Regulating Multiple Externalities: The Case of Nordic Fisheries

Staffan Waldo, Frank Jensen, Max Nielsen, Hans Ellefsen, Jónas Hallgrimsson, Cecilia Hammarlund, Øystein Hermansen and John Isaksen

Marine Resource Economics, 2016, vol. 31, issue 2, 233 - 257

Abstract: 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.

Date: 2016
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