Renewable Resources

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• Renewable 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.).
• Like non-renewable resources, are capable of
  being fully exhausted.

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Renewable Resources Renewable flow
resources Such as solar, wave, wind and
geothermal energy. These energy flow resources
are non-depletable.
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• Renewable Resources
• Key points of interest
• private property rights do not exist for many
  forms of renewable resource
• the resource stocks are often subject to open
  access tend to be overexploited
• policy instruments relative merits

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Renewable Resources Biological growth
processes Gt St1 - St where S stock size and
G is amount of growth This is called density
dependent growth. In continuous time
notation G G(S)
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Renewable Resources Biological growth
processes G G(S) An example (simple) logistic
growth Where g is the intrinsic growth rate
(birth rate minus mortality rate) of the
population. Now turn to the Excel file
logistic.xls
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MSY
SMAX
SMSY
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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 fishery. Extinction is more
likely, but will not necessarily happen.
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Steady-state harvests Let H harvest and G
net natural growth (G) In steady-state
harvesting G H and so dS/dt 0 (the
resource stock size remains constant over time).
There are many possible steady states or
sustainable yields. There is one particular
stock size at which the quantity of net natural
growth is at a maximum. This is a maximum
sustainable yield (MSY) steady state. Many
people believe that a renewable resource should
be managed to produce its maximum sustainable
yield. Economists do not agree that this is
always sensible (but it may be in some
circumstances).
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Note that in the textbook (chapter 9), a slightly
different diagrammatic exposition is used. We
have V PH where V is revenue from fish
sold But H f(S) so V PH(S) and
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C,V
Open access fishing equilibrium
C
V
SOA
S
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Private property (restricted access) fishing
equilibrium
C,V
C
V
Profit
SOA
SPP
S
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DYNAMIC FISHING MODELS See derivation in Perman
et al, chapter 9. Take account of opportunity
cost of leaving fish unharvested. This depends
on the rate of interest (or discount rate), r.
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• 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.

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• 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

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• 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.

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• 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)

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• Renewable resources policy
• Others
• Government's role in the provision of
  information
• Safe Minimum Standard of conservation (SMS)
  imposing constraints on resource harvesting and
  use so that all risks to the survival of a
  renewable resource are eliminated.

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A model of a commercial fishery See Excel file
logistic.xls and also Word file exploit6.xls