Quota Price Research Articles

What Restoration Schemes Can Do? Or, Getting It Right Without Fisheries Transferable Quotas

Under the Individual Transferable Quota (ITQ) schemes, the economic calculations fail to reflect a just distribution of wealth and results in deprivation of the public trust of fisheries. Some “neoclassic” economists claim that ITQs cost-efficiently eliminate the tragedy of the commons. However, Norwegian cost–benefit studies indicate a financial loss for second-generation ITQ owners due to the high price of tradable quotas. The financial burden caused by ITQs creates overfishing and pressure on the fishing stocks, which puts coastal municipalities at risk. If future fisheries are given legal protection, the losses due to hazardous fishing or overexploiting stocks is the fisherman's liability. Restoration schemes within the framework of total allowable catch (TAC) are an alternative to ITQs that may prevent resource depletion and the “tragedy of the commons.”

On the Microeconomics of Quota Management in Fisheries

This paper compares the economic incentives created by transferable and non-transferable quotas in a fishery, in particular the incentives to discard fish of certain species or grades when quotas are enforced at the landing site. With a hypothetical efficient allocation of non-transferable quotas, the incentive structure is essentially the same as under transferable quotas. However, in the absence of the information provided by the quota price, outcomes may not be the same under all conditions. Inefficient allocations of non-transferable quotas will tend to reduce discards due to highgrading but increase discards in multispecies fisheries. The impact of discarding on the quota price in a transferable quota fishery is examined.

Sunk Cost and Entry-Exit Decisions under Individual Transferable Quotas: Why Industry Restructuring Is Delayed

<i>The paper shows that explicit modelling of sunk cost and a firm’s entry-exit decision in a traditional deterministic investment model may give an explanation of the slow transition to the optimal fleet structure following the introduction of individual transferable quotas (ITQs). The analysis shows that the annual lease unit price of quota may be in a range where the long-run fleet structure will not be attainable at once. Over time, firms with zero gross investment as optimal behavior may leave the industry as the capital decays and over the transition period the optimal fleet structure prevails.</i> (JEL Q22)

Fishing quota markets

In 1986, New Zealand responded to the open-access problem by establishing the world's largest individual transferable quota (ITQ) system. Using a 15-year panel dataset from New Zealand that covers 33 species and more than 150 markets for fishing quotas, we assess trends in market activity, price dispersion, and the fundamentals determining quota prices. We find that market activity is sufficiently high in the economically important markets and that price dispersion has decreased. We also find evidence of economically rational behavior through the relationship between quota lease and sale prices and fishing output and input prices, ecological variability, and market interest rates. Controlling for these factors, our results show a greater increase in quota prices for fish stocks that faced significant reductions, consistent with increased profitability due to rationalization. Overall, this suggests that these markets are operating reasonably well, implying that ITQs can be effective instruments for efficient fisheries management.

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.

03/01985 Carbon quota price and CDM potentials after Marrakesh: Chen, W. Energy Policy, 2003, 31, (8), 709–719

A batch-type, controlled-air incinerator was used for the treatment of three kinds of waste ion-exchange resin. The concentration and composition of 21 individual PAHs (polycyclic aromatic hydrocarbons) in raw material, flue gas (gas and particle phases) and ash were determined. Stack flue-gas samples were collected by a PAH stack-sampling system. Twenty one individual PAHs were analyzed primarily by gas chromatography (GC) and a gas chromatography/mass spectrometer (GC/MS). The total-PAH concentration in flue gas and its composition in ash averaged 1782 μg/m3 and 6.00 μg/g, respectively. Phase distribution of the total-PAHs in the flue gas was mainly in the gas phase (92%) with a mean-concentration of 1640 μg/m3, while the total-PAH concentration in the particle phase (averaged 42 μg/m3) only represented a small fraction (9%) of the total-PAH mass collected. The PAH concentration in the stack flue-gas averaged ∼ 990 orders of magnitude higher that that in the ambient air. Phase distribution of the total-PAHs in the flue gas was very similar to that in the ambient air, being primarily in the gas phase. For the individual PAHs, lower molecular weight PAHs were dominant in the gas phase, while higher molecular weight PAHs were associated with the particulate. Of the PAHs from three input sources (diesel, ambient air and waste ion-exchange resins) entering the incinerator, diesel was found to contain the highest total-PAH mass fraction (averaging 99.5%). For PAH output-mass distribution from the incineration, lower molecular weight PAHs were primarily emitted by the stack gas phase, while higher molecular weight PAHs were discharged at a significant fraction by flue-gas particulate and ash. The blank-incineration results of diesel combustion showed that most of the PAHs in the diesel had been destroyed during the combustion process and that there was, therefore, a significant fraction of PAH emission due to the thermal-synthesis process during the waste ion-exchange resin combustion.

The effects on welfare of the imposition of individual transferable quotas on a heterogeneous fishing fleet

This paper examines the determination of effort levels, the rental price of quotas and the number of participants in a fishery managed with a total allowable catch and individual transferable quotas. How these variables change is determined for three phases of the management process. Potential participants in the fishery are assumed to be heterogeneous in their catching capabilities so that almost all active fishers earn positive net profits from fishing activities. It is shown that these quasirents are reduced during any of the management phases considered here. The impact of free allocations of permanent quota rights on fishers’ welfare is also considered. This may increase the welfare of all fishers if the allocation is based on catch history. However, an example is provided where the welfare of some highliners is reduced when the allocation is based on effort history.

Minimum information management systems and ITQ fisheries management

In 1986 New Zealand reformed its fisheries management regime with the introduction of a rights-based system of management. At the beginning of each fishing season a government agency sets an allowable commercial catch. Individual firms hold an entitlement to harvest a share of the allowable commercial catch. To date, the government agency has relied almost exclusively on the results of stock assessment research when setting the allowable harvest. Excessive reliance on biological data in fisheries management has attracted criticism. An alternative, a minimum information management system, uses information contained in quota prices as a guide to set limits on commercial harvest. This paper examines price formation in one quota market. We find evidence in the data that supports the use of quota prices to guide the setting of limits to commercial harvest. Furthermore, time-series analysis provides a basis for studying the temporal response of changes in asset prices to perturbations in the allowable harvest. The results illustrate how information summarized in quota prices can complement the findings of stock assessment research in fisheries management.

Climate Policy under Technology Spillovers

Technological development will most likely play an important role in curbing growth in greenhouse gas emissions. It is therefore important to incorporate factors influencing technological change in climate policy analyses. This paper studies climate policy when there are technology spillovers between countries, and there is no instrument that (directly) corrects for these externalities. The lack of an appropriate instrument reflects that R&D expenditures in a country are difficult to verify by other countries. We show that without an international agreement, the non-cooperative outcome will have too much emissions and too little R&D expenditures compared with the social optimum. While the non-cooperative equilibrium depends on whether countries use tradable quotas or carbon taxes as their domestic instruments for controlling emissions, all countries are better off in the tax case than in the quota case. Next we study two types of international climate agreements with full participation. One is a Kyoto type of agreement where each country is assigned a specific number of internationally tradable quotas. In the second type of agreement a common carbon tax should be used domestically in all countries. We show that none of the cases satisfy the conditions for the social optimum. Even if the total number of quotas is set so that the quota price is equal to the Pigovian level, R&D investments will be lower than what is socially optimal in the Kyoto case, whereas with a harmonized domestic carbon tax R&D expenditures could even be too high. Finally we examine the case in which there is an incomplete agreement, i.e. some countries have not signed the agreement. We demonstrate that there is virtually no difference between this case and the case of full cooperation.

Yield and Economic Return of Ten Peanut‐Based Cropping Systems

Research was conducted in North Carolina at two locations from 1997 through 2000 to determine net returns of 10 cropping systems during a 4‐yr cropping cycle that included peanut (Arachis hypogaea L.), cotton (Gossypium hirsutum L.), soybean [Glycine max (L.) Merr.], and corn (Zea mays L.). Cylindrocladium black rot [caused by Cylindrocladium parasiticum] (CBR) increased when soybean was included in the rotation sequence or when peanut was grown continuously. The CBR‐resistant cultivar NC 12C increased yield compared with the susceptible cultivar NC 7 when this disease was present. Cotton was a better rotation crop than corn at one of two locations with respect to peanut yield and gross economic value in the final year of the study. Net returns were substantially lower when peanut was marketed for export in the current federal program rather than at the quota price. However, the profitability ranking among cropping systems changed little regardless of marketing system. Crop yield and net return were influenced by crop selection, weather conditions, and commodity prices during the 4 yr.

Carbon quota price and CDM potentials after Marrakesh

The Kyoto Protocol sets quantified GHG emission reduction commitments for Annex I Parties. But their emission reduction requirements related to BAU projections, one of the key factors to effect on future carbon market, are uncertain. Both the decisions made in Bonn and Marrakesh would have further consequences for how the future carbon market will take shape. This paper, with application of the carbon emission reduction trading model, evaluates future carbon quota price and Clean Development Mechanism (CDM) potentials under different BAU projections, and does sensitivity analysis on carry-over of AAUs, CERs and ERUs, implementation rate, transaction cost, holding of CERs in Non-Annex I Parties, etc. to assess the impacts of relevant decisions of COP6-bis and COP7 on the carbon market. Under different BAU projections, future carbon quota price and CDM potentials could vary widely. Carry over of AAUs, CERs, ERUs, and holding of CERs in Non-Annex I Parties could raise both quota price and total CDM potentials considerably. Implementation rate could have big impacts on both carbon quota price and CDM potentials, especially for the cases formerly with relatively high CDM potentials, and it could also change the regional distribution of CDM potentials. Transaction cost's effect on the carbon market would be comparatively low, but would become unignorable in the market whose quota price is low. It would lead to a downward trend in price while upward in CDM potentials when increasing the implementation rate or lowering transaction cost. Withdrawal of USA would dramatically shrink carbon price and credit amount, and large numbers of hot air and sink credits would further greatly crowd out the CDM projects; carry over of AAUs, CERs and ERUs, holding of CERs in Non-Annex I Parties, prompt start of CDM projects, etc., would, however, enhance the total CDM credits to ensure more investment and technology flow to developing countries to promote their sustainable development.

Effects of agricultural market policy on crop production in China

This paper investigates the effects of Chinese market policy on crop production in the reform process. After a brief review of the policy changes due to the reform, the theoretical significance of Chinese market policies for crop production is demonstrated diagrammatically. It is shown that under the current market system the production of main crops is significantly influenced by both market and quota prices. While relatively high quota reduces the influence of market prices on production, relative price changes between competing crops will lead to shifting farmers’ cultivation preferences if inputs are constant. Empirical analysis, based on cross-section data for the period 1985–1997 from the province of Zhejiang, confirms these hypotheses. The effects of policy variables, however, prove to be crop-specific. If the potential of crop production in China is to be better used, an even more market-oriented agricultural policy is required.

Indicators of the effectiveness of quota markets: the South East Trawl Fishery of Australia

This paper presents some results of an investigation into potential indicators for the assessment of markets for individual transferable fishing quota where price data do not exist. The economic logic for implementing such markets and how they are expected to work is used as a basis for asking questions about how well they are performing, and what might comprise evidence of problems. Given data on quota ownership, transfer and leasing, and associated catches, but no quota price data, indicators are suggested for monitoring and analysing market activity. These are applied to data from the Australian South East Trawl Fishery. Results are discussed in terms of the utility of the methods and the implications for management policy for the fishery.

Individual transferable vessel quotas and efficient restructuring of the primary harvesting sector

Over the last three decades most of the world's fisheries have been subject to management programs that have tried to limit the use of key fishing inputs. Inevitably, these restrictions have proven ineffective at preventing rent dissipation and stock depletion. More noteworthy is that fishers have subverted the intentions of these restrictions by adjusting the primary harvesting technology. This has led to an inefficient industrial structure characterized by capital stuffing on the part of each vessel, excess employment, an inefficient mix of vessels in the fleet, and too many vessels altogether. A promising means of encouraging more efficient primary harvesting is the individual transferable vessel quota that allocates a given catch to each vessel, thereby giving an incentive to catch the quota at least cost. This paper examines efficiency gains and potential industry restructuring from the introduction of an ITVQ into a fishery that was previously subject to input restrictions. Using data from the British Columbia salmon fishery, this paper estimates restricted cost functions for each of four different vessel types and simulates the operations of a market for ITVQs. The demand for quota comes from individual vessels and is found by differentiating the cost function with respect to the shadow price of quota. The market for quota is in equilibrium when the total demand for quota is equal to the fixed supply of quota set by the government. This implicitly defines the equilibrium quota rental price. Results show that the ITVQ could generate unit rental prices for quota between 31 and 93 cents per pound (18–53% of the average landed price). Using this simulated price, each vessel's cost‐minimizing strategy is defined and both low cost vessels (those that will buy quota) and high cost vessels (those that will sell quota and exit the fishery) are identified. Quota trades between the two groups result in efficiency gains. These include reduced capital stuffing, exit of less efficient vessel types, attainment of economies of scale, and an efficient composition of vessel types in the fleet. In aggregate these gains lead to an estimate of annual resource rent that is approximately equal to one third of the value of the catch.

Price Expectations and International Quota Trading: An Experimental Evaluation

This paper reports a preliminary experimental test of international quota trading on a market characterized by several dominant traders. Uncertain quota demand and supply imply true market-clearing prices that in general differ from an expected competitive quota price. However, in the experiment the expected price level emerges as a focal point on which the bulk of quota trade contracts are keyed. Thus, incomplete price discovery occurs.

An Economic Analysis of Automatic Milking using a Simulation Model

The economic and logistical consequences of using an automatic milking system (AMS) on a dairy farm in the UK in place of the conventional dairy parlour are examined. A three-phase discrete simulation model is combined with an economic analysis for a range of real farms, herd size of 85–95, and then one of these farms is selected and a sensitivity analysis is conducted. The model is able to simulate milking for cows housed all-year and those that are to be fetched from fields. The model simulates the cows' yield and movement throughout the year, according to their individual lactation curves.The costs and benefits of an AMS for all-year voluntary presentation, for all-year manually fetched (from fields and barn) and for a combination of voluntary presentation from barns in winter, and manually fetched from fields in summer are examined. An analysis of the efficiency of the robot, i.e. time for robot to attach teat cups, time for cow to walk through the system and the time that the robot is available to the cow, is conducted. The utility of the robot is shown to be as important as robot efficiency and the cows will need to be motivated to use the robot for up to 22 h/d.If dairy farmers are to switch from conventional milking to automatic milking, they will need to decide how to deal with the increase in milk yield, by buying more quota or reducing their herd size. The costs of these two strategies are shown.Using current prices and costs, a single-stall robot is compared to a multi-stall robot. The sensitivity of robot cost and lifetime is shown. If the price of quota is low, the robot is competitive for all-year voluntary presentation with the conventional milking parlour, assuming that the robot can be shown to have the same reliability. If automatic milking becomes more popular, the price of the system is likely to fall. Each reduction of £1000 in the cost of the one robot and two milking stalls increases the annual relative profit of a farm (used as a baseline cost) by £147.

Cost Effectiveness of Pest Management Strategies in Peanut (Arachis hypogaea L.) Grown in North Carolina

Abstract Reducing costs associated with pest management in peanut (Arachis hypogaea L.) production systems in the United States will become increasingly important due to changes in federal legislation that reduced support prices and removed the escalator provision. The federal peanut program may be eliminated completely in 2002 at which time peanut most likely will be marketed at the world price, which is substantially lower than the current quota price. Eight experiments were conducted during 1997 and 1998 to evaluate pest control, pod yield, gross value, and economic return with preventive and integrated pest management (IPM)-based disease, insect, and weed management strategies. Preventive strategies included prophylactic applications of herbicides, fungicides, fumigant, and insecticides. IPM strategies involved host-plant resistance, targeting pesticide applications based on economic thresholds, and other thresholdbased practices to manage pests. Preventive and IPM weed management strategies provided similar economic return in seven of eight experiments. Early leaf spot, caused by Cercospora arachidicola, control was similar when fungicides were applied biweekly or based on weather advisories. However, scheduling fungicide sprays using weather-based advisories eliminated one to three fungicide applications per year. Biweekly applications of fungicides increased damage from twospotted spider mite (Tetranycychus urticae) in one experiment compared with applications using weather-based advisories. Fumigation by metam sodium for Cylindrocladium black rot (CBR), caused by Cylindrocladium crotalarie, was needed in one of three experiments where this disease was present. Resistance of the cultivar NC 12C to CBR was not sufficient to prevent yield and economic loss where damage exceeded 10% plant loss. Iprodione was applied preventatively for suppression of Sclerotinia blight, caused by Sclerotinia minor. However, this disease developed in only one of four experiments where fungicide was applied. Aldicarb applied infurrow and acephate applied postemergence based on damage thresholds controlled tobacco thrips (Frankliniella fusca) similarly in seven of eight experiments. In one experiment, aldicarb was more effective than acephate. Failure to apply chlorpyrifos for southern corn rootworm (Diabrotica undecimpunctata) control resulted in yield and economic loss in three experiments. Chlorpyrifos controlled potato leafhopper (Empoasca fabae) and prevented possible yield loss caused by this insect. Collectively, these data demonstrate the complexity of pest management in peanut and some of the weaknesses associated with current pest control and IPM practices. The importance of accurate identification of pests and detailed field histories also was demonstrated in these studies. Likewise, a thorough understanding of the impact of production practices on pest development and timely implementation of pest control tactics is critical for adequate plant protection.

ECOLOGICAL FISHERIES MANAGEMENT USING INDIVIDUAL TRANSFERABLE SHARE QUOTAS

This paper is concerned with the optimal management of fisheries in the ecological context. All fish stocks are embedded in an ecosystem. Therefore, to obtain maximum economic benefits, fisheries management must take due account of the corresponding web of ecological interrelationships. Unfortunately, however, due to the inherent complexity of ecosystems and the scarcity of the relevant empirical information, sensible ecological fisheries management is very difficult to achieve in most cases. This paper suggests a particular application of the individual transferable share quota (ITSQ) system that offers a potentially fruitful approach to the problem of ecological fisheries management. Under the particular ITSQ framework defined in the paper, the task of the fisheries manager is reduced to that of determining the current optimal vector of total allowable catch (TAC); i.e., the one that maximizes the present value of current and expected future fisheries rents from the ecosystem. Given the customary assumptions about market efficiency, this can be shown to be equivalent to setting TACs so that share quota prices are maximized. Since share quota prices are directly observable in the quota market, this is a comparatively easy task for the fisheries manager. This procedure, referred to as minimum information management (MIM) in the paper, obviously greatly simplifies the ecological fisheries management problem. An interesting implication of the analysis is that in the ecological context, economic optimality may easily require some TACs and some share quota prices to be negative.

Efficiency loss due to distortions in Dutch milk quota trade

This study analyses the welfare costs of trade distortions in the exchange of milk quota by simulating potential quota trade for 1992/93 subject to various trade restrictions. Efficient quota allocation, in an unrestricted market, comes about when the price of quota is 0.39 guilders per kilogram in 1992/93 prices. A combination of a floor of 10 thousand kilograms on quota supply and a ceiling of 75 thousand kilograms on quota demand results in an efficiency loss of 2.29 per cent of total profit without trade distortions. Incorporating a margin of 2 per cent between the demand and supply price has a minor effect, the total efficiency loss being 0.13 per cent. Another 0.13 per cent accrues to intermediates in quota trade as transfer costs. Copyright 1997 by Oxford University Press.

Discard Behavior, Highgrading and Regulation: The Case of the Greenland Shrimp Fishery

A formal economic analysis of the discarding problem is presented, focusing on the individual fisherman and the effect of different regulations on the fisherman's incentives to discard. It is shown that in a nonregulated fishery, either multispecies or single species/multisize, where the only constraints are the hold capacity and the length of the season, the fisherman may have rational incentives to discard/highgrade, if the marginal trip profit of an extra fishing day is greater than the average trip profit. Regulation by TAC does not change the incentives to discard. However, under INTQs and ITQs, the incentives to discard increase. The incentives to discard decrease under ITQs compared to INTQs, if the unit quota price is smaller than the shadow price of the quota. The model is applied to the Greenland shrimp fishery, where it demonstrates the reported discard behavior in the fishery. Finally, different regulations of discard are applied and discussed in the model. The analysis suggests that regulatio...