these effects together. |
| URL: | http://d.repec.org/n?u=RePEc:cmu:gsiawp:417232337&r=env |
| By: | Ekaterina Gnedenko; Zoya Gorbunova; Georgy Safonov |
| Abstract: | The project is devoted to investigation of the households’ perception of the ecological health risk using the example of the drinking water consumption. The authors estimate the households’ willingness-to-pay for improvement of drinking water quality. In addition, they analyze the possibilities of using the households’ resources as an alternative source for financing the ecological health risk reduction in Transition. |
| Date: | 2000–04–05 |
| URL: | http://d.repec.org/n?u=RePEc:eer:wpalle:98-263e&r=env |
| By: | Oliver Froer |
| JEL: | D61 Q22 Q26 |
| URL: | http://d.repec.org/n?u=RePEc:hoh:hohdip:217&r=env |
| By: | Oliver Froer |
| Keywords: | Contigent Valuation; |
| URL: | http://d.repec.org/n?u=RePEc:hoh:hohdip:245&r=env |
| By: | Helen Lückge; Sonja Peterson |
| Abstract: | To meet their Kyoto targets under the Burden Sharing Agreement, most European countries plan to make use of the flexible project mechanisms “Clean Development Mechanism” (CDM) and “Joint Implementation” (JI). In addition, CDM and JI credits can be used by installations to fulfil their obligations in the upcoming European emissions trading scheme. This paper compiles information from a variety of sources to give an overview over the different options to acquire CDM and JI credits and the extent to which European governments and companies plan to make use of these options. |
| Keywords: | European Union, CDM and JI, Emissions trading |
| JEL: | Q48 Q54 Q58 |
| Date: | 2004–11 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1232&r=env |
| By: | R. Andrew Muller; Stuart Mestelman; John Spraggon; Rob Godby |
| Abstract: | Using eight sessions (twenty-four ten-period markets) in a double ABA cross-over design, we demonstrate clear evidence of market power in double-auction emission trading markets (agents who are not constrained to only buy or sell). Conventional theory predicts that in half of the market-power environments monopsony should emerge and in half monopoly should emerge. Market-power outcomes are frequently observed, most often in the form of price discrimination, and most effectively by monopsonists. |
| Date: | 1999–12 |
| URL: | http://d.repec.org/n?u=RePEc:mcm:deptwp:1999-12&r=env |
| By: | R. Andrew Muller |
| Abstract: | This paper examines the differences between standard “cap-and-trade” emissions trading plans and “credit” plans in which individual agents create credits by reducing emissions below a firmspecific baseline. The two are equivalent if the baseline is a fixed quantity, but not if the baseline is specified as a baseline emissions ratio times current output. In the latter case there is no exogenous constraint on aggregate emissions. It may be called the case of “(ratio-based) credit trading”. Examples include the Clean Development Mechanism (CDM) of the Kyoto Protocol and the Canadian Pilot Emissions Reduction Trading plan (PERT). Unlike the case of cap-and-trade, the theoretical properties of ratio-based credit trading plans are not well known. In the absence of a binding quantity constraint, it is even difficult to understand how an ERC plan can generate a positive price. This paper studies the difference between ratiobased credit trading and conventional “cap-and-trade” plans in the context of a very simple model. It also considers how the two plans might interact if, for example, credits from a credit plan could be applied to commitments under a quantity-based cap-and-trade plan, and applies its findings to current plans for credit trading, including PERT and the clean development mechanism. The paper demonstrates that ratio-based credit trading is more like a tax instrument than a quantity instrument. It shows that there is no incentive to trade in a ratio-based market in which all firms receive baselines computed using their “business as ususal” emission ratios. Combining ratio-based credit trading with “cap-and-trade” allowance markets effectively relaxes the quantity constraint in the cap-and-trade plan and reduces the price of traded allowances. In the long run, there will be no effective constraint on emissions. The results have strong implications for current policy. In particular, they suggest that mixing quantity-based and ratio-based emission trading plans is inappropriate. |
| Date: | 1999 |
| URL: | http://d.repec.org/n?u=RePEc:mcm:deptwp:1999-13&r=env |
| By: | R. Andrew Muller |
| Date: | 1999 |
| URL: | http://d.repec.org/n?u=RePEc:mcm:deptwp:1999-14&r=env |
| By: | Martin Wagner; Georg Muller-Furstenberger |
| Abstract: | In this paper we discuss three important econometric problems with the estimation of Environmental Kuznets Curves, which we exemplify with the particular example of the Carbon Kuznets Curve (CKC). The Carbon Kuznets hypothesis postulates an inverse U-shaped relationship between per capita GDP and per capita CO2 emissions. All three problems occur in the presence of unit root nonstationary regressors in panels. Two of them are rather fundamental: First, the use of nonlinear transformations of integrated regressors in the Kuznets curve, which usually contains GDP and its square is problematic. This stems from the fact that nonlinear transformations of integrated processes are in general not integrated, which implies that (panel) unit root and cointegration techniques, widely used by now in the Kuznets curve literature, cannot be applied meaningfully in this context. Second, all methods applied up to now rest upon the assumption of cross-sectional independence. With a first application of factor model based methods that allow for cross-sectional dependence, we find evidence for nonstationary common factors in both the GDP and CO2 emissions series. Estimating the CKC on stationary de-factored data, we do not find support for an inverse U-shape. The third problem, abstaining at this point from the above two fundamental problems, is that the unit root and cointegration methods have been used too uncritically. In particular the notorious small sample problems of unit root and cointegration problems have been neglected. By applying various bootstrap algorithms and several estimators we show that a careful analysis should have lead researchers to interpret their results with more caution than commonly done, even when being unaware of the two problems stated above |
| Keywords: | Carbon Kuznets Curve; panel data; unit roots; cointegration; cross-sectional dependence; nonlinear transformations of regressors |
| JEL: | Q20 C12 C13 |
| Date: | 2004–12 |
| URL: | http://d.repec.org/n?u=RePEc:ube:dpvwib:dp0418&r=env |
| By: | Paola Ferretti (University of Venice) |
| Abstract: | In the contest of environmental management, the problem of minimizing the expected cost due to random checking processes and a possible failure is here addressed. Non-homogeneous Poisson checking processes with continuous non-decreasing intensity are considered, leading to the explicit detection of the sub-optimal solution for exponential or uniform failure density functions. The dynamic of the optimal solution is then analized using the phase-diagram tool. |
| Keywords: | Environmental management; audit scheme; random inspections; non-homogeneous Poisson checking process; optimal control; exponential failure density function; uniform failure density function. |
| JEL: | Q2 |
| Date: | 2004–11–29 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpga:0411010&r=env |
| By: | Andreas Waldkirch (Oregon State University); Munisamy Gopinath (Oregon State University) |
| Abstract: | Foreign direct investment (FDI) flows into developing countries have been increasing dramatically over the past decade. At the same time, there has been widespread concern that lax environmental standards are in part responsible for this surge. This paper revisits the pollution haven hypothesis by examining to what extent the pollution intensity of production helps explain FDI in Mexico. By focusing on pollution intensities, which are directly related to emission regulations, we avoid the problem of unobservable pollution taxes and allow for substitution between capital and pollution. Examining several different pollutants, we find a positive correlation between FDI and pollution that is both statistically and economically significant in the case of the highly regulated sulfur dioxide emissions. Industries for which the estimated relationship between FDI and pollution is positive receive as much as 40 percent of total FDI and account for as much as 30 percent of manufacturing output. Although our results suggest that environmental considerations matter for firms' location decisions, FDI locates in Mexico also in accordance with its comparative advantage in labor- intensive production processes, consistent with the previous literature. |
| Keywords: | Foreign Direct Investment, Pollution Haven, Mexico |
| JEL: | F21 F23 Q38 |
| Date: | 2004–12–07 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpit:0412005&r=env |
| By: | Lanier Nalley (Mississippi State University); Darren Hudson (Mississippi State University) |
| Abstract: | Much attention has been paid to alternative fuel sources of late. Ethanol has been a politically popular alternative fuel additive and has recently been pushed to the forefront as a leading replacement to MTBE as an oxygenate. This paper examines the potential markets for ethanol, including biomass ethanol, and discusses the strengths and weaknesses of different oxygenate products. We find that the market for ethanol is tenuous and dependent on government support at this time. Biomass ethanol is more expensive to produce, but does have the advantage of being able to be produced near petroleum refineries, thus reducing transport costs, compared to other sources of ethanol. |
| Keywords: | biomass, ethanol |
| JEL: | D1 D2 D3 D4 |
| Date: | 2004–12–08 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpmi:0412002&r=env |
| By: | Xavier Labandeira (rede & Department of Applied Economics. University of Vigo); Miguel Rodriguez (rede & Department of Applied Economics. University of Vigo) |
| Abstract: | Spanish emissions of carbon dioxide have grown by more than 40% in 2004 with respect to 1990. This is not compatible with the EU allocation of Kyoto-mandated CO2 reduction, even taking into account that Spanish emissions are allowed to rise by 15% in 2010. The reasons for this situation stem from a combination of economic growth and an inefficient energy domain, coupled with a total absence of climate change policies. In this paper, we use a static general equilibrium model to assess the effects of a sudden and intense (ie, with a limited time to carry out significant abatement) CO2 reduction by the Spanish economy. Our results show that the costs of immediate and medium-size reductions are not significant in the short run and could lead to the attaining of the EU agreed emissions level for Spain. However, delaying such action means that the degree of Spanish CO2 emission reduction is much higher and that economic costs are far more important. |
| Keywords: | Climate, energy, market |
| JEL: | P Q Z |
| Date: | 2004–12–02 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpot:0412001&r=env |
| By: | Ehrhart, Karl-Martin (Universitaet Karlsruhe); Hoppe, Christian (Universitaet Karlsruhe); Schleich, Joachim (Fraunhofer Institute for Systems and Innovations Research, Karlsruhe); Seifert, Stefan (Universitaet Karlsruhe, IWM) |
| Abstract: | We investigate the problem of optimally timing production schedules in an emissions trading regime that does not allow the transfer of unused allowances into future periods. We show that companies that produce storable goods partially shift the production to prior periods and imitate - by storing the output - emission rights banking. Competition distortions arise sectorally and intersectorally. |
| Date: | 2004–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:xrs:sfbmaa:04-55&r=env |
| By: | Schleich, Joachim (Fraunhofer Institute for Systems and Innovations Research, Karlsruhe); Ehrhart, Karl-Martin (Universitaet Karlsruhe); Hoppe, Christian (Universitaet Karlsruhe); Seifert, Stefan (Universitaet Karlsruhe, IWM) |
| Abstract: | Admitting banking in emissions trading systems reduces overall compliance costs by allowing for inter-temporal flexibility: cost savings can be traded over time. However, unless individual EU Member States (MS) decide differently, the transfer of unused allowances from the period of 2005–2007 into the first commitment period under the Kyoto Protocol, i.e. 2008–2012, will be prohib-ited. In this paper, we first explore the implications of such a ban on banking when initial emission targets are lenient. This analysis is based on a simulation which was recently carried out in Germany with companies and with a student control group. The findings suggest that an EU-wide ban on banking would lead to efficiency losses in addition to those losses which arise from the lack of inter-temporal flexibility. Second, we use simple game-theoretic considerations to argue that, under reasonable assumptions, such an EU-wide ban on banking will be the equilibrium outcome. Thus, to avoid a possible prisoners’ dilemma, MS should co-ordinate their banking decisions. |
| Date: | 2004–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:xrs:sfbmaa:04-60&r=env |
| By: | Tyron Venn (Risk and Sustainable Management Group, University of Queensland) |
| Abstract: | The large, unutilised native forest timber resource on traditional Wik land on Cape York Peninsula, Australia, could be managed for timber production to contribute to Wik socio-economic objectives. Wik elders have a set of forestry objectives and envisage that these will be best achieved by a timber industry selling unprocessed logs and woodchips. On the other hand, Balkanu Cape York Development Corporation, an indigenous community development organisation, anticipate that an industry utilising high-technology equipment and producing dried and dressed finished products including strip-flooring will best satisfy Wik forestry objectives. The Wilderness Society envisages small-scale, Ôcommunity developmentÕ activities such as portable sawmilling and niche market furniture manufacture as being appropriate types of forestry activities on Wik land. Goal programming analysis of forest use opportunities indicates that Wik forestry objectives are unlikely to be best satisfied by adopting the timber utilisation opportunities espoused by any one of the stakeholders. |
| JEL: | L73 |
| Date: | 2004–11 |
| URL: | http://d.repec.org/n?u=RePEc:rsm:murray:m704&r=env |
| By: | Thomas Bue Bjorner; Lars Garn Hansen; Clifford S. Russell (Department of Economics, Vanderbilt.edu) |
| Abstract: | Provision of information on the environmental effects of consumption is often put forward as an appealing alternative to traditional means of environmental regulation such as permits and environmental taxes. When consumers in opinion polls are asked if their purchasing decisions would be influenced by information on environmental or ethical aspects of products, the majority seem very ready to say yes. However, evidence for actual behavior along these lines is still limited. The paper presents an empirical analysis of the effect of a certified environmental label (the Nordic Swan), using a large Danish consumer panel with detailed information on actual purchases from the beginning of 1997 to January 2001 (weekly observations). In 1997, few products with the Nordic Swan label were available on the Danish market, as Denmark did not join the program of the other Nordic countries until April, 1997. Since then a considerable number of brands of different products in the Danish market have obtained the label, and the data includes information on purchases before and after a number of brands obtained the Swan label. In the paper we use a multinomial logit model to quantify the effect of the Swan label on consumers' choices among different brands of toilet paper, paper towels and detergents. It does appear that the Nordic Swan label has had a significant effect on Danish consumers' brand choices for toilet paper and detergents, corresponding to a willingness to pay for the certified environmental label of 10-17% of price of the labelled products. Results are less conclusive for paper towels, but the environmental label appears to have had less influence on the brand choice for the user of paper towels. . |
| Keywords: | Environmental labelling, information provision, consumer brand choice |
| JEL: | C25 D12 D64 Q28 |
| Date: | 2002–03 |
| URL: | http://d.repec.org/n?u=RePEc:van:wpaper:0203&r=env |
| By: | Johana Etner (GAINS et EUREQua); Meglena Jeleva (LEN-C3E et EUREQua) |
| Abstract: | This arrticle analyzes the determinants of voluntary contribution to environmental quality by introducing the perception of the environmental risk. The environmental quality is assumed uncertain and influenced by current quality and individuals' contributions. We consider individuals who are aware both of the impact of their voluntary contributions and of the quality of the current environment on the future quality of environment. Agents' preferences are represented by the RDEU model. We show that the contribution level results from two effects : a wealth effect (environmental or financial) and a risk one. It appears that wealth effects (unless for extreme wealth levels) is not sufficient to explain the implication of agents in the improvement of the environmental quality and that risk and attitude towards risk should be taken into account. |
| Keywords: | Risk perception; pessimism; optimism; environmental quality |
| JEL: | D89 D69 H23 |
| Date: | 2004–10 |
| URL: | http://d.repec.org/n?u=RePEc:mse:wpsorb:v04099&r=env |
| By: | Pierre-André Jouvet (GAINS et GREQAM); Philippe Michel (GREQAM et EUREQua); Gilles Rotillon (THEMA) |
| Abstract: | We study, in a simple model, the partial equilibrium of an industry with n firms endowed by different technologies which have different pollution effects. The price of input (labor) and the demand curve to the industry are given. Pollution is restricted by a tradable market of permits in the industry. We define an environmental efficiency factor for each firm. Given the total dotation of permits, the larger is the environmental efficiency factor, the larger is the firm's contribution to total production. to study the long run efficiency, we explicit the role of capital in production and obtain a proportional environmental efficiency factor. Last, we analyze the consequences of permits' allocations on the profitability of the firms. |
| Keywords: | Environmental efficiency factor, environmental performance, indicators, market of permits, undesirable output |
| JEL: | D2 D61 L19 Q28 |
| Date: | 2004–02 |
| URL: | http://d.repec.org/n?u=RePEc:mse:wpsorb:v04011&r=env |
| By: | Pierre-André Jouvet (GAINS et GREQAM); Philippe Michel (GREQAM et EUREQua); Gilles Rotillon (THEMA) |
| Abstract: | We study optimal growth and its decentralization in an overlapping generations model. The decentralization of an optimal path needs some specific taxes in addition to lump-sum transfers if there are externalities. The introduction of market of permits allows to neutralize the external environmental effects. We shows that there is a unique management of permits such that the equilibrium coincides with the optimal path : all permits should be auctioned i.e. no permits to firms. This conclusion is in contradiction with the usual pratice of grandfathering. |
| Keywords: | Optimal growth, environment, market of permits |
| JEL: | D61 D9 Q28 |
| Date: | 2004–02 |
| URL: | http://d.repec.org/n?u=RePEc:mse:wpsorb:v04012&r=env |
| By: | Basak Bayramoglu (Ceras-ENPC et EUREQua) |
| Abstract: | This paper analyses the transboundary pollution between Romania and Ukraine, coastal states along the Black Sea, and studies the welfare consequences of institutional arrangements for controlling this problem. To achieve this goal, we use a dynamic and strategic framework. We compare in terms of total welfare for two countries a first-best case with three different institutional arrangements : the noncooperative game of countries, the uniform emission policy and the constant emission policy as proposed by the Black Sea Commission. Our findings indicate that the noncooperative game provides a better level of total welfare than the other rules. |
| Keywords: | Black Sea, dynamic games, environment, institutional arrangements, noncooperative games, transboundary pollution, water |
| JEL: | C72 C73 Q5 Q53 |
| Date: | 2004–03 |
| URL: | http://d.repec.org/n?u=RePEc:mse:wpsorb:v04020&r=env |
| By: | Satish Chand |
| Abstract: | Not available |
| JEL: | O13 |
| Date: | 2001 |
| URL: | http://d.repec.org/n?u=RePEc:idc:wpaper:idec01-6&r=env |
| By: | Elizabeth H. Petersen; Steven Schilizzi; David Bennett |
| Abstract: | The results of this analysis show that a long-term tree crop plantation is effective at reducing carbon emissions from a predominantly grazing farming system. However, if the plantations are destumped, much of the carbon will be returned to the atmosphere in time, in which case benefits are confined to their ability to ‘buy time’ for the development of less-polluting technologies. The accreditation of commercial tree crops may provide a socially and politically feasible solution for medium-term environmental policy. The benefits of the policy would be strengthened if implemented in conjunction with salinity abatement policy. |
| JEL: | Q26 |
| Date: | 2002 |
| URL: | http://d.repec.org/n?u=RePEc:idc:wpaper:idec02-8&r=env |
| By: | Elizabeth H. Petersen; Steven Schilizzi; David Bennett |
| Abstract: | Three policy options for greenhouse gas abatement in the predominantly grazing systems of Western Australia are analysed. The two taxation policies (a tax on total emissions, and a tax on methane emissions only) are only effective at extreme tax rates ($85/t CO2 equivalents)where farming systems are no longer economically viable. The third policy option, emission restrictions, allows farms to remain profitable at approximately four times greater abatement levels than the taxation policies, and is found to be the most effective and efficient policy option studied. However, it is concluded that the introduction of any farm-level policy for greenhouse gas abatement would be politically unpopular and, in the absence of swift and innovative technological change, would cause the current farming systems to fail and be replaced by alternative land-uses. |
| JEL: | H23 |
| Date: | 2002 |
| URL: | http://d.repec.org/n?u=RePEc:idc:wpaper:idec02-9&r=env |
| By: | Kevin J. Fox; R. Quentin Grafton; Tom Kompas; Tuong Nhu Che |
| Abstract: | The paper presents the first ex-post analysis of profit and productivity of individual vessels following a vessel or licence buyback in a fishery. Using individual firm-level data for the period 1997-2000, the paper analyzes a “natural experiment" of the effects of a 1997 scheme to reduce fishing capacity in the South East trawl fishery of Australia. The scheme was unique in the sense that the buyback was implemented in a fishery managed by individual vessel tradeable harvesting rights rather than input controls. Using an innovative index method that decomposes the contributions of output prices, input prices, vessel size and productivity to relative profits, the economic performance of vessels is analyzed in the year of the buyback and for three years afterwards. Profits for all vessel classes rose over the period 1997-2000 following the 1997 buyback of 27 fishing licences, but some of the gains were due to a rise in output prices that were independent of the adjustment program. All vessel classes (small and large) also experienced substantial productivity gains immediately following the 1997 licence buyback with an average increase over all vessels of 39%. This increase, coincident with a decline in catch per unit of effort for key species, provides strong support that the buyback was successful at improving economic performance. Ongoing productivity improvements for small vessels over the period 1998-2000 following the buyback is attributed to the existence of individual tradeable harvesting rights in the fishery |
| JEL: | C43 D24 Q22 |
| Date: | 2003 |
| URL: | http://d.repec.org/n?u=RePEc:idc:wpaper:idec03-2&r=env |
| By: | Tom Kompas; Tuong Nhu Che; R. Quentin Grafton |
| Abstract: | The paper provides the first ex-post estimates of the effects on technical efficiency of input controls in a fishery. Using individual vessel data from the northern prawn fishery of Australia for the years 1990–1996 and 1994–2000, a stochastic production frontier is estimated to analyse the efficiency impacts of input controls on engine and vessel size. The results indicate that technical efficiency is increasing in a measure of vessel size and engine capacity that was controlled by the regulator from 1985 to 2001, and decreasing in an unregulated input, gear headrope length. The study shows that fishers have substituted from regulated to unregulated inputs over the period 1990-2000 and technical efficiency has declined coincident with increasing restrictions on vessel size and engine capacity. The decline in technical efficiency indicates that the goal of the regulator to increase economic efficiency has not been realised. |
| JEL: | O13 Q22 |
| Date: | 2003 |
| URL: | http://d.repec.org/n?u=RePEc:idc:wpaper:idec03-3&r=env |
| By: | Tom Kompas; Tuong Nhu Che |
| Abstract: | In this paper efficiency gains and associated cost reductions from increases in traded quota are estimated with a stochastic cost frontier for the Australian South East Trawl Fishery (SETF). Estimation of this frontier also provides key information on the relative importance of input costs in the SETF, returns to scale, variations in costs as a result of trade in quota and the economic performance of each fishing vessel, year to year. Final estimations indicate that increases in the volume of quota traded have resulted in considerable efficiency gains and cost reductions in the SETF, ranging from 1.8 to 3.5 cents per kilogram for surveyed vessels for every one per cent increase in the volume of quota traded, or 1 to 2.4 per cent of total variable costs, with considerable gains also accruing to crew and skipper in the form of larger share payments. Mean vessel efficiency is relatively high in the SETF, estimated at over 90 per cent, and increases further to 92 per cent over the sample period with increased trades in quota. |
| JEL: | Q22 Q28 |
| Date: | 2003 |
| URL: | http://d.repec.org/n?u=RePEc:idc:wpaper:idec03-6&r=env |
| By: | Tom Kompas |
| Abstract: | This paper is a study of the production technology and relative efficiency of vessels harvesting banana and tiger prawns in the Northern Prawn Fishery (NPF), one of Australia’s largest and most lucrative fishing areas. It is based on an unbalanaced panel data set of 226 observations among thirty-seven vessels for the years 1990-1996 and employs a technique which specifies a stochastic frontier production function in order to decompose the variation among vessels in the harvest of prawns due to unbounded random effects beyond firm control from those that result in differences in technical inefficiency among fishing vessels in the industry. In other words, variations in maximum expected output can occure either as a result of stochastic effects (e.g., good and bad weather states), or from the fact that vessels in the industry may be operating at various levels of inefficiency due to mismanagement, poor incentive structures, less than perfectly competitive behaviour or inappropriate input levels or combinations. Estimation of this output frontier also provides key information on the relative importance of inputs in the production of banana and tiger prawns, output elasticities, returns to scale, possible variations in stock size and the economic performance of each fishing vessel, year to year. Likelihood ratio tests confirm that both stochastic effects and the extent of technical inefficiency matter, thus making traditional OLS estimates inappropriate. The level of technical inefficiency is shown to depend positively on gear headrope length and negatively on either the number of A-units or fuel expenditures. The point is especially relevant since A-unit restrictions over vessel size and engine power in the fishery during this period appear to have resulted in a substitution toward less efficient but unregulated inputs, such as gear headrope length. In this regard, the recent introduction of gear headrope length restrictions may be justified on two counts, both as a device to limit effor or tach and protect prawn stocks and as a way, given the final estimates in this paper, of improving economic performance by increasing the technical efficiency of vessels remaining in the industry. Nevertheless, it is important to emphasize that restrictions on an existing inefficient input may result in far smaller reductions in effort than projected, since the technical efficiency of vessels in the fishery will rise. With an increase in technical efficiency, gear-restricted fishing firms will harvest at points closer to their output frontiers. Moreover, with the removal of A-unit restrictions, ‘effort creep’ in the form of larger vessels and more powerful engines may more than compensate for any decrease in effort due to gear reduction. |
| JEL: | O33 Q22 |
| Date: | 2001 |
| URL: | http://d.repec.org/n?u=RePEc:idc:wpaper:idec01-8&r=env |