Transcript Renewable Resources Reading   Perman et al (2nd ed.) Chapters 9 and 10 Perman et al (3rd ed.) Chapters 17 and 18

Renewable Resources
Reading


Perman et al (2nd ed.) Chapters 9 and 10
Perman et al (3rd ed.) Chapters 17 and 18
Renewable flow resources
• Such as solar, wave, wind and geothermal energy.
• These energy flow resources are non-depletable.
• But entail costs in harnessing them as usable energy
resources
Renewable stock resources
 living organisms: fish, cattle and forests, with a
natural capacity for growth
 inanimate systems (such as water and
atmospheric systems): reproduced through time
by physical or chemical processes
 arable and grazing lands as renewable
resources: reproduction by biological processes
(such as the recycling of organic nutrients) and
physical processes (irrigation, exposure to wind
etc.).
Are capable of being fully exhausted.
Biological growth processes
G = G(S)
An example: (simple) logistic growth:

S 
G (S)  gS1 

 SMAX 
Where g is the intrinsic growth rate (birth rate minus
mortality rate) of the population.
Figure 17.2 Steady-state harvests.
GMSY = HMSY
G1 = H1
0
S1L
SMSY
S1U
SMAX
Commercial fisheries
Open access vs Restricted access fisheries
What is an open access fishery?
Consequences of open access: entry continues until all rents
are dissipated (profit per boat = zero).
Stock sizes will tend to be lower, and harvest rates will tend
to be higher (but may not always be) compared with a
restricted access (“private property” or “common property”)
fishery.
Exhaustion or even extinction is more likely, but will not
necessarily happen.
Switch now to “Model
Equations” document
Figure 17.3 Steady state equilibrium fish harvests and stocks at various effort levels.
HMSY = eEMSYS
H1 = eE1S
H2 = eE2S
H2
H1
G(S)
S1
SMSY
=SMAX/2
S2
S
Figure 17.4 Steady state equilibrium yield-effort relationship.
HPP
H=(w/P)E
HOA
 e 
H  e ES MAX  1 - E 
 g 
EPP
EOA
g/e
E
Figure 17.5 Stock and effort dynamic paths for the
illustrative model.
60.000
1.200
50.000
1.000
Effo rt
Sto ck
40.000
0.800
30.000
0.600
20.000
0.400
10.000
0.200
0.000
0.000
0
20 40 60 80 100 120 140 160 180 200 220 240 260 280 300
Figure 17.6 Phase-plane analysis of stock and effort
dynamic paths for the illustrative model.
17.6.3 The present value maximising fishery model

Max
 P Ht - C(H t , St )e-it dt
0
subject to
dS
= G( St ) - H t
dt
and initial stock level S(0) = S0. The necessary conditions for maximum wealth
include
pt  P 
C( H , S)
H t
dp t
dG (S) C( H, S)
 ip t  p t

dt
dS t
S t
(17.29)
(17.30)
P is the market, or landed, price of fish (treated here as an exogenously given fixed
number)
pt is a shadow price, the net price of fish.
17.6.3.1 Steady state equilibrium in the present value maximising fishery
We have G(S) = H and the optimizing conditions 17.29 and 17.30 collapse to the
simpler forms
pP
ip  p
C(H, S)
H
(17.31)
dG (S) C(H, S)

dS
S
(17.32)
Divide both sides of Equation 17.32 by the net price p to give
 C 


dG  S 
i=
dS
p
(17.33)
Equation 17.33 is one (steady-state) version of what is
sometimes called the ‘Fundamental Equation’ of renewable
resources.
Figure 17.7 Present value maximising fish stocks with and without
dependence of costs on stock size, and for zero and positive interest rates.
G(S)
Slope = i
Slope = i - [-(C/S)/P]
SPV
SPV*
S
OPEN ACCESS AND SPECIES EXTINCTION
The extinction of renewable resource stocks is a possibility in
conditions of open access, but open access does not necessarily result
in extinction of species.
Open access enhances the likelihood of catastrophic outcomes
because:
 Incentives to conserve stocks for the future are very weak.
 Free riding once a bargain has been struck
 Crowding diseconomy effects
EXCESSIVE HARVESTING AND SPECIES EXTINCTION
There are many reasons why human behaviour may cause population
levels to fall dramatically or, in extreme cases, cause species
extinction. These include:
 Even under restricted private ownership, it may be ‘optimal’
to the owner to harvest a resource to extinction. Clark (1990)
demonstrates, however, that this is highly improbable.
Ignorance of or uncertainty about current and/or future
conditions results in unintended collapse or extinction of the
population.
Shocks or disturbances to the system push populations below
minimum threshold population survival levels.
WHATEVER THE REGIME, SPECIES EXTINCTION IS
MORE LIKELY:
 the higher is the market (gross) resource price of the
resource
 the lower is the cost of harvesting a given quantity of the
resource
 the more that market price rises as the catch costs rise or as
harvest quantities fall
 the lower the natural growth rate of the stock, and the lower
the extent to which marginal extraction costs rise as the stock
size diminishes
 the higher is the discount rate
 the larger is the critical minimum threshold population size
relative to the maximum population size.
Renewable resources policy
Command-and-control:
• Quantity restrictions on catches (EU Total Allowable Catches)
• Fishing season regulations
• Technical restrictions on the equipment used - for example,
restrictions on fishing gear, mesh or net size, or boat size.
Incentive-based policies:
• Restrictions on open access/property rights
• Fiscal incentives
• Establishment of forward or futures markets
• Marketable permits (‘individual transferable quotas’, ITQ)
Forestry
As far as forests as sources of timber are
concerned, much of the previous analysis
applies.
But a new issue arises: the average length of
a “rotation”.
What is also important here is the multiple
service functions of much forestry.
This can often extend optimal rotation
lengths.