Template-Type: ReDIF-Paper 1.0
Author-Name:  Lars Gårn Hansen
Author-Name-First: Lars Gårn
Author-Name-Last: Hansen
Author-Email: lgh@foi.ku.dk
Author-Workplace-Name: Institute of Food and Resource Economics, University of Copenhagen
Title: Regulating Renewable Resources under Uncertainty
Abstract: Renewable natural resources (like water, fish and wildlife stocks, forests and grazing lands) are critical for the livelihood of millions of people and understanding how they can be managed efficiently is an important economic problem. I show how regulator uncertainty about different economic and ecological parts of the harvesting system affect the optimal choice of instrument for regulating harvesters. I bring prior results into a unified framework and add to these by showing that: 1) quotas are preferred under ecological uncertainty if there are substantial diseconomies of scale in harvesting, 2) that a pro-quota result under uncertainty about prices and marginal costs is unlikely, requiring that the resource growth function is highly concave locally around the optimum and, 3) that quotas are always preferred if uncertainly about underlying structural economic parameters dominates. These results showing that quotas are preferred in a number of situations qualify the pro fee message dominating prior studies.
Length:  44 pages
Creation-Date:  2012-02
File-URL: http://okonomi.foi.dk/workingpapers/WPpdf/WP2012/WP_2012_3_regulating_renewable.pdf
File-Format: Application/pdf
Number: 2012/3
Classification-JEL: H23, Q2 
Keywords: Prices vs. quantities, renewable resource regulation 
Handle: RePEc:foi:wpaper:2012_3