Posted by Rich Sweeney on February 18, 2009
One alternative to auctioning off carbon permits under a cap and trade program is to give them away based on past usage. This is often promoted by industry groups as a way of gradually easing in carbon regulation without rocking the boat too much early on. Recently this notion has also been promoted in the EU as a way of providing compensation to industries that experience a significant decrease in international competitiveness due to domestic climate policy (similar measures are also being discussed by unions in the US). However, one of the problems with output based permit allocation is that it creates an incentive for actors to alter their behavior in the period(s) prior to setting the allocation. For example, if carbon permits were simply given out proportionally based on firms’ share of total carbon emissions in the previous year, there would be a huge incentive to be as dirty as possible.
A good example of this phenomenon was reported in the WaPo on Saturday, in “Waterman Inflated 2008 Crab Harvest Figures”. Basically Maryland officials determined that reported blue crab hauls for 2008 were wildly inflated. While the watermen have claimed its simple human error, its appears that the state sees an attempt to influence future catch limits. From the article, “State officials said the discrepancy was probably caused by watermen overstating what they’d caught. One likely reason, they said, was that some thought the state would use the catch from 2008 to set future limits on crabbing — that a big catch last year would lead to a higher quota later.”
H/T to Dave Evans.
Posted in Cap and Trade, Fisheries | 1 Comment »
Posted by Rich Sweeney on August 6, 2008
Today at RFF Harrison Fell gave an interesting overview of current topics in fishery research. I love to fish, but know basically nothing about the economics of fisheries (other than the basic tragedy of the commons stuff). Thus I was pretty surprised to hear about all of the cool research currently going on in this field. Here are some highlights.
Bio-economics: It’s pretty obvious that overfishing can severely curb the size of fish stocks over time. What’s less obvious (at least to me), is how fishing can affect the physical characteristics of a given species over time. But recent research indicates that this may be precisely what’s happening. Fishing nets are designed to catch fish once they reach a given size. But, just like people, some fish grow faster than others. Thus, bigger fish are being weeded out of the reproductive pool earlier than smaller fish, possibly putting downward pressure on the average size of the species. This phenomenon was the subject of an article in Science this year called “The role of Fisheries-Induced evolution”. If true this could dramatically alter many of the dynamic game solutions of prior fisheries research and influence the regulation of fishing practices going forward.
Perverse incentives: While there’s still a lot of work to be done, fisheries regulation has gotten better and smarter over time in America and the EU. However these policies only control for behavior within 200 miles of domestic shore. The response in countries like Spain and Portugal has been to head south to engage in shady agreements to fish the territories of African nations. Not much is known about how these bribes licenses are negotiated and monitored, or how revenues are redistributed.
A less deadly catch? Finally, Harrison mentioned that there’s some evidence that individual fishing quotas (IFQs) may be improving worker safety in the fishing industry. Previous suboptimal policy approaches, such as total allowable catch, encouraged boats to go balls to the wall in an all out race until the limit was reached. Looks like Kurt better speed up his data collection process if he wants to identify a risk wage premium in fishing labor data.
Posted in Fisheries, ToCs | 1 Comment »