Options in Bioeconomic Modelling of Stocks and Harvesting of Tuna John Kennedy

1. Sustainability of Oceanic Top Predator Species Workshop University of California at Santa Barbara, 12-14 April 2007 Options in Bioeconomic Modelling of Stocks and Harvesting of Tuna John Kennedy Department of Economics and Finance La Trobe University Melbourne

2. The Case of Western and Central Pacific (WPC) Migratory Tuna Stocks • The four main migratory tuna species in the WCPO are: • Yellowfin • Bigeye • Skipjack • Albacore Sustainability of Oceanic Top Predator Species Workshop

3. Skipjack, yellowfin, and bigeye straddle the equator, throughout the year migrating in response to changes in feed supply, dependent on the position of the sun relative to the equator. • Migration of the three stocks is through the EEZs of Pacific Island Nations and the High Seas. • The ability of the Pacific Island Nations to determine harvesting access to stocks in their EEZs by their nationals or by Distant Water Fishing Nations does not enable the attainment of an economically efficient outcome across the coastal states. Even if the coastal states agree to pursue nominated catches in their EEZs through time, the leakage of stock to the High Seas means that overfishing will occur there. • The United Nations Fish Stocks Agreement goes some way towards establishing a system of annual catch quotas and their allocation across all interested harvesting parties. The system is implemented by a Regional Fisheries Management Organisation. A Western and Central Pacific Fisheries Commission is now in force for the WCP. Sustainability of Oceanic Top Predator Species Workshop

4. Characteristics of the WCP Tuna Fishery • Multifaceted: • Multi-species (Skipjack, Yellowfin, Bigeye, Albacore) • Multi-gear (Mainly Purse seine and Longline, but also Pole and Line, and Troll • Many Distant Water Fishing Nations (Asian – Japan, Taiwan, Korea, China; USA; growing EC interest) • Many disparate Pacific Island Nations – coastal states with EEZs. Sustainability: Yellowfin and Bigeye stocks are now viewed as over-exploited, requiring reduced targeting to ensure sustainability. Sustainability of Oceanic Top Predator Species Workshop

5. Scope for modelling many interactions: Physical/Biological effects Between fleets with different gears targeting different species - e.g. Purse seiners taking young surface skipjack, yellowfin and bigeye for a low price return compared with longliners taking deeper older and much higher priced (sashimi) tuna. Increased purse seining reduces returns to longliners through lower stock in older age catergories, increasing the cost of catching additional tuna. Price effects As more is caught of a grade of tuna by some fleets, price of the grade falls, adversely affecting returns for other fleets taking that grade. Sustainability of Oceanic Top Predator Species Workshop

6. The Western and Central Fisheries Commission boundary, and national EEZs Sustainability of Oceanic Top Predator Species Workshop

7. The Forum Fisheries Agency (FFA) region defined by outline of 5 degree squares and the EEZs of FFA member countries (shaded) Sustainability of Oceanic Top Predator Species Workshop

8. Criteria for gauging the impact of policy or environmental change: • Biological/Sustainability • Economic efficiency • Socioeconomic • Equity/fairness Who determines the criteria? A regulatory regime? Sustainability of Oceanic Top Predator Species Workshop

9. The WCP Regulatory Regime In the case of the WCP tuna fishery, the regional tuna stocks are now to be managed by the WCP Fisheries Commission based on an agreed Convention. Such an economic objective can be taken to be sanctioned by: Article 5 (a) of the Convention, which advocates “measures to ensure long-term sustainability of highly migratory fish stocks in the Convention Area and promote the objective of their optimum utilization”. Resources are optimally utilized if the result is economically efficient. However, the article 5 (b) objective, which is the only one discussed at length, in general will not be economically efficient. It is to be subject to economic (and environmental) factors, but in what way is not spelt out. Article 5 (b) of the Convention makes the main management objective the targeting of the stock resulting in maximum sustainable yield. As is well known, this objective only results in outcomes which are economically efficient if the cost per unit of fishing effort and the real rate of discount are zero (both unlikely to hold in practice), or for particular combinations of positive effort costs and rates of discount. Sustainability of Oceanic Top Predator Species Workshop

10. Equity considerations The Convention does refer to many economic and social issues which should be taken into account in deciding regulatory measures, but with no indication of weighting. For example: Recognizing the ecological and geographical vulnerability of the small island developing States, territories and possessions in the region, their economic and social dependence on highly migratory fish stocks, and their need for specific assistance, including financial, scientific and technological assistance, to allow them to participate effectively in the conservation, management and sustainable use of the highly migratory fish stocks, Further recognizing that smaller island developing States have unique needs which require special attention and consideration in the provision of financial, scientific and technological assistance, … Because the management of migratory and high seas fish stocks typically results in returns to more than one nation, the question arises as to whether returns should be differentially weighted by nation in determining joint returns. Should returns to the PINs be weighted more highly than returns to DWFNs? Should the PINs as a bloc be encouraged to develop strategies to maximise their total access-fee income, on grounds of equity, or of evening the bargaining power between the PINs and the DWFNs? Sustainability of Oceanic Top Predator Species Workshop

11. Simulation or Optimisation mode? Simulation Ideal for conducting ‘What If?’ analysis (Policy or Environmental change) Few constraints in formulating the problem Large search for policy settings which result in a ‘good’ outcome. Optimisation May be used normatively for finding the best catch levels, or predictively (positively) for predicting the catch levels of rent maximising fishers. Sustainability of Oceanic Top Predator Species Workshop

12. A Simulation Example: WESTERN AND CENTRAL PACIFIC OCEAN BIOECONOMIC TUNA MODEL The spatially disaggregated bioeconomic model described by Bertignac et al. (2000) for investigating optimal reductions in fishing effort by fleets across tuna species in the western and central Pacific Ocean has been updated for further explorations of policy relevant in the Commission era. Cost and price parameters have been updated (Reid et al. 2003); and fleet coverage has been expanded, effort and stock exponents in Schaefer harvest functions have been estimated empirically and are not necessarily set to 1, and fishing effort is now split between effort within the FFA region and outside the FFA region (Reid et al. 2006). Effect of effort reduction across all fisheries on economic rents A paper was prepared by the Scientific Committee of the WCPFC in response to a resolution passed by the Commission requesting estimation of potential consequences of alternative management options for bigeye and yellowfin tuna based on projections from population models (Hampton et al. 2005). One of the options considered was a 30 per cent reduction in fishing effort of all fisheries from levels in 2003. By way of complementary analysis, the results for economic rents from running the updated model for a 30 per cent reduction in effort are briefly reported below. Fuller details are given in Reid et al. (2006). Sustainability of Oceanic Top Predator Species Workshop

13. Change in fishery rent under a 30 per cent effort reduction Sustainability of Oceanic Top Predator Species Workshop

14. Optimisation • A common approach: • Determine the optimal outcome (maximum present value of rents generated by all participants across some time period; if rents, is this all rents – producer, consumer and government?) • What regulatory mechanisms or incentive systems might bring this about? • e.g. ITQs, ITEs – for economically efficient outcomes? But are the markets competitive? • - but these options are very likely to have impacts on the objective function, which when taken into account will change what outcome is optimal. Sustainability of Oceanic Top Predator Species Workshop

15. An WCP Optimisation Example Comparison of rent-maximizing and reference solution. Catch is in thousand tonnes and rent in million US$. Hannesson and Kennedy (2007) Sustainability of Oceanic Top Predator Species Workshop

16. Time dimension • Static or steady state • Comparative statics – Change of equilibrium catch and stocks from a base equilibrium resulting from a new management policy or from environmental change. • Dynamic • Length of planning horizon (finite or infinite?) • Rate of discount (real rate? market or normative?) Sustainability of Oceanic Top Predator Species Workshop

17. Spatial dimension • One fishing ground or many? • Important in modelling migratory stock passing through the EEZs of coastal states and the High Seas if the EEZs are the control areas. • Then modelling of diffusion and advection of stock between say 5 degree squares of ocean likely to be important. • But from an overall control point of view, these may be artificial. • May be more reasonable to have TACs set across the whole region, allocating the TAC equitably across coastal and distant water states, and allowing the quotas to be traded. Sustainability of Oceanic Top Predator Species Workshop

18. CES Data to 5 degree squares map Sustainability of Oceanic Top Predator Species Workshop

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20. Stock dimension • Stock size captured by: • total biomass of the stock? • biomass of each age cohort? Sustainability of Oceanic Top Predator Species Workshop

21. Deterministic or stochastic • If stochastic, how is the objective function different from that for a deterministic formulation of the model? • Expected return? Implies the decision maker is risk neutral • Utility functions for risky income, allowing for risk preferring or risk aversion in decision making? Sustainability of Oceanic Top Predator Species Workshop

22. Number of decision makers Are there one or many decision makers/governments/ regulatory bodies/stakeholders? Each with one or many objective functions? If many decision makers, game theory is relevant, at least for insights. What if the decision makers each went their own way, harvesting through time to maximise their objective function, taking as given the harvesting of the other decision makers? The outcome of such behaviour across all decision makers is a Nash Equilibrium. Sustainability of Oceanic Top Predator Species Workshop

23. Some Game Theory Concepts • Solution Concepts • 1) The core, for side payments feasible (Straffin, 1993 p. 165) • 2) Coalition-proof Nash equilibrium (CPNE) for side payments feasible • Allocations • i) Joint maximisation solution • ii) Shapley value • Aumann (1989, p. 23) sums up the value with: “Fully characterised by a set of axioms, it may be thought of as a reasonable compromise or arbitrated outcome, given the power of the players.” • iii) The nucleolus • Even if the rent maximising solution is not in the core, it can still be argued that it is the allocation most likely to be accepted by all players, because the greatest loss (or equal losses) suffered by players through not receiving coalition returns would be minimized (Straffin 1993, p. 205). Sustainability of Oceanic Top Predator Species Workshop

24. WCP Example Rent obtained by one defecting fleet, rent for coalition of remaining fleets , and coalition rent for dissuading defection. Million US$. Hannesson and Kennedy (2007) Sustainability of Oceanic Top Predator Species Workshop

25. Conclusions The WCP tuna fishery presents many modelling choices. Which choices should be made obviously depends on the purpose or objectives of the modelling effort. Different objective require extensions along different dimensions. The change in regulatory system from reliance on national autonomy over provision of access rights to tuna in EEZs to a Commission with responsibility for overall sustainability and economic returns suggests that modelling will become less spatially explicit. To obtain agreement at the Commission level on total allowable catches and their allocation will require bargaining between many disparate parties. Equity considerations will be one influence; a second and probably stronger influence will be tradeoffs and side payments in agreeing allocations. What is lost or gained by an alternative course of action to the current action can only be determined by modelling. Game theory concepts are likely to play a larger role in modelling the WCP tuna fishery to highlight the bargaining power of the participants. Sustainability of Oceanic Top Predator Species Workshop

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