The optimal tax for maximum economic yield: Fishery regulation under rational expectations

This paper examines the optimal tax to achieve maximum economic yield (MEY) exploitation in a rational expectations model of a competitive open-access fishery. To analyze the dynamic evolution of resource use a structural model which explains the relationship between the firm and the industry is presented. The unregulated equilibrium is contrasted with the potential MEY. Conditions under which the unregulated equilibrium will be MEY are explored. In addition, a tax is devised which will cause non-MEY competitive exploitation to become MEY when the tax is implemented.     

Commercial fisheries under price uncertainty

The deterministic models applied in economics of fisheries are extended to comprise price uncertainty and risk aversion among the fishing units. It is proved that in the open-access fishery both the total fishing effort and the number of fishing units are reduced as the variance of the price increases; that the total fishing effort may be smaller in the open-access fishery than in the optimal fishery at a high variance; that only a fixed producer price system can create a first-best optimum, and that a tax on revenue is more efficient than both fishing unit quotas or tax on catch.     

A free lunch in the commons

We derive conditions under which raising costs through a regulatory constraint or a fully expropriated tax can increase the profits arising from a common-pool resource. The basic model assumes a fixed number of identical agents with linear costs selling in a single period at an exogenous price. A necessary and sufficient condition for a cost increase to be profitable is that aggregate output from the resource be locally convex in aggregate effort. We also show that cost increases can be profitable even if price is endogenous, agents are heterogeneous, entry is costless, or agents are playing a Markov-perfect equilibrium of a dynamic game. We also discuss more general welfare implications of the result along with its relation to existing results for a Cournot oligopoly.     

Salience of carbon taxes in the gasoline market

We demonstrate that the carbon tax imposed by the Canadian province of British Columbia caused a decline in short-run gasoline demand that is significantly greater than would be expected from an equivalent increase in the market price of gasoline. That the carbon tax is more salient, or yields a larger change in demand than equivalent market price movements, is robust to a range of specifications. As a result of the large consumer response to the tax, we calculate that during its first four years, the tax reduced carbon dioxide emissions from gasoline consumption by 2.4 million tonnes.     

Optimal exploitation of a fishery employing a non-linear harvesting function

A harvesting function is developed to described the rate of removal of fish from a fish population. The function incorporates the effects of both the handling or processing time of the catch and the competition, between boats in the fleet, for the fish.We will assume that the growth rate of the fish population can be modelled with a concave, dome shaped growth curve. With this assumption, it has been shown that if the rate of harvesting the fish is linearly related to both effort (which can be thought of as some measure of the number of boats in the fleet) and the population size, then the population will tend towards a single equilibrium level which is globally stable. This paper shows that the saturation effects due to the handling time may generate two equilibrium levels (one stable, one unstable) rather than a single globally stable equilibrium. The results of competition between boats are economically undesirable because of the decrease in efficiency. However, this competition may be beneficial to the exploited fish population.Using the harvesting model derived earlier, the steady state or long term optimal harvesting policies as well as the transition paths to these states are developed. The only constraint is on the maximum allowable effort which is effectively an upper limitation on the fleet size or number of man-hours of fishing.     

Strategic climate policy with offsets and incomplete abatement: Carbon taxes versus cap-and-trade

This paper provides a first analysis of a “policy bloc” of fossil fuel importers which implements an optimal climate policy, faces a (non-policy) fringe of other fuel importers, and an exporter bloc, and purchases offset from the fringe. We compare a carbon tax and a cap-and-trade scheme for the policy bloc, in either case accompanied by an efficient offset mechanism for reducing emissions in the fringe. The policy bloc is shown to prefer a tax over a cap, since only a tax reduces the fuel export price and by more when the policy bloc is larger. Offsets are also more favorable to the policy bloc under a tax than under a cap. The optimal offset price under a carbon tax is below the tax rate, while under a cap and free quota trading the offset price must equal the quota price. The domestic carbon and offset prices are both higher under a tax than under a cap when the policy bloc is small. When the policy bloc is larger, the offset price can be higher under a cap. Fringe countries gain by mitigation in the policy bloc, more under a carbon tax since the fuel import price is lower.     

Market equilibrium and welfare effects of a fuel tax in China: The impact of consumers' response through driving patterns

We investigate the market equilibrium and welfare effects of a fuel tax in China relative to an alternative policy instrument that rations the number of new automobile sales through auctioned quotas. Unlike those of previous studies, our modeling approach incorporates both household car purchase and utilization decisions, the latter of which have been ignored in previous studies on China's fuel tax. Ignoring this margin of choice will underestimate the fuel tax's ability to mitigate externalities. Using detailed household-level panel data and a fixed effects econometric specification, we estimate the fuel price elasticity of vehicle miles traveled is −0.59 on average. The results of the counterfactual analysis suggest that a 51% increase in tax-inclusive gasoline prices will reduce car sales by 24.9% but increase social welfare to a degree that depends on vehicles' lifetime. We find that compared to auctioned quotas, the fuel tax results in greater car sales but higher social welfare.     

Private aquaculture and commercial fisheries: Bioeconomics of salmon ranching

This paper shows that common property problems associated with open access salmon ranching in the absence of a commercial fishery result in inefficiency characterized by overstocking. The presence of an open access fishery presents additional common property problems which will inhibit the development of fish ranching. At prices where salmon ranching does occur, the open access commercial fishery will tend to overexploit the natural fish stock to a greater extent than if there were no salmon ranching. It is shown that there exists a range of prices where both fish stocks can coexist with open access. However, there is a limit price above which the natural stock will be driven to extinction through overfishing stimulated by stock from salmon ranchers. The range of prices under which both species can coexist can be increased through either restrictions of fishery effort or reducing the catchability of aquacultured stock. Cooperative management of both aquaculture and commercial fishing results in profits from both activities and will not cause extinction of the natural fish stock.     

Substitution between biofuels and fossil fuels: Is there a green paradox?

We show that (i) subsidies for renewable energy policies with the intention of encouraging substitution away from fossil fuels may accentuate climate change damages by hastening fossil fuel extraction, and that (ii) the opposite result holds under some specified conditions. We focus on the case of subsidies for renewable resources produced under increasing marginal costs, and assume that both the renewable resources and the fossil fuels are currently in use. Such subsidies have a direct effect and an indirect effect working in opposite directions. The direct effect is the reduction in demand for fossil fuels at any given price. The indirect effect is the reduction in the current equilibrium price for fossil fuels, which tends to increase the amount of fossil fuels demanded. Whether the sum of the two effects will actually result in an earlier or later date of exhaustion of the stock of fossil fuels depends on the curvature of the demand curve for energy and of the supply curve for the renewable substitute.     

Substitution between biofuels and fossil fuels: Is there a green paradox?

We show that (i) subsidies for renewable energy policies with the intention of encouraging substitution away from fossil fuels may accentuate climate change damages by hastening fossil fuel extraction, and that (ii) the opposite result holds under some specified conditions. We focus on the case of subsidies for renewable resources produced under increasing marginal costs, and assume that both the renewable resources and the fossil fuels are currently in use. Such subsidies have a direct effect and an indirect effect working in opposite directions. The direct effect is the reduction in demand for fossil fuels at any given price. The indirect effect is the reduction in the current equilibrium price for fossil fuels, which tends to increase the amount of fossil fuels demanded. Whether the sum of the two effects will actually result in an earlier or later date of exhaustion of the stock of fossil fuels depends on the curvature of the demand curve for energy and of the supply curve for the renewable substitute.     

Equilibrium Prices in a Vertically Coordinated Fishery

Competition among processing firms is analyzed in a fishery that is managed under a total allowable catch constraint. Firms compete first in the ex-vessel market for round fish and then in the downstream consumer market. Nash equilibrium prices are characterized at each stage of the vertical market. When the number of processors is sufficiently large, equilibrium prices are approximately Walrasian. The ex-vessel price is close to the processor marginal valuation of the round fish and the consumer price clears the total quantity of processed fish. Implications for market structure, conduct and performance, and fisheries management policy are drawn.     

Effects of Fisheries Closures and Gear Restrictions on Fishing Income in a Kenyan Coral Reef

Abstract: The adoption of fisheries closures and gear restrictions in the conservation of coral reefs may be limited by poor understanding of the economic profitability of competing economic uses of marine resources. Over the past 12 years, I evaluated the effects of gear regulation and fisheries closures on per person and per area incomes from fishing in coral reefs of Kenya. In two of my study areas, the use of small‐meshed beach seines was stopped after 6 years; one of these areas was next to a fishery closure. In my third study area, fishing was unregulated. Fishing yields on per capita daily wet weight basis were 20% higher after seine‐net fishing was stopped. The per person daily fishing income adjacent to the closed areas was 14 and 22% higher than the fishing income at areas with only gear restrictions before and after the seine‐net restriction, respectively. Incomes differed because larger fish were captured next to the closed area and the price per weight (kilograms) increased as fish size increased and because catches adjacent to the closure contained fish species of higher market value. Per capita incomes were 41 and 135% higher for those who fished in gear‐restricted areas and near‐closed areas, respectively, compared with those who fished areas with no restrictions. On a per unit area basis (square kilometers), differences in fishing income among the three areas were not large because fishing effort increased as the number of restrictions decreased. Changes in catch were, however, larger and often in the opposite direction expected from changes in effort alone. For example, effort declined 21% but nominal profits per square kilometer (not accounting for inflation) increased 29% near the area with gear restrictions. Gear restrictions also reduced the cost of fishing and increased the proportion of self‐employed fishers.     

Oil Exploration under Climate Treaties

In this paper we focus on how an international climate treaty will influence the exploration of oil in non-OPEC countries. We present a numerical intertemporal global equilibrium model for the fossil fuel markets. The international oil market is modelled with a cartel (OPEC) and a competitive fringe on the supply side, following a Nash–Cournot approach. An initial resource base for oil is given in the non-OPEC region. However, the resource base changes over time due to depletion, exploration, and discovery. When studying the effects of different climate treaties on oil exploration, two contrasting incentives apply. If an international carbon tax is introduced, the producer price of oil will drop compared to the reference case. This gives an incentive to reduce oil production and exploration. However, the oil price may increase less rapidly over time, which gives an incentive to expedite production and exploration. In fact, in the case of a rising carbon tax we find the last incentive to be the strongest, which means that an international climate treaty may increase oil exploration in non-OPEC countries for the coming decades and reduce OPEC's market share.     

Do renewable energy policies reduce carbon emissions? On caps and inter-industry leakage

In a parsimonious two-sector general equilibrium model, we challenge the widely-held tenet that within a cap-and-trade system renewable energy policies have no effect on carbon emissions. If the cap does not capture all sectors, we demonstrate that variations of a renewable energy subsidy change aggregate carbon emissions through an inter-industry leakage effect. We decompose this effect into intuitively intelligible components that depend in natural ways on measurable elasticity parameters. Raising the subsidy always reduces emissions if funded by a lump-sum tax, reinforcing recent findings that tightening environmental regulation can cause negative leakage. However, if the subsidy is funded by a levy on electricity, it can increase emissions. These results provide a valuable basis for an informed design of renewable energy policies and an accurate assessment of their effectiveness. We highlight how a state-of-the-art statistic used by governments to gauge such effectiveness, “virtual emission reductions”, is biased, because inter-industrial leakage effects are not captured.     

Optimal policy instruments for externality-producing durable goods under present bias

When consumers exhibit present bias, the standard solution to market failures caused by externalities—Pigouvian pricing—is suboptimal. I investigate policies aimed at externalities for present-biased consumers. Optimal policy includes an instrument to correct the externality and an instrument to correct the present bias. Either instrument can be an incentive-based policy (e.g. a tax on fuel economy) or a command-and-control policy (e.g. a fuel economy mandate). Under consumer heterogeneity, a command-and-control policy may dominate an incentive-based policy. Calibrated to the US automobile market, simulation results suggest that the second-best gasoline tax is 3–30% higher than marginal external damages. The optimal price policy includes a gasoline tax set about equal to marginal external damages and a fuel economy tax that increases the price of an average non-hybrid car by about $550–$2200 relative to the price of an average hybrid car.     

环境税的倍加红利效应及CGE模型对其的支持

归纳分析了环境税"倍加红利"效应的主要观点,通过推介国外应用可计算一般均衡模型(CGE)分析环境税倍加红利效用的经验,提出了在我国开征环境税和应用CGE模型对其进行分析的构想,以期为寻求环境税在我国的开征提供理论和实践依据。     

Income and Price Elasticities of Bushmeat Demand in Lowland Amerindian Societies

Abstract: Consumption of bushmeat is an important component of household economies in most tropical forested regions of the world and is resulting in unsustainable levels of hunting, even in relatively isolated regions. We conducted standardized surveys of household consumption, income, wealth, and education level among Amerindian societies in Central and South America. Results suggest 1) demand for bushmeat may follow an inverted ∪ pattern with income, 2) consumers, particularly the most well-off, reduce their consumption of bushmeat as the price increases; and 3) a small decrease in the price of meat from domesticated animals is likely to lead to a large decrease in the consumption of fish but not of bushmeat. Policy makers may be able to reduce demand for bushmeat by raising the price of bushmeat, by increasing the direct and opportunity costs of hunting, and by raising household income.     

Non-compliance and the quota price in an ITQ fishery

This paper examines the effects of non-compliance on quota demands and the equilibrium quota price in an ITQ fishery. I show that whereas lower quota prices are implied unambiguously by expected penalties which are a function of the absolute violation size, the expectation of penalties based upon relative violations of quota demands can, under certain conditions, produce higher quota prices than in a compliant quota market. If there are both compliant and non-compliant firms in the fishery, the result would then be a shift in quota demand from compliant to non-compliant firms, rather than the reverse. The findings are generally applicable to quota markets in other industries, including pollution permit markets.     

Procrastinating reform: The impact of the market stability reserve on the EU ETS

We study the impact of the market stability reserve (MSR) on price and emission paths of the EU ETS. From 2019 onwards, the MSR will adjust the number of allowances auctioned as a function of the size of the surplus, i.e. in times of a large surplus it shifts the issue date of allowances into the future. In a perfectly competitive allowance market the MSR only affects price and emission paths if the baseline equilibrium becomes unfeasible. If the MSR is binding, prices increase in the short run but drop in the medium run relative to the baseline. The MSR increases price variability if uncertainty over future allowance demand is resolved while there is a surplus. The long run cap is unaffected by both the MSR and overlapping climate policies. This contrasts the EU׳s objectives of improving the resilience of the EU ETS and increasing synergies with overlapping climate policies.     

Rational host country use of a severance tax

This paper addresses the basic question: How should a host country use a constant severance tax to control a foreign-owned mining firm? The basic rule is derived, and comparative static analysis is performed to show the effects of price, cost, and interest changes on the optimal tax policy.