COMMON PROPERTY UNDER MANAGEMENT FLEXIBILITY: VALUATION, OPTIMAL EXPLOITATION, AND REGULATION

Evidence shows that fisheries need close and careful attention because it has been observed that common property fisheries might be blamed for at least two sources of inefficiency. On one hand, resource overexploitation; on the other, the "static" or "passive" management applies, as outlined in the traditional fisheries literature. This paper presents a fishery model that embraces a combination of regulatory measures, an ITQ system, and a property tax rate under management flexibility. The model allows for a common property fishery to be exploited with full economic efficiency and flexibility in contrast to the mismanagement described in the traditional literature.Resource /Energy Economics and Policy,

Uncertainty and Real Options. Investment and Development of Fishing Resources (II)

[EN] The irreversibility of the investment expenditures in a fishery and the high degree of uncertainty attaching to the price of the fishing resources make the evaluation of investment opportunity in a fishery particularly difficult. The net-present-value proposes the following rule: "Invest in a project when the present value of its expected cash flows is at least as large as its cost". As the expenditures are largely irreversibles (sunk cost that cannot be recovered) and the fishing investment can be delayed, the previous rule is incorrect. Thus, in this paper it is used an option based approach to capital budgeting because under this technique management have valuable flexibility, giving the firm the opportunity to wait for new information to arrive about prices. The paper presents a model that determines when (at which price level) it is optimum for a firm invest in a fishery and what it is the value of the investment opportunity. The natural growth rate and production function of fishing resources are those of Shaefer model.fishing resources, real options, irreversibility, recursos pesqueros, opciones reales, flexibilidad de gestión, irreversibilidad, management flexibility

Investment and Development of Fishing Resources: A Real Options Approach

The valuation of the opportunity to either invest or exploit a fishery is particularly difficult because of the high uncertainty concerning the resource price. The traditional net-present-value (NPV) and other discounted-cash-flows (DCF) methods cannot properly capture the management's flexibility and strategic value aspects of a fishery, thus they may understate its value. The rationale for using an option-based approach to capital budgeting arises from its potential to conceptualize and quantify this flexibility, as new information arrives, to alter its operating strategy, to defer investments, to shut down (and restart) fishery development. Real Options valuation has traditionally been applied in the area of natural resource investments different from fishing resources. This paper presents a general bioeconomic model for the value of a fishery. It suffices to determine not only the value of the fishery when open and closed, but also the optimal policy for opening, closing and setting the harvest rate. Moreover, the paper turns to the valuation of a fishery investment opportunity and the optimal investment rule. The natural growth rate of fishing resource stock and the production function are those of the Schaefer model. Finally, results for the Pacific Yellowfin Tuna are presented.Keywords: Fishing Resources, Management's flexibility, Real Options

Incertidumbre y Opciones Reales: Inversión y explotación de una pesquería (I)

[EN] The valuation of development opportunity of a fishery is made particularly difficult by the high degree of uncertainty attaching to the price of the fishing resource. The net-present-value and other discounted cash-flows cannot properly capture the management s flexibility, thus they may understate its value. The motivation for using an option-based approach to capital budgeting arises from its potential to conceptualize and quantify the management s flexibility. Under this technique, management may have valuable flexibility to alter its operating strategy, options to shut down (and restart) fishery development. Real Options valuation has traditionally been applied in the area of natural resource developments different from fishing resources. The paper presents a general bioeconomic model for the value of a fishery. It suffices to determine not only the value of the fishery when open and closed, but also the optimal policy for opening, closing and for setting the harvest rate.[ES] La valoración de la oportunidad de explotar una pesquería es particularmente difícil por el alto grado de incertidumbre asociado al precio del recurso pesquero. Los métodos tradicionales de descuento como el valor actualizado neto (VAN) no capturan apropiadamente la flexibilidad de gestión de un determinado proyecto de inversión. Es por ello, que en este trabajo se hace uso de la Teoría de las Opciones Reales que incorpora flexibilidad de gestión en la valoración, en cuanto que se introduce la posibilidad de cerrar temporalmente la explotación de la pesquería a medida que se vaya obteniendo nueva información sobre los flujos futuros. En la literatura tradicional se ha venido utilizando la Teoría de las Opciones Reales para valorar explotaciones de recursos naturales no renovables distintos de los pesqueros. En este trabajo se presenta un modelo bioeconómico general para valorar una pesquería. Este modelo determina no sólo el valor de la misma cuando está siendo explotada y cuando está cerrada, sino que también determina las políticas óptimas de explotación y capturas.Se agradece la financiación recibida del Ministerio de Educación y Cultura (AP96)

Fractional Integration Analysis and its Implications on Profitability: the Case of the Mackerel Market in the Basque Country

This paper analyses weekly prices for mackerel landed by the inshore fleet at the ports of the Basque Country in 1995-2008, using new econometric techniques never before applied to the fishing market. The idea is to learn to what extent fishermen can pass on the effects of negative shocks (e.g. fuel price increases) to their ex-vessel prices. This will give an idea of the profitability of the fishery in question. To that end, a cyclical ARFIMA model is adjusted to the series analysed, then the impulse-response function is constructed. Among other things, the behaviour of this function shows that possible increases in production costs are not being passed on to prices, which lowers the profitability of fishing. In view of these results, it is suggested that fishermen need to be able to pass the shocks that they suffer on to prices if the profitability of this fleet is to be assured.long memory, seasonality, fishing market, mackerel, impulse response function

Incertidumbre y Opciones Reales: Inversión y explotación de una pesquería (II)

[EN] The irreversibility of the investment expenditures in a fishery and the high degree of uncertainty attaching to the price of the fishing resources make the evaluation of investment opportunity in a fishery particularly difficult. The net-present-value proposes the following rule: "Invest in a project when the present value of its expected cash flows is at least as large as its cost". As the expenditures are largely irreversibles (sunk cost that cannot be recovered) and the fishing investment can be delayed, the previous rule is incorrect. Thus, in this paper it is used an option based approach to capital budgeting because under this technique management have valuable flexibility, giving the firm the opportunity to wait for new information to arrive about prices. The paper presents a model that determines when (at which price level) it is optimum for a firm invest in a fishery and what it is the value of the investment opportunity. The natural growth rate and production function of fishing resources are those of Shaefer model.[ES] La irreversibilidad de los costes necesarios de inversión en una pesquería así como el alto grado de incertidumbre asociado al precio del recurso pesquero hacen que la valoración de la oportunidad de invertir en una pesquería sea particularmente difícil. Los métodos tradicionales de descuento como el valor actualizado neto (VAN) proponen la siguiente regla: "Invertir en un proyecto cuando el valor presente esperado de los flujos futuros sea al menos tan grande como los costes necesarios de inversión". Sin embargo, dada la irreversibilidad de los costes y que las decisiones de inversión en una pesquería pueden posponerse la regla anterior de inversión no es correcta. Es por ello que, en este trabajo se hace uso de la Teoría de las Opciones Reales que incorpora exibilidad de gestión en la valoración, en cuanto que se introduce la posibilidad de observar y retrasar la inversión en la pesquería en función de la información de mercado que se vaya obteniendo. Este trabajo presenta un modelo que permite determinar cuándo es óptimo invertir en una pesquería así como cuánto estaría dispuesto a pagar un agente por aquel derecho que le confiere la propiedad del recurso, esto es, el valor de la oportunidad de invertir en una pesquería. Las funciones de crecimiento así como de capturas que se adoptan en el modelo son aquéllas que corresponde al modelo de Schaefer, ampliamente utilizado en la literatura de pesquerías.Se agradece la financiación recibida del Ministerio de Educación y Cultura (AP96)

Is existing legislation fit-for-purpose to achieve Good Environmental Status in European seas?

Recent additions to marine environmental legislation are usually designed to fill gaps in protection and management, build on existing practices or correct deficiencies in previous instruments. Article 13 of the European Marine Strategy Framework Directive (MSFD) requires Member States to develop a Programme of Measures (PoM) by 2015, to meet the objective of Good Environmental Status (GES) for their waters by 2020. This review explores key maritime-related policies with the aim to identify the opportunities and threats that they pose for the achievement of GES. It specifically examines how Member States have relied on and will integrate existing legislation and policies to implement their PoM and the potential opportunities and difficulties associated with this. Using case studies of three Member States, other external impediments to achieving GES are discussed including uses and users of the marine environment who are not governed by the MSFD, and gives recommendations for overcoming barriers

Fractional Integration Analysis and its Implications on Profitability: the Case of the Mackerel Market in the Basque Country

This paper analyses weekly prices for mackerel landed by the inshore fleet at the ports of the Basque Country in 1995-2008, using new econometric techniques never before applied to the fishing market. The idea is to learn to what extent fishermen can pass on the effects of negative shocks (e.g. fuel price increases) to their ex-vessel prices. This will give an idea of the profitability of the fishery in question. To that end, a cyclical ARFIMA model is adjusted to the series analysed, then the impulse-response function is constructed. Among other things, the behaviour of this function shows that possible increases in production costs are not being passed on to prices, which lowers the profitability of fishing. In view of these results, it is suggested that fishermen need to be able to pass the shocks that they suffer on to prices if the profitability of this fleet is to be assured.The first author wishes to express his thanks to the University of the Basque Country for the funding received through its programme of aid for the training of research staff (2007/2010). Thanks are also due to the Basque Government Department of Agriculture, Fisheries and Food for aid received via the pre-doctoral grant “Ciencias económicas aplicadas al sector medioambiental con especial incidencia en el sector pesquero”, developed at the Marine Research Unit of AZTI-Tecnalia (2006/2007). The second author, for his part, is grateful for funding received under project SEJ2007- 61362/ECON of the Spanish Ministry of Science and Technology and from the ERDF

Un indicador de sostenibilidad socio-económica de la flota de cerco de túnidos tropicales del País Vasco y su estrategia de pesca con FADs

[EN] This article applies the Rapfish methodology, a non-parametric and multi-disciplinary technique, with the objective of defining and evaluating a Sustainability Index of the Basque purse-seine fleet, fishing tropical tuna in the Indian and Atlantic Oceans. The estimated Sustainability Index for the fleet fishing in the Indian Ocean is above a critical sustainability threshold and improves between 1998 and 2009. The opposite occurs for the fleet in the Atlantic Ocean. The influence of the growing use of Fish Aggregating Devices on the behaviour of fishers in the Indian Ocean is also analysed.[ES] Este artículo aplica la metodología de Rapfish, técnica no paramétrica y multi-disciplinar, con el objetivo de definir y evaluar un índice de sostenibilidad de la flota de cerco del País Vasco, dedicada a las pesquerías de túnidos tropicales en los Océanos Índico y Atlántico. El índice de sostenibilidad estimado para la flota del Océano Índico se sitúa por encima de un umbral crítico de sostenibilidad y mejora entre 1998 y 2009. Lo contrario sucede para la flota del Atlántico. Asimismo, se analiza la influencia que el uso creciente de dispositivos concentradores de peces genera en la estrategia de los pescadores del Océano Índico.Los autores desean agradecer la financiación recibida del proyecto MADE (Mitigating Adverse Ecological Impact of Open Oceans Fisheries, www.made-project.eu) co-financiado por la UE y el Gobierno Vasco. Este artículo es la contribución número 632 de AZTI-Tecnalia (Unidad de Investigación Marina).Murillas-Maza, A.; Moreno, G.; Murua, J. (2014). A socio-economic sustainability indicator for the Basque tropical tuna purse-seine fleet with a FAD fishing strategy. Economía Agraria y Recursos Naturales - Agricultural and Resource Economics. 13(2):5-31. https://doi.org/10.7201/earn.2013.02.01SWORD53113

Weak and Strong Sustainability Assessment in fisheries: An application to a real case study

This paper analyzes the suitability of strong and weak sustainability assessment in the context of fisheries management. This topic is a main stream issue in the field of Ecological Economics, but its application to fisheries is rather ambiguous, although fisheries have been the focus of many pioneering studies related to natural resource management. In this paper, through an application of a multidisciplinary technique designed to assess fisheries sustainability (RAPFISH), we bring this gap analysing the implications of both approaches in a real case study: the Basque trawl fisheries operating in the North East Atlantic. Strong sustainability assessment is postulated as the more suitable index to guide natural resources management in general and fisheries in particular. In contrast weak sustainability approaches are suggested as just a complementary tool to be applied together with critical thresholds