zondag 21 juli 2013

Confusing Nemo (2): Fisheries subsidies, good and bad

Next in my little fact-checking exercise of The Black Fish's campaign movie:

"Every year, $25,000,000,000 of tax money continues to subsidize a very harmful industry"

And that's a literal quote from the movie. The implication is clear: our tax money - $25 billion of it - is being spent on promoting overfishing. Where does the figure come from?

Rashid Sumaila is a Canadian resource economist who has gained a big reputation with his work on game theoretic analyses of fisheries and big, global-scale analyses of fisheries subsidies. If anyone knows about the global scope of fisheries subsidies it is him; the $25 billion in The Black Fish's movie is based on his 2010 article in the Journal of Bioeconomics.

Interestingly, the article does not only give an estimate of the total amount of subsidies, but also distinguishes three types of subsidies: beneficial subsidies, capacity-enhancing subsidies, and ambiguous subsidies. The distinction is based on what the subsidy does to the resource stock: does it lead to bigger (beneficial) or smaller (capacity-enhancing) fish stocks? This criterion is fairly easy to apply and interpret, but it also leaves some issues out of the discussion, as we will see later.

Beneficial subsidies

Beneficial subsidies contribute to the resource stock, and include such expenses as monitoring programmes, research for stock assessments, and establishing MPAs. Their total amount is about $8 bln.

The article does not ask the question whether this should all be funded by tax money. The rule of thumb should be: subsidize public goods, but let the users of the public good pay whenever possible. As a fish consumer I'm willing to contribute (through a higher fish price, ideally) to a responsible management of our fish stocks, but I'm not sure I agree with sending the bill to those who have no stake in it, like vegetarians (or principled meat eaters, for that matter). The exception may be MPAs, which provide more public goods than just more fish (which is not as clear-cut as it seems, by the way).

Capacity-enhancing

This includes tax-payers' money spent on enhancing fishers' capacity to deplete fish stocks, like public money spent on port development, fleet renewal, and price support. With $16.2 bln this is the largest category. By far the largest type of capacity-enhancing subsidy (or any kind of fishery subsidy) are fuel subsidies: every year a whopping $6.4 bln is spent to lower the price fishers pay for their fuel. Sumaila et al.'s definition of fuel subsidies is interesting: they define fuel subsidies as the difference between what fishers pay for their fuel and what other sectors pay for the same fuel. This means that (partial) tax exemptions, like the red diesel that The Netherlands until recently had, are included; however, blanket fuel subsidies, like those in Indonesia, Nigeria, and Egypt, are not.

I don't know how the authors categorize subsidies for more selective, or low-impact fishing gear, such as the pulse trawl. It must have been difficult to identify exactly on what kind of innovation or renewal a subsidiy is spent, so I suspect the authors have filed this as capacity-enhancing.

You could also argue that port development is simply an investment in infrastructure, which is a public good. The government also builds roads, railways, and glass fiber networks, why single out port infrastructure as a subsidy to fisheries? Moreover, is port development bad if fish stocks are healthy and well-managed?

Ambiguous subsidies

For researchers this is the most interesting category because its effect is unclear. Buyback subsidies, for example, may reduce fishing capacity on the short term, but on the long term the effect is less clear-cut. The vessels bought may go to other countries at dumping prices; fishers may also anticipate future buybacks when deciding whether or not to invest in new fishing capacity. Ambiguous subsidies amount to about $3 bln.

Do tax-payers spend $25 bln on overfishing?

Now I'm confused. $8 bln + $16.2 bln + $3 bln = $27.2 bln, not $25 bln as the movie states. The article's abstract, however, estimates the global amount of subsidies at between $25 bln and $29 bln. Does The Black Fish prefer to give a conservative estimate, rather than the best estimate according to the article? But then why lump together scientific research and establishing MPAs (which I cannot believe The Black Fish would oppose) with fuel subsidies (which are undoubtedly wrong)?

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