Regulating multiple externalities:the case of Nordic fisheries

• Published in: Marine Resource Economics
• Main Authors: Waldo, Staffan, Jensen, Frank, Nielsen, Max, Ellefsen, Hans, Hallgrimsson, Jónas, Hammarlund, Cecilia, Hermansen, Oystein, Isaksen, John
• Format: Article in Journal/Newspaper
• Language: English
• Published: 2016
• Subjects: Climate change; economic efficiency; externalities; fisheries; fuel efficiency; regulation; Faroe Islands; Iceland
• Online Access: https://curis.ku.dk/portal/da/publications/regulating-multiple-externalities(863243ec-dac9-49a5-98d2-3136c57cba9c).html; https://doi.org/10.1086/685286

Open access is a well-known externality problem in fisheries causing excess capacity and overfishing. Due to global warming, externality problems from CO2 emissions have gained increased interest. With two externality problems, a first-best optimum can be achieved by using two regulatory instruments. However, solving the open-access externality problem also affects CO2 emissions. By using a bio-economic model covering Iceland, Norway, Denmark, Sweden, and the Faroe Islands, it is shown that regulations of the open-access externality problem have a large effect on both economic performance and CO2 emissions, while an additional CO2 regulation only has minor effects. The second-best solution achieved by only regulating open access reduces emissions by approximately 50% compared to current fisheries, with the exception of Iceland, which already has a well-developed fisheries management system. Open access is a well-known externality problem in fisheries causing excess capacity and overfishing. Due to global warming, externality problems from CO2 emissions have gained increased interest. With two externality problems, a first-best optimum can be achieved by using two regulatory instruments. However, solving the open-access externality problem also affects CO2 emissions. By using a bio-economic model covering Iceland, Norway, Denmark, Sweden, and the Faroe Islands, it is shown that regulations of the open-access externality problem have a large effect on both economic performance and CO2 emissions, while an additional CO2 regulation only has minor effects. The second-best solution achieved by only regulating open access reduces emissions by approximately 50% compared to current fisheries, with the exception of Iceland, which already has a well-developed fisheries management system.