Directory UMM :Data Elmu:jurnal:E:Ecological Economics:Vol36.Issue2.Feb2001:

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SURVEY

Challenges for economic policy in sustainable management

of marine natural resources

Derrin Davis

_{*, Donald F. Gartside}

b a_{Graduate Research College,}_{Southern Cross Uni}

6ersity,PO Box157,Lismore,NSW2480,Australia

b_{Center for Coastal Management,}_{Southern Cross Uni}

6ersity,Lismore,NSW 2480,Australia

Received 17 April 2000; received in revised form 19 September 2000; accepted 20 September 2000

Abstract

The sustainable management of marine natural resources presents particular challenges to the managers of those resources. While such management has typically been based on biological considerations, it is argued that this has resulted in overexploitation and destruction of important marine assets in industries such as fishing and tourism. Consequently, it is concluded that other approaches are needed, with the use of economic concepts and management tools particularly relevant. At the same time, the human welfare outcomes of the application of various policy instruments must be carefully considered. While biological information is critical to the formulation and implementa-tion of successful management regimes, it is concluded that the applicaimplementa-tion of economic instruments will become more attractive to resource managers, with these instruments underpinned by consideration of property rights and an appropriate allocation of economic rents. A greater focus on these economic matters will take resource managers further in the direction of sustainable management of increasingly scarce marine resources. The conclusions in the paper are supported by various case studies from fisheries and tourism. © 2001 Elsevier Science B.V. All rights reserved.

Keywords:Marine natural resources; Sustainable management; Fisheries; Tourism; Economic instruments

www.elsevier.com/locate/ecolecon

1. Introduction

The natural resources of the sea are extremely valuable and, for the most part, are renewable. If properly managed, they should provide continu-ing returns into the future without diminishcontinu-ing

their productivity. Yet, for many of these re-sources, including those of importance to indus-tries such as fishing and tourism, efficient management and sustainable exploitation have been the exception rather than the rule. Resources have been depleted and have collapsed due to over-exploitation, with severe economic and social consequences for the humans relying on them. For example, the collapse of cod stocks on the * Corresponding author. Fax: +61-2-66215386.

E-mail address:[email protected] (D. Davis).

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banks in the Northwestern Atlantic by the mid-1990s resulted in more than 40 000 people being unemployed in the Canadian Maritime Provinces. With Federal Government assistance to these peo-ple due to expire after 7 years, the fish stocks still have not recovered (Kurlansky, 1997). On a global scale, the magnitude of the problem is illustrated by global marine fish production esti-mated to cost $124 billion per year to harvest (the operating cost of the global fishing fleet), but returning revenues of only $70 billion (Mace, 1997). The $54 billion shortfall is thought to represent various kinds of government subsidies to fishing that help entrench both the over-ex-ploitation of resources and the economic ineffi-ciency of the fishing industry.

Although there has been considerable develop-ment of both economic theory and biological models as they apply to the management of marine natural resources over the past 50 years, policy development for the marine environment is particularly complicated compared with that for many land-based resources. Despite development of increasingly sophisticated and complex policy frameworks, biological, economic and social out-comes often have been poor. Complications range from wider questions of sovereignty at both inter-national and state levels to the difficulty of defin-ing ownership of free-rangdefin-ing or migratory resources like fish stocks. Establishing property rights in ways that result in the generation and fair distribution of economic rent, along with sustainable utilization of resources, has proved to be extremely difficult.

Four major areas of economic policy that have emerged as significant issues for the proper man-agement and development of marine natural re-sources are discussed in this paper: implementation of appropriate economic instru-ments; establishment of property rights; genera-tion and distribugenera-tion of rent; and management of resources for sustainability. While there are obvi-ous overlaps and interactions between these areas, they are separated to some extent in the following discussion to allow easier consideration of their characteristics and potential roles in marine re-source management.

2. Economic instruments for managing marine natural resources

James (1997) defined economic instruments (EIs) as instruments that operate through market processes or other financial incentives. This con-trasts with the traditional approach to managing natural resource problems, which has been to apply regulations, sometimes known as the ‘com-mand-and-control’ approach. ‘Command-and-control’ refers to government measures (legislation) with which individuals or corporate entities must comply. Examples of this approach to environmental management include establish-ing regulations that set standards for air and water quality, prescribing consumer behaviour, and limiting the fishing equipment that may be used in specific fisheries.

Economists have, however, long argued that market-based incentives, which apply monetary values, are more efficient for environmental man-agement than those based on ‘command-and-con-trol’ approaches. Yet environmental management has been dominated by the regulatory approach. James (1997) noted that regulations were, until recently, almost the only instrument used by gov-ernments in natural resource and environmental management. This began to change to some ex-tent in 1972 when OECD countries agreed to pursue a ‘polluter-pays’ approach as a back-ground economic principle for environmental pol-icy. A recent manifestation of this policy was the introduction, in 1999, of ‘ecotaxes’ on energy sources in Germany.

Economic instruments incorporate monetary values for the use of natural resources by, for example, applying taxes, prices or tradable rights. The main attraction of these pricing mechanisms is that they provide clear signals in the market to consumers about the cost of producing a particu-lar product, and to producers about the relative valuations (based on willingness to pay) that con-sumers place on the resources, i.e. a simple infor-mation system is established. Wills (1997) noted that society needs a ‘‘signalling and incentives system to co-ordinate individuals’ production and consumption activities’’. Following Wills, such a system must ‘signal information’ about resource

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availability or scarcity. This information is useful for bringing production and consumption into balance, and for directing scarce resources to their most valued uses. Pricing systems imply that there are rewards and penalties for consumers and pro-ducers in relation to their activities.

An advantage of EIs is that they allow for adaptive choice and decentralized decision-mak-ing by those whose behaviour is to be modified. There are, however, some disadvantages in relying on markets for management of marine natural resources, especially for optimal allocation of scarce resources. To understand these disadvan-tages, it is important to examine the consequences of inefficient or wasteful exploitation of natural resources. Foremost among these are welfare im-plications, particularly where future generations are left worse off by the actions of the present generation. Also, market failure can increase po-tential environmental impacts from the exploita-tion of natural resources. Market failure occurs where prices do not properly reflect the true value of the good in question. Many of the benefits of, for example, marine protected areas, such as eco-logical, biological or aesthetic values, are subject to market imperfections. Davis and Tisdell (1995) pointed out that because there is no ‘environmen-tal price’ to be paid by consumers who reap the benefits of, say, a pristine coral reef, then the reef is made available at an inefficiently cheap price (i.e. the net social benefits arising from use of the reef are not maximized) and it may subsequently be overused and degraded. An obvious reason for this is that many of the benefits from being able to use the reef are difficult to measure and express in monetary terms.

Setting an appropriate price for marine and other natural resources is a major challenge be-cause of the so-called intangibles. These include values other than those associated with immediate use such as existence, option and bequest values (Munasinghe, 1992). To make matters worse, overuse and damage of the resource is virtually guaranteed because of the open access nature of most marine resources, an issue discussed later in this paper in relation to property. Therefore, as explained by Turner et al. (1994), market failure arises because the price for goods and services

does not reflect the true value of the resources being used to produce them, including the full cost of degradation of those resources.

Many marine environmental goods presently are unpriced and are consequently overused (marine waters used for sewage disposal have traditionally been subject to such overuse). Where the major part of environmental goods and ser-vices is unpriced, markets cannot be used for effective allocation. With zero price, they would dissipate all of the resource without regard to its true, but hidden values. This problem is charac-teristic of the open access and/or public good nature of most marine environmental goods. Davis and Tisdell (1995) explained that, when open access is the case, individuals have no incen-tive to conserve the resource being exploited. In other words, they do not take account of user costs and, although one user might take care, others will not. They concluded that this supports the adage that the property of all becomes the responsibility of none.

Economic instruments are designed to correct market failure — to ensure that real or inclusive costs are signalled to producers and consumers. Turner et al. (1994) noted two ways in which market failure in the context of natural resource services could be overcome. First, markets could be created in previously free services by attaching a price to them. This might require restriction of access to such resource services by, for example, charging entrance fees. The best known price-based instruments are taxes and user-pays charges. Restricting access might, alternatively, involve changing property rights (an example of changing property rights would be to establish extended exclusive economic zones in the oceans). Second, markets could be modified by centrally deciding the value of natural resource and envi-ronmental services, and ensuring that those values are incorporated in the prices of goods and ser-vices. This type of approach is known as the market-based incentives approach, and is nor-mally contrasted with the direct regulatory ap-proach. Annual licence fees might provide an example of a centrally determined value for access by commercial tour operators to particular sites or attractions in marine protected areas, although

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those fees — where they are charged — tend to be based on administrative costs rather than envi-ronmental values. An example is provided in the whale shark tourism industry in Western Aus-tralia’s Ningaloo Marine Park, where daily visitor charges include a fee that is payable to the state’s management agency (Davis et al., 1997; Davis and Tisdell, 1999).

Despite growing interest in the application of EIs, many questions still arise. For example, is it not easier to make a rule about resource use and enforce it? The principal problem with this regula-tory approach is that it does not work. The cost of effective enforcement, both in monetary and social terms, inevitably is too high. Without effec-tive enforcement and compliance, the resource is likely to become degraded. In addition to being expensive and difficult to enforce, regulations will most likely not result in the most efficient use being made of scarce resources because they take no account of costs, are inflexible and slow to change as technology and production patterns change (for example, see Alder and Haste, 1995), and they provide no incentive for groups such as polluters to continue to improve beyond the set regulatory limit. For example, if pollution (such as effluent discharge into an estuary) is at a high level and pollution represents a direct cost to society (e.g. Fig. 1, Point A), regulations might be introduced requiring polluters to reduce their out-puts to a level below a set standard (point B) within a given period of time. But there is no incentive in this system to continue to reduce

pollution to still lower levels — polluters will reduce levels as required, but then continue pol-luting at a level such as that shown by the line CD. EIs are implemented to provide the incentive for continued reduction in pollution, perhaps fol-lowing the line ACE. With regulation, there is a loss to society represented by the hatched area. The load-based licensing scheme for effluents re-leased into the atmosphere and water bodies, recently implemented by the state of New South Wales, Australia, is a scheme designed to provide such on-going incentives for environmental improvement.

In addition to providing better outcomes for the environment, EIs usually help achieve these objectives at a lower cost to the community than the ‘command and control’ approaches, for the reasons already outlined. In the wider context, as pointed out by James (1997), they are a practical means of implementing the principles of sustain-able development.

In resolving resource use problems, however, it is essential that any solution adopted should not impose more costs on society than the problem being solved — there should be a net benefit to society from the change. The application of this principle is not always straightforward when there is uncertainty surrounding the true costs of the problem and the costs and benefits of alternative solutions. This uncertainty results in some solu-tions being ‘second best’. For example, Forsyth et al. (1995) explained that user-charges should be related to costs, either the costs of environmental damage or the monetary costs incurred in avoid-ing such damage. But the difficulty is that such costs, particularly environmental costs, are often difficult to estimate accurately. The result is that charges are sometimes imposed not on the exter-nality, but as a Pigovian tax on the person or product that generates the externality, meaning that such charges relate only indirectly to the environmental costs being incurred.

Social outcomes also comprise an important area of cost. Sustainable communities are an im-portant part of the marine resource management equation, and formulation of policy, including that based on EIs, will require compromises and trade-offs between economic efficiency and social Fig. 1. Incentive effects of economic instruments.

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and biological outcomes. This is not, however, an argument against the use of EIs. Regulation may also result in welfare losses, but without the atten-dant gains in economic efficiency potentially available through the use of EIs. And, of course, taking no policy action is almost guaranteed to result in the demise of certain coastal industries and communities as happened, for example, with sardines on the US West Coast and herring in the North Sea.

Marine natural resources can also provide more than one service. For example, many fish species have both a recreational and commercial value, and marine parks have a wide variety of different users. Management of these resources will entail multiple objectives and, therefore, a combination of management instruments will be needed. Fur-thermore, valuation of the resources might be incorrect. Marine protected areas provide an ex-ample. There have been a number of valuation studies of protected areas with values based on activities such as tourism. Yet these valuations may overstate the value of protection to the area — many of the tourism activities would have occurred whether or not protected status had been granted. If user-charges were based on the value of major activities in the protected area, they would most likely result in charges being levied that are too high and so over-estimate the ‘added-on’ value conferred by protection. Consequently, economic approaches such as the auction of rights to access certain resources can be used to elicit a more accurate, market-based valuation of those resources.

Economic instruments are also subject to a range of other limitations. Markets can distort values when they are based on poor information about resources. For example, stocks of orange roughy, a fish occurring in water over 3 km deep in the Southern Ocean and sub-Antarctic, were greatly over-estimated, resulting in over-capital-ization in the industry. Sound market decisions rely on good information.

Governments can also distort markets by grant-ing exemptions to regulations that otherwise would impose a cost. This so-called ‘government failure’ is, perhaps, one of the greatest sources of poor resource management around the world. For

example, sea farming of tuna in South Australia was allowed to proceed with an exemption from the Environmental Protection and Assessment Act, yet such an industry might impose significant economic and other externalities on other users of the areas in which the farms are located. Equity issues might also arise, with an EI having most impact on those who can least afford to pay, e.g. increases in fishing licence fees will most affect the poorest sectors of the industry. Wills (1997) also explained that environmental problems involve uncertainty, and this renders the development of management strategies more difficult. These cases, however, support at least partial adoption of EIs, as these are more flexible than the regulatory ‘command and control’ approach.

Two final points can be made about the use of EIs for marine resource management. First, as noted by Davis and Tisdell (1996), EIs are mostly underpinned by technical or biological consider-ations (such as the desired upper limit on emis-sions, or the total allowable catch in certain fisheries) and, therefore, the most effective ap-proach is likely to involve a blend of incentive-based approaches and regulation.

Second, as Turner et al. (1994) argued, there is little doubt that society will demand increasingly stringent pollution controls in the future and, therefore, costs and regulatory intrusiveness will escalate significantly. Similarly, pressure on scarce natural resources such as fish stocks will lead to society and industry demanding improved man-agement of those resources, involving better bio-logical, social and economic outcomes (such as generation of rent), notwithstanding the biological uncertainties that typify their exploitation. These factors will require increased use of market mech-anisms for revealing information, compared with the excess costs and bureaucracy associated with strategies based solely on regulation. Economic incentives, of necessity, will become more widely adopted by government resource management agencies. To achieve desired management out-comes for a range of natural resources using economic approaches relies, however, on im-proved specification of the property rights govern-ing the use of those resources.

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3. Property rights

Designing property rights structures that are in tune with the functions of ecosystems and the economic goods and services they generate pre-sents a major challenge (Costanza, 1999). In con-sidering property in an economic sense, it is important to recognize that definitions are not limited to physical or geographic entities. In eco-nomic terms, property is a stream of benefits or income and a property right is a claim to this stream (Bromley, 1992). The general characteris-tics of property rights have been described in the following terms (Scott and Johnson, 1985): exclusivity;

right to enforce exclusive use; transferability to others; right to determination of use; duration and timing of rights; provision for payment.

There are, however, several different types of property that more or less satisfy these require-ments. Different authors have recognized different categories of property. For example, Scott and Johnson (1985) identified the following categories in relation to resource management:

freehold (fee simple): characterized by indefin-ite duration and absence of continuing obliga-tions to the party from whom the interest is derived;

leasehold: characterized by certainty of duration;

profit a` prendre and easement: characterized by rights that are acquired over the land owned by another;

license: characterized by permission given by the occupier of the land to do something that would otherwise amount to a trespass.

On the other hand, Tisdell and Roy (1997) argued that property rights and governance are inter-related because of the importance of know-ing who owns the rights (individuals, groups/ com-munities, or governments) and how these property rights could be enforced. Pearce (1992) similarly noted that the ownership of an asset is not unfet-tered because private contract or law generally imposes some restrictions. Tisdell and Roy iden-tified four broad types of property:

private property: rights rest with an individual or legal entity;

state property: rights rest with the government; communal property: rights rest with an

iden-tifiable community of users;

open-access property: access is free and open to all.

As Tisdell and Roy pointed out, these cate-gories are not mutually exclusive and can overlap or form combinations of ownership rights, such as community and government shared ownership, which commonly occurs in some Indian Ocean countries.

There are problems in management of natural resources associated with all types of property ownership. However, in the marine estate, it is open access and community (common property) forms of property ownership that have posed the greatest problems for the application of economic theory and development of policy. These prob-lems have been recognized by economists for nearly 50 years following seminal papers by Gor-don (1954) and Scott (1955) who identified the problems of fisheries overharvesting, population collapses and poor economic performance as be-ing manifestations essentially of economic rather than biological factors. Yet problems with poorly specified property rights in the marine estate con-tinue, with Costanza (1999, p. 199) stating that ‘‘the cultural traditions of open access must be replaced with more appropriate property rights regimes and governance structures’’.

In fisheries, the pervading biological perspective of resource managers exacerbates these problems. This perspective manifests itself in the application of biological production models for utilization of fisheries, models that provide for a ‘maximum sustainable yield’ to be harvested from stocks. Management then constitutes a series of input and output controls to effect a total harvest, while ignoring the costs of making the catch. When management agencies essentially ignore economic considerations about costs of harvest and rev-enues produced, they allow fishers to compete with each other in a fruitless endeavour to in-crease their individual shares of the catch, which results in escalating overall costs, but no corre-sponding increase in total catch. The resulting

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outcomes of over-exploitation of resources and economic and social hardship have become char-acterized as ‘the tragedy of the commons’ (Hardin, 1968). At this point, it is worth noting that, notwithstanding the widespread acceptance of Hardin’s ‘tragedy’, this tragedy, as explained by Aguilera-Klink (1994), more correctly relates to open access. Certain forms of common prop-erty ownership, as occurs throughout the island nations of the south and west Pacific, serve to protect fisheries (and other) resources and, there-fore, potentially comprise a property structure that achieves desirable economic, social and bio-logical outcomes (Thistlethwaite and Davis, 1996). There appears to be ongoing confusion among resource managers about the distinction between common property and open access forms of ownership, with the former not necessarily leading to a tragedy of over-use of scarce resources.

An increasingly common response of marine natural resource management agencies to the problems of poorly specified ownership has been to establish and gradually refine individual prop-erty rights. In theory, these refinements will re-move the competition between individuals that characterizes open access or common property resources (Christy, 1996; Pearse, 1996).

In fisheries, the establishment of share owner-ship is one of the most advanced forms of prop-erty rights allocation currently employed. This is a refinement of the quota system and is based on division of a total allowable catch into quotas, with shares that can be traded. The shares effec-tively divide the fish stock into a form of imper-fect private property ownership. The imperimper-fection stems from the reserve powers of ownership of the fisheries retained by the government. This form of management is particularly suited to those fisheries where there have been relatively few li-censed operators, the product has a high market price, it is possible to set a total allowable catch each year, and it is possible to restrict illegal sales. The last two points remain contentious because of the difficulties of accurately measuring fish stocks, and because it is believed that in these fisheries illegal sales are usually unacceptably high. Meere (1997) also argued that such approaches to

man-agement are likely to work best in the case of single-species fisheries, such as the Australian blue fin tuna fishery.

Two Australian cases that can be used to illus-trate share-managed fisheries are the Tasmanian abalone fishery and the New South Wales rock lobster fishery. The Tasmanian abalone fishery is predominantly an export fishery where high prices are paid for the product (Anonymous, 1999). The price in 1996 was around $25 kg. The commercial fishery is based on two species, Haliotis lae6igata (greenlip abalone) and Haliotis rubra (blacklip abalone), and commenced in 1963. Production in Tasmania in 1994 – 1995 was 2269 tonnes, valued at around $59 million. A system of shares of total allowable catch (TAC), termed a ‘deed of arrange-ment’ was established in 1994. These ‘deeds’ were a formal contract that guaranteed a share of quota that was fully transferable. Initially, shares were allocated to the operators of the fishery in proportion to historic catch levels. Each of the 3500 units of quota entitles its owner to harvest 600 kg abalone and, if the owners of shares are not licensed divers, they must employ a licensed diver to take the allocated catch. There are about 350 holders of quota and numbers of units held by individuals vary widely. The shares may be traded on an open and public market, so that any person can buy a share entitling him/her to a specified quantity of abalone. Shares can be as-signed to third parties, thus enabling them to be used as security for financial arrangements. Shares can be traded freely subject to rules specified each year in relation to the biological sustainability of stocks (mainly TAC and size limits).

The New South Wales rock lobster fishery is based on a single species, Jasus 6erreauxi. The fishery serves both domestic and export markets, and the product again attracts a high price per kilogram (Anonymous, 1997). The mean price in 1995/1996 was around $35 kg, giving the fishery an annual total value of around $4 million. Al-though the highest reported catch was 365 tonnes, quotas (TAC) established in 1992 in response to declining catches and catch rates over the preced-ing 40 years have varied around 110 tonnes. Share management was established under legislation that came into operation in 1995. Shares were,

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again, issued to licensed operators in the fishery based on historic catches. Rock lobster can only be taken by fishers with specially endorsed li-censes, with these licenses issued only to fishers who hold shares (or their nominees). Transferabil-ity of quota is restricted to selling the entire fishing operation or leasing some or all the quota (a temporary transfer for a year). There are cur-rently 188 endorsed fishers with individual hold-ings ranging from 12 to 218 shares. The average quota entitles holders to 560 kg, but individual quotas range from 130 to over 2000 kg. Once again, the quantity of catch specified in each share may vary from year to year, depending on the total allowable catch.

In the abalone and rock lobster fisheries, intro-duction of increased size limits, quota and share management arrangements appear to have re-sulted in increased stocks. In both fisheries, the quota has been increased as stocks have recov-ered. The report of the NSW Rock Lobster Total Allowable Catch Committee (1997) noted that substantial effort reductions since the introduc-tion of management measures in 1994 were due to:

exclusion of around 800 fishing operations (out of a total approaching 1000) for failing to meet entry criteria;

a large number of small holders leasing out all their quota and not fishing;

some quota holders selling all their entitlement and leaving the fishery;

remaining operations using fewer traps per boat to catch their entitlements.

Although share-managed fisheries might over-come the problems of unrestricted competition between fishers, competition that results in eco-nomic inefficiency and waste, this method is still in an early phase of development. It is, however, an innovative approach to natural resource man-agement involving the use of EIs and regulation in combination. Nonetheless, share-based entitle-ments still suffer from the shortcomings of other quota-based management approaches. The gen-eral challenges include:

providing long-term resource security to share holders;

refining biological methods for determining the total allowable catch that is acceptable to share holders;

ensuring accurate reporting of catch by li-censed operators;

reducing catch by unlicensed operators; developing a system to provide a share of the

resource for the recreational sector;

ensuring that economic rents are distributed appropriately.

There are a number of areas of the marine estate in addition to fisheries, which pose chal-lenges for the development of appropriate eco-nomic policy and management measures relating to property. Examples of these areas include tourism, coastal urban and property development, agricultural activities impacting on the marine ecosystem, and general marine activities such as aquaculture/sea farming, transport, waste dis-posal, mineral exploration and extractive industries.

Three tourism-related activities with significant property right implications are visitation and pon-toon mooring rights for coral reef tourism opera-tors, recreational scuba diving with dive charter operators, and the special case of tourism and scuba diving to observe whales, other marine mammals and whale sharks. A major issue facing each of these activities is establishing an appropri-ate form of property right. At present, a range of access arrangements exists, including open access in the case of most scuba dive operators, some form of limited entry licensing regulation for some observational activities, and a more formal form of leasehold property for moored pontoons. We predict that the development of property rights for these activities will follow a similar path to that experienced for fisheries management. The consequences of open (unrestricted) access to reefs and marine animals already appear to be over-uti-lization and degradation of resources and/or a reduced recreational experience. Concerns for the carrying capacity of tourism resources (Davis and Tisdell, 1995, 1996; Davis et al., 1997) might be addressed by establishing strict limited-entry li-censing arrangements for the number of operators and the scope of their activities. These limited-en-try controls must include strict controls on

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‘ef-fort’. Without an inbuilt ‘effort’ reduction scheme, limited-entry systems are likely to result in the collapse of the resource due to the inex-orable increase in exploitation rate from adoption of new technology and competition between oper-ators. We predict that this will be a step towards development of more formal property rights that confer more secure license tenure and transferabil-ity. Furthermore, where ecotourism operations involve a discrete and defined geographic loca-tion, such as a coral reef, the property right will increasingly take the form of tradable private property (albeit leasehold), similar to that which exists for coral island resorts. Steps in this direc-tion have begun in activities such as swimming with whale sharks in Ningaloo Marine Park, Western Australia, and whale watching in Queensland’s Hervey Bay.

4. Economic rent and property

The issues of economic rent and property, while defined separately, are inextricably linked for marine natural resources. Economic rent, accord-ing to the Pareto definition, is the payment to a factor in excess of what is necessary to keep it in its present employment (Pearce, 1992). World Bank (1996), in discussing fisheries and forestry resources, referred to rent as the economic surplus over and above normal profits earned from the exploitation of those resources. While valuable marine natural resources should be capable of generating considerable economic rent, this usu-ally has not happened, at least for any sustained period of time. The simple reason for this failure, and the ultimate cause of the over-exploitation and collapse of many marine resources, has been the inability to clearly define ownership of indi-vidual parts of the resource. This has meant that resources, especially in the open ocean, have been exploited as open access or, in some cases, com-munity or common property. In these circum-stances, any rent generated is dissipated in wasteful competition between operators or by new operators continuing to enter the arena, resulting in high costs and over-capitalization until the costs of harvesting the resource equal or exceed the revenue produced from its sale.

Even when a fishery is fully exploited, addi-tional operators usually will continue to seek en-try to the fishery. The new entrants will generate little if any additional catch, but simply divide the existing catch into smaller shares (while increasing the overall effort and costs of harvesting the available catch). They continue to seek entry be-cause they judge their potential catches against those of the most successful fishers, rather than the catches of the average or less successful fishers. For renewable resources like fish stocks, the restraint required for sustainability, leaving some portion of the resources to generate future stocks, cannot be achieved without strict controls on the number of fishers and their fishing effort. Without these controls, any stock not used as soon as it becomes available is taken by one’s competitors. The inevitable result is that the re-source becomes depleted and may collapse. These outcomes are remarkably pervasive whenever marine natural resources are exploited without strict controls on the number of participants and their effort — the conditions characteristic of imperfect property rights and dissipation of eco-nomic rent.

The two key questions in relation to economic rent from marine resources are: (1) how it can be generated over the long term; and (2) how is it distributed (or who keeps it)? It might be inferred from the preceding discussion that the establish-ment of clear-cut property rights over marine resources should ensure that they would continue to generate economic rent over the long term. This clearly is not the case. Property rights, on their own, do not guarantee that resources will be exploited in a way that will continue to generate rent.

For example, in the case of individual transfer-able quotas for fisheries, the introduction of quo-tas, while in theory removing much of the incentive for competition between fishers and the tendency to over-capitalize catching capacity, can-not guarantee these outcomes (Copes, 1986). Fishers still must make judgements on when to catch their quota. Should they catch their quota as quickly as possible to be certain of getting it, or should they space out their catches to suit market conditions, to smooth out supply, or improve

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their chances of catching a better size class — and risk not catching their quota? They might risk a poorer market later in the season, or unexpected reductions in quota if managers come to believe that stocks are not as large as previously thought. Such factors mean that there is still competition between fishers. Then there are questions of over-quota catches (either incidental or intentional), ‘high grading’ (discarding smaller fish when larger ones are caught), management of by-catch, and the reliability of data reporting and enforcement measures, regardless of the property rights.

To improve the chance of generating long-term rent, there still needs to be strict overall controls on the costs of harvesting. In fisheries, once the number of operators has been limited, this usually translates into other controls on effort, such as restrictions on upgrading vessels and gear, areas fished, or duration of fishing.

The second major question concerns the distri-bution of any rents that are generated. The op-portunity to appropriate rents is a significant factor in attracting resource users into various marine industries, including fishing and tourism. There is some argument that rents are the only factor, although this argument is complicated by the non-monetary values and satisfactions associ-ated with lifestyle that attach to many outdoor natural resource uses, values and satisfaction that appear to persist long after any ‘surplus produc-tion’ rent has been dissipated.

The answer to who appropriates the economic rent from marine natural resources usually is not linked to who owns those resources. Most natural resources are in ‘public ownership’. That is, they are the property of the state and are managed by government agencies, supposedly on behalf of the whole community. The 200-mile EEZ, for exam-ple, established after the ‘Cod Wars’ between Great Britain and Iceland in the mid-1970s, de-fines the sovereignty of individual nations over areas of ocean. Nations may then manage fishing rights and exploitation of non-living marine re-sources, both by nationals and foreigners, within the EEZ. However, where rent is generated, it is mostly appropriated by the resource users, whether they are commercial fishers, tourism charter operators or oil and gas prospectors, with

little or no benefit distributed to the wider com-munity who are the actual resource owners. Fur-thermore, some rents are transferred overseas when foreign fishing fleets operate (whether ille-gally or under license) within national waters.

Management policies for such resource uses tend, unfortunately, to be reactionary. The re-source is already heavily exploited before manage-ment strategies are developed. In economic terms, users should be required to distribute the rent back to the owners of the resource, the commu-nity, in some way. This might, for example, re-quire users to purchase the rights for exploitation via an auction or tendering process, or require payment of a resource rental tax, with the pro-ceeds returned to the community via government services, taxation rebates or a dividend. But be-cause policy is normally made after a resource is heavily exploited, governments, even if they are willing, find it difficult to recover rents on behalf of the community. Industry groups exploiting the resources, not surprisingly, strongly resist any moves in this direction. In cases such as Aus-tralia’s southern blue fin tuna industry, where individual transferable quotas are now employed, the rent was retained by those fishers already in the industry because of the allocation of fishing (property) rights to the participants.

At the same time, where fishing communities have built livelihoods based on access to a partic-ular marine resource, such communities have a valid argument for the appropriation of some portion of the rent arising or, at least, some preferential access to those resources. This sup-ports the requirement that sustainability also takes account of social aspects of resource use and management. Similarly, in many parts of the world, e.g. the South Pacific, marine resources are held in a manner akin to private property rights by village or clan-based communities. Clearly, such groups can rightly claim access to the re-sources in question and to the rents arising from exploitation of those resources. The important feature of this situation is that the property rights are well specified. In this case, the nation gains a benefit through the taxation system and, possibly, through export income.

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Long-line fishing for tuna species in the South Pacific nation of Samoa, however, provides an example where poorly specified property rights is leading to misallocation and dissipation of eco-nomic rent. The fishery commenced operations in earnest in late 1993. In that year, the value of exports was (Samoan Tala) ST150 000; this grew to ST45 million in 1999 when more than 5000 tonnes tuna were exported to canneries in Ameri-can Samoa (mainly albacore) and to the US sashimi market (mainly yellowfin and bigeye). However, for historical reasons associated with the encouragement of local village fishers to un-dertake commercial activity, export fishers (many of whom operate industrial size vessels) are zero-rated for the Samoan value-added goods and services tax, pay few import duties on inputs, and are not subject to either income tax or any sort of resource rental tax. Consequently, these fishers are appropriating all the economic rent from ex-ploiting a resource that belongs to all the people of Samoa. In such a case, there is a strong argu-ment for the introduction of a resource rental tax on fish landings.

Four principal outcomes of the Samoan situa-tion arise. First, the appropriasitua-tion of economic rent totally by commercial fishers, who pay no taxation, is highly inequitable, given that the re-sources belong to all Samoans. Second, there is now evidence of declining catch per unit effort as more and more fishers enter the industry, leading to greater competition and increasing effort to catch available stocks of fish. Third, tuna stock assessments undertaken by the Secretariat of the South Pacific indicate that, despite the tuna being migratory stocks, there is an approximate sustain-able catch to be had in each country’s EEZ. Overexploitation of stocks will result in declining overall catches and associated problems such as reduced fish sizes. Finally, the open access (for Samoan fishers) nature of the fishery results in economic inefficiency in Samoa as investment and other resources are re-directed to the long-line fishery because of the potential, through poorly specified property rights, to appropriate any avail-able rent.

In tourism, an example of rent appropriation by commercial interests is provided in Australia’s

Great Barrier Reef Marine Park. Tourism opera-tors in the Park have, in general, appropriated the economic rent available from access to the reef and its marine life. The Marine Park Authority allocates 6-year permits, but charges only a permit application fee to commercial tourism operators, while users pay a so-called Environmental Man-agement Charge (EMC) of A$4 per day. But a valuable property right is thereby given essentially free-of-charge to permit holders who, subse-quently, seek to appropriate rents from exploiting the resources of the Reef. Furthermore, permits are fully transferable. Yet the Marine Park is a public asset: it belongs to all Australians, who pay for management costs that exceed A$25 million annually. EMC collections totalled A$3.58 million in 1997 – 1998, and were 19% of total Australian Government appropriations for the Park in that year. So non-users are paying for the management of an asset from which others appropriate rents. There is a strong argument that the wider com-munity, as represented by the Authority and the Government, should appropriate at least a por-tion of the rent. In the Low Isles off Port Douglas (north of Cairns), a permit is said to have a market value of around A$100 000. This repre-sents a windfall for operators holding the first permits for the area, yet it rightly belongs to the community. In economic terms, users should be required to distribute the rent back to the commu-nity in some way. This might, for example, re-quire users to purchase the initial rights for exploitation via an auction or tendering process, with the proceeds returned to the community via government services

The southern blue fin tuna case, previously discussed, also illustrates the potential of the eco-nomic system to signal information and scarcity value, with the trading price for quota reflecting fisher’s expectations about future rents in the fishery. When quotas were introduced in 1984, quota traded for A$800 to A$1200 per tonne. By 1987, when most of the adjustments in quota holdings and fleet structure had taken place, prices had risen to A$3200 – 3500 per tonne. By 1992, prices had reached A$20 000 per tonne.

In summary, the reality of most current re-source management policies is that those who

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exploit natural resources tend to capture most or all of whatever rent is generated. This might result in resource use that is inefficient from an eco-nomic viewpoint when it encourages the diversion of investment funds into the industry until all available rent has been appropriated or dissi-pated. However, inefficiency does not arise from who captures the rent; for example, a sole owner would be likely to operate an efficient fishery. Rather, it is the way in which the property rights are specified, rather than their allocation, that offers a solution to inefficiency. Conversely, the way in which rents are captured is generally in-equitable, resulting in a low or zero return to the owners of the resource, the wider community, and it is likely to lead to overexploitation of the resource in question. Alaska provides some con-trast to the normal situation. The government there captures some of the rent via a fisheries landing tax and through license fees for oil pro-duction, both of which are economic instruments, and distributes this share directly to all taxpayers each year, similar to the payment of dividends to company shareholders. This is clear recognition of community ownership of the state’s natural re-sources. If governments were, alternatively, to collect resource rentals and re-distribute those through the provision of community services, par-ticularly to those areas and sectors most in need, then distribution and equity problems would again be addressed. Additionally, resources might be used in a more sustainable fashion if the incentive to overexploit them and dissipate the rent was reduced by an appropriate allocation of the rent. This requires proper management of resources to ensure that rent is produced and clear, and transparent policy strategies designed to return a proportion of the rent to the true resource owners.

5. Sustainability

There has been much comment in recent years on the nature of sustainable development and, in particular, on the internal contradictions implicit in this term (for example, Common, 1995; Pi-rages, 1996). While it is generally accepted that

sustainable use of natural resources means that their exploitation by one generation should not diminish their value for succeeding generations, application of this concept remains elusive and is the subject of much debate.

Kirkegaard and Gartside (1998) suggested that a practical time-scale for sustainability for natural resource management broadly equates to 80 – 100 years. After that time, it would be difficult for people to imagine what society might be like. Even making predictions of what constitutes sus-tainability within that time period will be difficult because of natural changes beyond human control and changes to the way humans use natural re-sources. They considered that it was important to question what resource managers are trying to conserve, noting that ecosystems change in com-position over time. They pointed out, for exam-ple, that the composition of fisheries, even those presently characterized as ‘sustainable’, has changed substantially over the period during which they have been exploited.

These issues become more focused when con-sidering different forms of property rights, includ-ing those involvinclud-ing exploitation for commercial gain, as in fisheries. In this case, a minimum expectation is that those exploiting the resources would seek commercial returns on capital invested in acquiring access, and in harvesting and devel-oping the resources. As already outlined, open access and some forms of common property own-ership result in overexploitation and collapse of resources, rather than in sustainable biological and social outcomes.

This is not sufficient reason to argue that re-newable natural resources should be maintained in government ownership and commercial ex-ploitation prohibited. In reality, natural resources treated in this manner assume no value to the community, other than their intrinsic ecological and existence values. These resources are even more likely to be degraded or lost. An example of this case is provided by the American alligator, which faced extinction before its management in-cluded a regulated harvest program, thus placing a direct value on its continued survival and on maintenance of its habitat.

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Even the responsibility of maintaining a com-mercially exploited marine natural resource, whether a reef or a fishery, in its present condition over the course of just one human generation may be too onerous for the custodians/owners of that resource because of natural variation and diffuse external influences in marine systems that are beyond the owner’s control. The issue of how commercial exploitation of natural resources can be reconciled with the need for sustainability in variable environments remains a challenging one for economic policy development and manage-ment, particularly in marine settings. But it is clear that EIs, used in tandem with regulation and more fully specified property rights, will become increasingly attractive to management agencies seeking to achieve sustainable use of natural resources.

6. Conclusions

Many of the challenges for improving the man-agement of marine natural resources in the com-ing millennium involve development and application of appropriate economic measures. It is essential that biologists, who are the predomi-nant group among natural resource managers, understand these economic issues or we will con-tinue to fail to achieve the potential of our in-creasingly scarce marine resources. Society will increasingly demand more truly sustainable man-agement of natural resources, along with a greater share of the rent from exploitation of those re-sources. Well-specified and transparent property rights, coupled with increasing use of economic instruments, will be among the policy instruments that support satisfaction of these demands.

Economics has an important role to play in signalling the true value of resources, and in providing incentives for resource users to behave in ways seen as appropriate by society. The care-ful implementation of EIs will also increase the possibility that coastal communities that rely on marine resources for their livelihood will survive and prosper. Reliance on regulation alone has not, and will not, guarantee either desired social or biological outcomes. A greater focus on

eco-nomic values and correctly specified property rights will also allow management agencies to collect some of the economic rent generated and distribute it to benefit or improve the social wel-fare of the owners of the resources. At the same time, significant difficulties remain, particularly for the management of fisheries resources, re-sources that are usually highly mobile, that are well out to sea, occur across legal jurisdictions, are difficult to monitor, and that co-exist with other species, leading to problems such as effec-tive by-catch management. Based on experience thus far, EIs are likely to work best in single species fisheries, such as the Samoa long-line tuna fishery where a resource rental tax and improved specification of property rights are needed, or for species that are not highly mobile such as certain crustaceans and shellfish.

Conversely, in tourism, EIs have the potential to make a far greater contribution to the sustain-able management of marine resources. Tourists and tourist operators will almost certainly be asked to return a greater proportion of economic rent to the wider community, while there are sound arguments to introduce systems such as tendering or auctions for licenses and making those licenses transferable. Marine tourism in the Great Barrier Reef Marine Park provides an ex-ample where such instruments should be applied. We predict increasingly rapid adoption of such management strategies in the near future as man-agement agencies strive to reduce the costs of managing marine resources, the community de-mands some return of rent for its ownership of those resources, and as pressure for sustainability of marine natural resources increases.

Acknowledgements

The authors thank Harry Campbell, Ian Kirkegaard and Clem Tisdell for guiding us along these paths, Southern Cross University for re-search funds for Don Gartside, and the Depart-ment of Economics, University of Queensland, for a Visiting Fellowship to Don Gartside during the conduct of this work. The useful comments of two anonymous reviewers are also gratefully

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acknowl-edged. The authors alone remain responsible for its content.

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fort’. Without an inbuilt ‘effort’ reduction scheme, limited-entry systems are likely to result in the collapse of the resource due to the inex-orable increase in exploitation rate from adoption of new technology and competition between oper-ators. We predict that this will be a step towards development of more formal property rights that confer more secure license tenure and transferabil-ity. Furthermore, where ecotourism operations involve a discrete and defined geographic loca-tion, such as a coral reef, the property right will increasingly take the form of tradable private property (albeit leasehold), similar to that which exists for coral island resorts. Steps in this direc-tion have begun in activities such as swimming with whale sharks in Ningaloo Marine Park,

Western Australia, and whale watching in

Queensland’s Hervey Bay. 4. Economic rent and property

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In tourism, an example of rent appropriation by commercial interests is provided in Australia’s

In summary, the reality of most current re-source management policies is that those who

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5. Sustainability

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6. Conclusions

Many of the challenges for improving the man-agement of marine natural resources in the

com-ing millennium involve development and

application of appropriate economic measures. It is essential that biologists, who are the predomi-nant group among natural resource managers, understand these economic issues or we will con-tinue to fail to achieve the potential of our in-creasingly scarce marine resources. Society will increasingly demand more truly sustainable man-agement of natural resources, along with a greater share of the rent from exploitation of those re-sources. Well-specified and transparent property rights, coupled with increasing use of economic instruments, will be among the policy instruments that support satisfaction of these demands.

Acknowledgements

The authors thank Harry Campbell, Ian

Kirkegaard and Clem Tisdell for guiding us along these paths, Southern Cross University for re-search funds for Don Gartside, and the Depart-ment of Economics, University of Queensland, for a Visiting Fellowship to Don Gartside during the conduct of this work. The useful comments of two anonymous reviewers are also gratefully