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Economics & Social Sciences Research Program

Developing a Dynamic Multiregional Economic Model for Alaska Fisheries

Standard regional economic models usually focus on a single region. These models generally fail to capture economic impacts transmitted outside that region and also do not account for spillover effects in the study area resulting from events occurring outside. In addition, products from Alaska fisheries are consumed around the world, and global demand for these products is an important source of income to Alaskan fishers, processors, and traders.

An inter-regional (or multiregional) model can more fully measure the impacts of a regionís fisheries, including impacts occurring in regions that supply commodities or factors of production to industries in the study region, or that purchase goods and services produced there. An inter-regional model could be especially useful in the case of Alaska, where most intermediate goods and services are imported, and much of the factor (labor and capital) income is paid to nonresident vessel owners and crew members. This type of model could also be used to track the impact of expenditures by vessel owners and crew members who participate in other regions' fisheries. Similarly, U.S. regional economic accounts distinguish between domestic versus foreign trade, but do not identify bilateral trade flows between partners. However, information about the volume and value of trade between partners is important for understanding the current and historic economic status of a fishery, and, thus, for making reasonable projections about future economic conditions in scenarios that account for important current issues such as the effects of climate change or ocean acidification.

Existing economic impact models for fisheries usually focus on impacts from regulations imposing supply-side shocks (e.g., change in harvest levels) or change in exogenous demand for seafood products. With these models it is difficult to disentangle and evaluate the effects of changes in market conditions (e.g., changes in the world market price of seafood) and changes in global demography (e.g., population and age structure in consuming countries). Demand for seafood products is expected to increase substantially in coming decades due to these demand-side effects. On the supply side, emerging issues of importance to fisheries and seafood production systems include climate change and ocean acidification. These issues are expected to receive greater attention as more is learned about their effects on the productivity of ocean ecosystems.

Therefore, ESSR Program economists Drs. Chang Seung and Mike Dalton and contractors Phil Watson and Edward Waters will construct a dynamic multiregional computable general equilibrium (DMRCGE) model to incorporate and integrate the important drivers of seafood product supply and demand. The DMRCGE model will enable examination of the inter-regional effects of not only regulatory-induced supply-side perturbations but also of changes in world seafood market conditions, changes in world demography, global climate change, and ocean acidification. Intermediate steps include the construction of a multiregional social accounting matrix (SAM) model, and construction of a "static" multiregional computable general equilibrium (CGE) model.

By Chang Seung

A Tradable Salmon Bycatch Quota System for the Pollock Fishery?

The Bering Sea pollock fishery has experienced a significant increase in benefits from economic rationalization brought about by the American Fisheries Act which was passed in 1998. The "race for fish" ended in the fishery, product recovery increased markedly, and intercooperative agreements (ICA) have allowed the participants in the fishery to jointly address problems through civil contracts. Two notable benefits of the ICA are increased information sharing on bycatch and the development of voluntary rolling hotspots (VRHS) which close areas of the Bering Sea for periods of time after observations of spatially aggregated high-bycatch areas.

Despite aggressive action by industry to close Chinook and 'other salmon' bycatch hotspots, the fishery experienced record levels of Chinook bycatch in 2007. The North Pacific Fishery Management Council (NPFMC) is currently evaluating a large suite of potential policies including both new spatial closures and the imposition of a limit or "hard-cap" on the amount of salmon that can be caught in the pollock fishery before the fishery is closed.

Creating a hard cap will by definition limit the quantity of salmon caught in the pollock fishery, but without allowing for individual or cooperative-level allocations of salmon, a hard cap could restart the race for fish in the pollock fishery. This would occur if participants in the pollock fishery expect the fishery to close early due to the fleet reaching the salmon hard-cap, causing cooperatives to speed up fishing to ensure that their pollock quota can be fished before it is lost.

Fortunately, tradable salmon bycatch quotas or other individual bycatch accountability (IBA) mechanisms can help to efficiently ensure that the benefits of rationalization continue to be experienced by the pollock fishery. A tradable salmon quota system would require that vessels hold salmon quota in order to fish for pollock. Tradable quotas would not cause a race for fish because vessels or cooperatives would be able to fish their entire pollock quota as long as they possess or can purchase bycatch quota.

Under the current system or under a hard-cap system without tradable bycatch quota, bycatch is a classic environmental externality -- the vessel choosing whether or not to fish in a high or low bycatch area pays the cost of traveling to avoid bycatch. However, the vessel does not pay the cost of generating additional salmon bycatch; this is experienced by the fleet as a whole (and other users of salmon). A tradable bycatch quota system would require vessels to pay a direct cost for salmon bycatch and would, thus, provide efficient incentives for vessels to decide whether or not to take action to avoid bycatch or to instead expend bycatch quota to avoid the costs of traveling to cleaner areas. A quota system is a market-based regulation rather than a "command and control" system. Rather than putting the decision about what area to control in the hands of a regulator, the decision to avoid bycatch is put in the hands of every individual making the tradeoff of fishing benefits and (all) bycatch costs. This means that vessels can choose whatever means of bycatch reduction that they see fit, be it avoiding hotspots, fishing more intensively in different times of the year, or using salmon excluders or other alternative fishing technologies that might reduce bycatch.

As part of the suite of alternatives being considered, the NPFMC is considering a tradable salmon bycatch system; it is also possible that the pollock industry ICA would allow industry to organize a tradable salmon system that they could administer. Various challenges remain in the implementation process, however; while the pollock fleet has a relatively high level of observer coverage, approximately 20% of catch remains unobserved. There are also legal challenges to trading prohibited species catch (PSC) such as salmon. During the coming months NPFMC staff and AFSC researchers will continue to consider options for a tradable salmon bycatch system.

By Alan Haynie

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