A Bioeconomic Analysis of the Impact of Buyback Programs : Application to a Limited Entry Scallop French Fishery

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1 A Bioeconomic Analysis of he Impac of Buyback Programs : Applicaion o a Limed Enry Scallop French Fishery Olivier GUYADER*, Fabienne DAURES*, Spyros FIFAS** Insu Français de Recherche pour l Exploaion de la Mer (IFREMER) *Service d Economie Marime ** Déparemen Ressources Halieuiques BP Plouzané FRANCE Absrac: The objecive of he paper is o analyse and o simulae fishers dis-invesmen behaviour especially in he conex of he French buyback policy. A case sudy, he limed enry scallop fishery of he Sain-Brieuc bay is used o consider he problem of excess capacy and o review he impac of he naional decommissioning schemes on he scallop flee. The role of financial incenives echnical and economic are sudied o explain individual decisions o say or o leave he fishery. Considering hese lessons, he second par of he paper aims a modelling fishers behaviour in order o simulae he bioeconomic impacs of buyback programs and he role of differen incenive schemes. Special aenion is paid o he assessmen of willingness o accep o leave he fishery. The model is applied o he scallop fishery while highlighing agency problems such as he role of he regulaor s informaion abou flee and cos srucure. The problem of windfall gains problem due o he mis-specificaion of he buy-back programs is analysed. Spreadshee simulaions lead o cos-benef analysis of differen policy opions. Keywords: Fishing capacy adjusmen, buy-back programs, premium, willingness o accep, bio-economic model, cosbenef analysis. This sudy is par of he EU funded projec The significance of Economic Incenives in Fisheries Managemen under he CFP (FAIR PL ). INTRODUCTION There is an increasing concern abou excess capacy in he fisheries a an inernaional level as well as in he European Union (FAO 1997) (Gréboval and Munro 1998) (Hacher and Robinson 1998). The economic analysis of hese problems has focused on he facor explaining overcapalisaion and he policy opions marke based or adminisraive sysems - o conrol and reduce fishing capacy of he flees (Newon 1998) (OECD 1997) 1. Whin managemen alernaives, buyback programs of vessels or licences is one of he ool used by counries o adjus heir flees in order o reach differen objecives (Holland and al. 1999) (Holland 1999) (Mezner and Rawlinson 1998). They have been widely used o resore profabily o he fishery, o reach sock conservaion objecives bu hey also lead o disribuional implicaions in erms of ransfer paymens. A European level, Adverse effecs on fishing socks (Anon 1990) (Anon 1996) has led o srenghen he role and o harden he consrains of Muli Annual Guidance Programs (MAGPs) whin he Common Fishery Policy. The MAGP funding by he European Union is par of he srucural policy budge which is also dedicaed o he building and modernisaion of he flees (Giguelay 1999) (Hacher 2000). Each member sae has been required o adjus he naional flee hrough he MAGP since The MAGP objecives expressed in erm of kilowa or gross regisered onnage are linked o some general objecives expressed in erms of fishing moraly reducion. Faced by he increased ighening up of he MAGP objecives, he member saes have implemened differen ypes of public policies and buyback programs o fulfil flee capacy reducion arges (Fros and al. 1995) (Anon 1997a) (Anon 1997b). In France, a secor-relaed policy based on enry barriers and individual perms has been used o conrol he flee capacy. From 1991 o nowadays, vessel buyback programs linked o a premium offered by he governmen o he vessel owners has been adoped o reduce he flee size (Daures and Guyader 2000). Despe policy ineres in buyback programs, here is few quanaive analysis of he implicaion of hese program from an economic poin of view (Anderson 1998)

2 (Chuang 1999). More recenly, Ikara and Odink (1999) used empirical daa o examine fishers resisance o ex. Bioeconomic analysis of flee adjusmen do no include he cos of such programs and hen overesimae heir social benefs. Moreover, mos of he approaches fail o consider he problem of asymmerical informaion beween regulaors and fishers. The firs par of he paper describes he evoluion of he limed enry scallop fishery in he Sain-Brieuc Bay. I examines he managemen opions used o conrol he flee fishing capacy, hen analyses he condions and he impac of he naional decommissioning schemes on he scallop flee during he period The naure of he applicans o hese buyback programs and he role of economic parameers are also considered o explain ex behaviour. The second secion deals wh a model o consider he dis-invesmen sraegies. The objecive is assess he minimum willingness o accep (WA) for which decision o say or o leave he fishery are equal. Sensivy analysis of WA o model srucure is underaken and discussed. Then, he micro-economic model is linked o a more sandard bio-economic approach ha enables us o assess he macro-resuls of buyback programs as a funcion of premium level, public budge consrains. This finally leads o cos-benef analysis of capacy adjusmen and o focus on he windfall gains effecs and he problem of lack of informaion in public policy 1. THE SCALLOP FISHERY IN THE SAINT- BRIEUC BAY. The Sain-Brieuc scallop fishery is locaed whin he Orienal par of he English Channel (ICES area VIIE) and is no shared wh oher European counries. This is one of he wo main scallop producion areas in France. Annual official landings have reached around 3800 ons since he beginning of he 90 s when he naional producion flucuaed around ons per year. The area is exploed by vessels using dredge gear which come from he marime disrics of he Norh of Brany. The flee is composed of small uns (average of 10.3 meers long and 127 kw for heir engine power) which are mulipurpose vessels carrying ou rawl, gillnes, pos, ec., ouside he scallop season from Ocober o April and ouside he inseason fishing ime 2. The scallop urnover has oscillaed beween 30 à 100 MF (base 1995) over he las weny and he fishery is srucuring acivy for he coasal flees of he area. The changes in producion over he period are mainly due o modified socks producivy and change in he fishing moraly. Producion in ons Figure 1. Evoluion of he scallop landings and urnover of he Bay /64 66/67 69/70 72/73 Landings 75/76 78/79 81/82 84/85 Campaigns Value 87/88 90/91 93/94 96/97 99/ Producion value (millions francs 95) Scallop recrus are considered as highly variable (facor 1 o 15) and his is a disadvanage for he managemen of he fishery, based on an average suaion. Relaion beween genors and recrus is mainly disguised by environmenal facors (Boucher 1985) (Fifas e al. 1990). Nowhsanding he good reproducion of he beginning of he 90, he poenial fecundy index used as a proxy of he adul biomass has plummeed in he las fifeen. Is level is now suaed a abou ons versus ons in he 70 s bu he sock is no considered as o be hreaened by exincion. As a consequence, landings fell from around ons a he middle of he 70 s o 1500 ons a he end of he 80 s. Afer he increase of he beginning of he 90 s and despe new managemen measures, he scallop fishery faces a new fall in official landings from 4200 ons for he 1995/96 fishing season o around 2800 ons for he 1998 and 1999 seasons. Despe high levels of regulaion enforcemen and monoring, illegal behaviour seems o be prevalen. Figure 2. Long erm effecs of differen flee sizes level Fecundy index Fecundy index Producer surplus 0 0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1,0 1,1 1,2 1,3 1,4 1,5 Flee size number (base 1=253) Producers surlus Noe : susainable level wh curren regulaion on days a sea 2

3 As illusraed on he las figure, producers surplus bu also sock suaion will be improved by flee reducion considering oher regulaions as a consan. A 45 percen increased ren will be obained wh only 30 percen of he curren flee level and sock fecundy improvemen will increase he probabily o reach beer recrus in he fuure. As a consequence, he reducion of he flee can lead o posive effecs from economic efficiency perspecive Managemen of he fishing capacy by flee adjusmen The developmen of he scallop fishery is mainly explained by he swch of he coasal flees from he clam fishery which collapsed in he 60 s. In order o avoid he same even and o conrol fishing moraly in an indirec way, he managemen auhories decided in 1963 o lim enry in he fishery. Inpu regulaions such as hours a sea, maximum engine power, vessel lengh and mesh size lims were also implemened. The licence sysem wh a numerus clausus was pu ino force in 1973 wh allocaion based on hisorical righs. Finally, 466 licences were issued o he vessels from he main marime disrics for he fishing season and his number declined o 447 in 1980 o 371 in The scallop flee decrease wen on o reach respecively 282 and 254 uns in 1990 and Differen facors may explain he 45 percen reducion over he period. Firs of all, he decline of he scallop sock during he 80 s and he relaive remuneraion fall in he fishery give fishers incenives o leave o oher bes alernaives. This implies ha he fishing capal has no lef he fishery secor. Second, naural reiremen of fishers occurred and he managemen auhory decided no o allocae all he free licences o he candidae for enry. The ex flows leads o disribuive effecs because mos of he vessels excluded were from marime disrics ouside he Sain-Brieuc Bay ; 85 percen of he vessels are now from Bay versus 65 percen in Finally, scallop vessels have been recenly scrapped by differen French buyback programs applied ino he conex of he Muli-annual Guidance Programs of he Common Fishery Policy 3. Decommissioning programs were no dedicaed specifically o he scallop fishery because here was no a discriminaive policy whin he French fishery secor (Daures, Guyader, 2000). Moreover, he scallop fishery regulaors did no adjus he flee size in proporion o he vessels scrapped. Figure 3. Evoluion of vessel number in he scallop fishery Vessels Figure 4. Flee characerisics indexes Index base 1 : ,4 1,3 1,2 1,1 1 0,9 0,8 0,7 0,6 0, Source : IFREMER kw /vessel 1999 lengh/vessel Flee kw The managemen of inpu regulaion has no been really effecive in conrolling he fishing power of he flee. Even hough maximum lims for vessel characerisics had been implemened 4, here were economic incenives for vessel owners whin he flee o increase engine power by buying oher vessels or upgrading he older ones before he implemenaion of fishing perms in 1989 which aimed a conrolling 5. Since his period, capal suffing has been sill increased hrough invesmen in elecronic fings and improving skills (Guyader, Fifas, 1999). Tha is why managemen auhories decided o reduce days and hours a seas (from 120 o 43 hours beween 1973 and 1997) in order o adjus he caches level o he sae of he resources and o balance ou he producion over he. 1.2 Buyback program and he role of echnical and economic parameers Considering he flee dynamics, is possible o carry ou a preliminary sudy on he facors which may explain fishers ex whin decommissioning schemes during According o Fros and al. (1995), many facors like expecaions on shor-run or long run profs, age and value of he vessels, privae wishes, premium level, ec. may be deerminans of whdrawal. Daures and Guyader (2000) showed ha here was no buyback 3

4 Table 1. Characerisics of he sub-flee in erm of vessel and skipper age [0-60kW] [60-120kW] [ kW] [>185kW] Toal flee Skipper mean age Sandard Deviaion Variaion coef Vessel mean age Sandard Deviaion Variaion coef Tes on skipper mean age : F(3.269)=0.28<2.64 for p=5% discriminaion whin he French flee in erms of premium offered per kw 6. The same conclusion can be made a he scallop fishery level wh an average premium level offered of abou 22 kf/gr in 1991 wh no significan difference whin scallop sub-flees specified before. Consequenly, ex behaviour has been influenced by oher parameers. A large range of applicans were involved for an idenical premium rae, eher young fishers or older lef he secor. For example, 10 percen of he [30-40[ and [50-60[ old fishers decided o reire. The populaion of scrapped vessels was he oldes in frequency wh 67 percen aged more han or equal o 20. In order o ake ino accoun he oal populaion srucure, he percenage of vessels inside each age caegory is calculaed for he oal flee a he end of 1990 and he populaion which lef he flee in 1991 by he firs decommissioning plan. The figure 5 exhibs vessel age influence on he incenives o dis-inves from he fishery. Abou 45 percen of he decommissioned vessels are from old caegory which represens abou 20 percen of he oal populaion and only 32 percen of he scrapped vessels comes from he caegory when represens abou 34 percen of he oal populaion. The gap in percenage beween ex vessels and oal populaion skipper age is weaker bu he rae of ex is neverheless higher for he oldes fishers han heir represenaiveness in he populaion srucure. A global level, skipper age is likely a key facor in behaviour o leave he fishery bu vessel age seems o be a more key parameer for a given fisher age in ex decision and he conclusion is srenghened by he analysis a scallop fishery level 7. As shown on able 1, here is no saisical difference in vessel skipper age beween he differen sub-flee caegories. Average age is abou 40 and variance analysis es used o compare he differen mean ages concludes ha he hypohesis of a same mean can no be rejeced a 5 percen level. Figure 5. Age srucure of he oal populaion of acive vessels and of decommissioned vessels* 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% More han o o o 20 Less han 10 % Toal flee % Dec Vessels Figure 6. Skippers age srucure in he oal populaion and in decommissioned vessels* 35% 30% 25% 20% 15% 10% 5% 0% More han o o o 40 Less han 30 % Toal flee % Dec. Ve ss els * Vessels less han 12 meers long firs Plan. Source : IFREMER based on adminisraive daa However, here is a negaive relaion beween he vessel engine power and he vessel mean age. The mos recen vessels in he scallop flee are generally speaking he mos powerful because of he posive relaion beween vessel producivy and engine power ha ince fishers o change heir fishing un. Then, he mean age per caegory is linked o he rae of ex in each sub-flee hroughou he period (figure 7). During his period, 68 vessels having held a scallop licence previously decided o apply for he buyback program. Abou 76 percen of he ex flow occurred in The nex figure illusraes ha 4

5 he rae of ex of he [0-60kw[ sub-flee is in proporion o sub-flee mean age when he rae of ex is less for he oher flee componens 8. For a given age, he disance beween he real rae of decommissioned vessels and he proporional rae of ex is a relaive measure of he facors explaining he resisance o ex. Assume ha infra-marginal skipper or marginal vessels and oher individual influence are randomly dispersed beween he differen sub-flees, hese relaive gaps can be considered as an index, measuring he differences in producivy, revenues and coss of he average vessel in each sub flees. Figure 7. Rae of ex as a funcion of vessel age Sub-flee Age index 0,55 0,45 0,35 0,25 0,15 0,05 >185 kw [ kw[ [ kw[ [0-60 kw[ 0,05 0,15 0,25 0,35 0,45 0,55 % of ex of each sub-flee The nex secion focuses on he economic analysis of hese differences in an aemp o value he minimum willingness o accep o ex he fishery. I is mainly based on heoreical consideraions abou economic behaviour and a model framework is presened o go ahead in he characerisaion of fishers decision in he conex of buyback programs. 2. A MODEL TO ASSESS WILLINGNESS TO ACCEPT (WA) TO LEAVE THE FISHERY. The objecive of his secion is o model fishers behaviour in a cerain environmen and heir decision o leave or o say in he fishery secor. The aim of he developed ool is o assess he role of differen economic incenives individual fishers face and heir impac on he willingness of fishers o leave he fishery. Recen papers deal more or less wh his realm (Wenniger and Jus, 1997) (Guyader, 1998ab). More precisely, we assume ha vessel-owners - and skippers in he conex of small-scale producion - are able o value he ne presen benefs (losses) o say in he fishery and he opporuny cos or presen benef if hey leave he fishery. The calculaion gives us he evoluion of minimum willingness o accep (WA) o leave he fishery ha is compared wh he premium offered by he buyback program organised by he public auhory. The opporuny of including differen componens ino he calculus is discussed. This approach is furher combined wh a bio-economic simulaion model in order o assess he impac of capacy adjusmen on fishery performance and he feedback effecs on fishers decision o whdraw from he indusry over he ransion period. 2.1 Economic incenives o say or o leave he fishery. In he model, he decision o say or o ex he fishery depends on he fisher s calculaion of economic opporunies even if oher facors can have an influence on heir choice (Fros & al. 1995). The ne presen value of fishing acivy (npv) discouns he sum of annual economic ne sreams during he acualisaion period (see equaly 1). Acualisaion period ( A ) is he delay beween he period of he reiremen of each fisher (i) and he curren period () bu an oher basis can be used. ( r ) is he individual psychological discouning rae o consider fishers preference for ime bu we use he capal cos funding rae or he opporuny cos of capal in order o ake care of he presen value of differen alernaive1. I can also include a risk premium o deal wh he uncerainy in fishing acivies. The ne presen value of saying in fishing is he sum of differen erms; he presen value of ne capal sream exraced from he fishery, he ne presen value a he end of he acualisaion period (T) of he licence price (PL) if can be sold and of he vessel sale price (PK). Even if he vessel price on he second hand marke depends on regulaions and public subsidies o he fishing secor, we consider ha each vessel value is approached by s curren value : e.g. he deflaed purchase value of he fishing un including he value of invesmens (engine, elecronics and oher equipmen) and deducing he economic depreciaion of he capal 2. The vessel value is hen exogenous o he model and does no depend on fishing revenues ha could capalised in. Finally he ne presen value of fishing acivies and saying ino he fishery includes he presen value of ne labour income sreams for he skipper if he is also he vessel owner. 1 In a suaion of perfec capal markes, he individual psychological discoun rae and capal cos rae equals. 2 I s also possible o consider insurance value as a proxy of capal value bu his value change during he simulaion according o vessel obsolescence and wear. 5

6 Table 2. Differen componens included o assess willingness o accep o leave he fishery (discouned values) Case 1 Case 2 Case 3 Case 4 Case 5 Case 6 Ne fishing owner income (e.g. i i i i i i accouning flows) Vessel resale price a he end of he acualisaion period i i i i i Ne fishing skipper income (wage) i i i Vessel resale price a presen ime i i Opporuny cos of labour i i Buy-back Premium i i i i Noe : Differen basis for income flow acualisaion can be used : he income of he las year or he ne income average over he wo or hree las. Noe ha he basis for ne capal and labour sream calculaion can be changed whin he model. The las period or he average ne incomes over a defined pas period may be used o reflec he income expecancies in he fuure. Consequenly, he ne presen value of saying is : (1) npvf PL i T i 1 ncs /(1 r) (.) /(1 r) T i i 1 nls PK i (.) /(1 r) /(1 r) On he oher side, he presen value of leaving he fishery can be expressed as he wo furher equalies : (2a) npve PK ( gr ) PL w /(1 r) or i i i 1 (2b) npve s. gr PL w /(1 r) i i i 1 In such a suaion, each vessel owner has an alernaive o leave he fishery, eher by selling his vessel on he second hand marke a he curren period, or by whdrawing s vessel wh a counerpar as he premium offered. ( w ) is he opporuny cos of labour ha each fisher (i) may expec o earn elsewhere in he economy and he las righ erm of he equaly represens he ne presen value of hese incomes can be valued. (s) is he un premium per GRT alloed by he adminisraion o he fishers o buyback heir vessel wh (gr) as he vessel Gross Regisered Tonnage. The decision rule o say or o leave he fishery a any ime of he simulaion depends on he form of he inequaly : (3) npvf npve T 1,... The righ side of he inequaly can be viewed as he opporuny cos of saying in he fishery. As shown hereafer, fisher exs (say in) he fishery when he ne presen value of fishing is less (more) han he ne presen value of leaving. From inequaly (3) is deduced he un premium per gr for which he wo opions equal. s * (4) PL i 1 > i w 1 ncs (.) /(1 r) /(1 r) /(1 i 1 / gr i PK i nls (.) /(1 r) /(1 r) PL This amoun reflecs he minimum willingness o accep (WA) per gr necessary o ince vessel owners o leave he fishery. I does include working saisfacion bonus or loss (Anderson, 1980) ha reflecs his paricular fisher ineres for he job. The valuaion of his componen is no possible in his sudy An economic basis for assessing WA. Even if he decision environmen of he firm (e.g. he decision-maker) is cerain, he problem of he basis for calculaion of he WA can be asked. The fac is ha one can include differen componens o represen and o model fisher behaviour. Empirical works do no give precise informaion on his realm and he aim of his paper is o underscore he sensivy of he resuls o he differen model srucures. We do no acually use licence price valuaion because non ransferabily of such fishing i 6

7 use righs in he French managemen sysem. Case number 1 includes only he ne capal sream from one side and he buyback premium on he oher side. This reflecs he suaion of he an exclusive vessel-owner or enrepreneur who is exhausing only he revenues of capal and combinaion of producion facors wh he fishing firm. Case 2 is no a remoe srucure because only he vessel resale price is added o he lef side of he inequaly. The nex are likely he mos appropriae combinaion in order o deal wh he firm ownership srucure of he Bay of Sain-Brieuc fishery. Case 3 and 6 consider he suaion in which here is no premium offered. Ex is open o fishers and hey decide o say or o ex by comparing he alernaive revenues of hese wo opions. The difference is ha case 3 does no use labour revenues when case 3 does. Table 3. Figures regarding he scallop fishery average daa over he period Flee caegories [0-60kW] [60-120kW] [ kW] [>185kW] Vessel number / caegory kw / vessel Crew / vessel Scallop landings / vessel (ons/year) * Scallop urnover / vessel (KF**)* Toal urnover less variable coss / vessel** * simulaion resuls ** KF = Thousands francs Finally, Cases 4 and 5 make nearly he same disincion (case 4 includes wage incomes in he fishery bu no opporuny cos) bu gives he opporuny o he fishers o be compensaed from he whdrawal of heir vessels. 3. APPLICATION TO THE SCALLOP FISHERY. This simulaion model of capacy adjusmen hrough ex is carried ou and applied o he scallop fishery of he Sain-Brieuc Bay (area VIIE). The economic componen developed before is conneced o a bio-economic model of he fishery. Biological dynamics exploaion parameer are based on a srucural and single species approach ha ake ino accoun six cohors ; mainly ages from 3 o 6 are subjec o harves (Fifas, 1993). A more complee descripion of he model as a whole can be found in Guyader and Fifas (1999). Nowhsanding biological impac of decommissioning schemes can be valued only from scallop sock poin of view, economic impac can be assessed especially in erms of scallop acivy bu also in considering he differen acivies as a whole. We assume ha capacy reducion does no lead o any effec on he oher socks. Finally, he Model building gives he opporuny o modify simulaions parameers ha can have an influence on fishers decisions Model parameers The model is able o calculae crew, skipper incomes and vessel-owner revenues for each year no only for scallop campaign (Ocober o April) bu also for he oher acivies carried ou all along he year. Then annual ne operaing income is calculaed as he difference of gross prof less fiscal depreciaion and ineres charges, his difference being subjec o income axes. Ne operaing income ha can be posive or negaive. On anoher side, firm owners have o pay for boa invesmens in he form of annual cash paymen if he owners finances and (or) sequences of paymen of ineress and capal for loans subscriped if vessel owners ake ou a bank loan. The difference gives us ne annual sream for he vessel owner (ncs : ne capal sream). Mos of he ime, vessel owners are also skippers of heir uns, so ha hey are paid for he services due o working force and skills. Skipper annual ne wage (nls : ne labour sream) whin share remuneraion sysem can be included ino calculaion of he sream flows earned in fishing acivy. Before analysing he simulaion from a dynamic perspecive, he nex secion focuses on he resuls of differen model srucure and pays aenion o sensivy resuls o parameers variaions. Table 4. Willingness o Accep (WA) per GRT un as a funcion of flee caegory (year 1999) kw kw kw >185 kw WA WA WA WA WA WA Privae acualisaion rae = 5% - acualisaion period = 10 Opporuny cos of labour in he region (ne wage for skilled worker) Figures in housands francs 3.2. Saic Resuls. No surprisingly, he differen modelling opions 7

8 described before give heerogeneous WA resuls. For a ypical firm from [ kw], he WA varies from o nearly francs in he firs year of he simulaion. In his las case, WA4 merges all fishing revenues for he vessel owner and vessel skipper who is supposed o have no opporuny cos (e.g. he fisher is no proeced by unemploymen insurance or he is no able o find a new job in an oher secor. The incenives o leave he fishery are very low, conversely he value given o he fishing acivy is very high. The inroducion of he opporuny of labour in he region (case 5) lowers he minimum premium per GRT ha he vessel owner may claim in order o leave he fishery. WA5 plummes o francs. Comparison of WA2 and WA5 shows ha including labour remuneraion o fishers program has lle influence on WA because [ kw] fishers do no earn quasi-rens in he fishery wh regard of he bes opporunies in he economy. Conversely, his leads o posive effecs for he las wo class [ kw] and [>185 kw]. The [0-60kW] fishers are in he oppose suaion because heir WA declines and become negaive so ha here is a naural economic incenive o leave he fishery his year. If we reain he 6 h case as he bes indicaor of fisher behaviour and considering ha here is no buy-back policy (WA6), only vessels of caegory [0-60 kw] are inced o leave he fishery and o sale heir vessel on second-hand vessel marke. Their presen value of ne benef sreams are lower han he resale price of heir un and we may ascerain ex flows from he fishery for he firs caegory. Table 5. Sensivy of Willingness o Accep o he discouning period WA5 WA1 Acualisaion period () _60 KW _120 KW _ KW >185 KW Privae discouning rae = 5%. Figures in housands francs Taking ino accoun and characerising he opporuny coss of labour which could be heerogeneous whin fishers is he key poin of his analysis, because s inroducion or exclusion in he fisher program can lead o broad effecs on economic incenives and on he value given o WA. The dynamics of he flee depends clearly on hese values. The able 4 also shows differences in resuls whin vessel caegories for a same model srucure. In he hird case, WA of he [>185 kw] vessels is f/gr he lowes so ha hey will likely be he firs o ex, hen he [0-60 kw] vessel wh f/gr 8 will leave he fishery secor if he premium offered is equal or more han hese WA. These differences are mainly explained by he gap in economic performance of he caegories and in a reduced range due o he disorion in subsidies allocaion. Differen capal cycles ha lead o an ineress paymens variaion among he vessels. In conras, fisher populaion demographics may have a srong influence on ime scales used by each fisherman. The ime delay beween decision period reference (curren age of he fisher) and he normal end of he fisher acivy can be used as he acualisaion period. According o he ne presen value calculus, he higher he acualisaion period, he higher he WA is. For a ypical vessel of caegory [>185 kw], he WA5 shif is valued a abou f/gr when acualisaion period change from 5 o 10. Wha is imporan o say abou hese resuls is ha he srucure in age of he fisher populaion has a srong influence on vessel exs per caegory. Considering he model, he [0-60 kw] vessels will ex firs whaever he populaion srucure and wh or whou a buyback program. Fisher owner of a ypical [>185 kw] vessel who expec o ake reiremen in five will no leave he fishery if oher owners have he same age and he same discouning period because his WA is he highes ( f/gr for a 5 period). Moreover, if he expecancies o find anoher job elsewhere are low, his WA will be more valued. Bu if oher fishers of his vessel caegory or he nex caegory are younger and would like o reire in a 15 period, he will be inced o leave before hem because hey will need a higher premium per GRT; respecively and francs for [ kw] and [ kw] vessels.. In conclusion, he srucure of he fisher populaion hrough demographic consideraion and he srucure of he flee in erms of economic resuls may explain ex behaviour. More han vessel performance over ime, individual consideraions like age and opporuny cos of labour may have a sraighforward influence in he decision making process and he model seems o be good ool o assess individual WA. Neverheless, could be difficul o une he model by comparing WA o real premiums offered by he adminisraion because of he possible windfall gain capured by he fishers (see furher). The nex secion considers he simulaion of buyback programs. Table 6. Evoluion of flee srucure on scenario 3 Vessel class/ Years Variaion rae 1998/ kw % kw % kw % >185 kw % Vessel number % Toal GRT % Toal KW % Noe : Basis for income acualisaion : curren year. Discouning period = 15

9 4. COST-BENEFIT ANALYSIS OF BUYBACK PROGRAMS. We assume now ha he public auhory decides o fix he premium per gr offered and is he same for he four vessel caegories. Toal budge available for adminisraion is limed and we assume ha governmen is able o choose he eleced vessels o he decommissioning plan (e.g. he firms wh he lowes WA firs ex he fishery). Then, fishers apply or no o accep he oal premium and heir decision o say in he fishery is open each year and depends on economic incenives and public decision o organise or no a decommissioning plan. Vessel owner opporunies mus be reconsidered a each eraion in spreadshee in order o ake care of he changing bio-economic environmen and incenives. The simulaion oupu gives he evoluion of differen indicaors like he biomass level, individual and flee producion level and urnover of he flee, surplus, public cos, ec. beween 1998 and The nex par only analyses he economic consequences of differen capacy adjusmen program from a public policy perspecive Bio-economic simulaion of decommissioning plans. Inially, we compared he saus quo resuls named as scenario 0 o a specific decommissioning plan oupu (scenario 3). The laer scenario provides adminisraion a 30 million franc budge o be used in he firs wo (1998 and 1999) and equally affeced o boh. Premium offered by adminisraion o leave he fishery is allocaed on an egalarian basis and is equal o francs per gr (Basis 100). Table 7. Minimum willingness o accep o leave he fishery Indicaors/Years Average Willingness/GRT 0_60 kw Average Willingness/GRT 60_120 kw Average Willingness/GRT 120_185 kw Average Willingness/GRT >185 kw Toal Willingness for flee Average Willingness/vessel Average Willingness/GRT Figures in housands francs The ables 7 indicae he willingness o accep (WA) for each vessel caegory compared wh he premium and he consequen evoluion of he flee srucure during he firs hree. Only he firs class [0-60 kw] has a WA per gr which value is under he premium offered in Tha is why all he vessels of his segmen (26 uns) leave he fishery. The annual budge available is enough o cover vessel ex cos esimaed a 6.02 Million francs. The balance is hen repored o he second year of he plan and Million Francs are hen available o be spen o whdraw 60 uns of class 2. In 1999, WA declined due o lower revenues (lower sock level) and higher cos due o he replacemen of differen componens of he engine. The premium is hen enough o ince all he fishers o leave he secor (see able 7) bu he spreadshee excludes only hose who have he lower WA. They are probably he more ineresed in exing he fishery and he windfall gain per gr, he difference beween premium and WA is higher for hem. As regards global flee adjusmen, respecively 34% of he scallop flee and 20.6% of oal fishing capacy expressed as oal engine power in kw is decommissioned by his plan. Bu his policy can be viewed as no effecive in reaching s objecives if he reducion in fishing power mus reach 30 %. The amoun spen in decommissioning plan has cos 30 Million Francs when he sum of oal minimum willingness o accep o leave he fishery is valued a Million Francs by he model. The difference is he oal windfall gain ransferred from axpayers o fishers and windfall gains leads o huge disribuion effecs. Whaever he scenarios, heir impac of hese policies can be assessed hrough differen indicaors. Reducion in fishing capacy and in fishing moraly gives rise o he shif of harves profile per vessel and oal landings. Vessel segmen from 0 o 60 kw does no benef from his because leaves he fishery bu increase in producion level reaches durably 3.5 ons per season for he oher flee segmen. The difference beween he scenarios is small a he beginning of he period bu he firms benef rapidly from he sock growh due o lower fishing moraly. As shown in Figure 9, landings increase in boh cases bu he fishery encouners a difference in supply valued a 660 ons in 2000 bu his gap is reduced a 120 ons in As a consequence, sock recovers from 9800 o ons in he scenario 3 when increase is limed from 9800 o in scenario 0 ons Sock rebuilding is due o beer recrus during he period han over he las period, ha s why he sock adjuss o a new equilibrium. From an economic side, he impac of saus quo or decommissioning scheme can be assessed a firm bu also 9

10 flee level. A micro-level, one can see ha average willingness o accep per kw necessary o leave he fishery increases in boh case, bu he implemenaion of scenario 3 yields higher values han saus quo. I exceeds nearly francs for a francs value. Macroanalysis is used in his sudy and he indicaor of producer surplus exhaused from scallop acivy is reained o assess he economic efficiency of he policy. Clearly, vessels whdrawal yields more annual economic ren han saus quo exceped he firs wo when he decommissioning plan has no produced s effecs. As soon as 2001, he fishery will produce around 1 Million Francs more ren and his gap will coninue o increase o reach nearly 5 Million Francs in Figure 8. Toal scallop landings during he ransion period (scenario 0 and 3) Q000.0 Q100.3 Figure 9. Toal producer surplus rajecory under he scenarios 1 and 3 Toal producer surplus ( S000.0 S100.3 The Cumulaive sum of hese differences represens 31.8 Million Francs, bu annual sreams can be discouned o ake ino accoun he public auhory preference for ime. Discoun raes vary from 0 o 10 percen. Whaever discoun rae value, ne presen values (NPV) of producer surplus sreams under scenario 3 exceed NPV of producer surplus ha proceed from he applicaion of scenario 0 (see able 8). Consequenly, implemenaion of buyback program can be judged as he bes policy if he public auhory considers his indicaor as he creria for decision-making. Moreover, he cos-benef analysis ha relae public policy cos o surplus yields shows ha he balance is always posive, from 23 o 6 Million Francs over he reference period. The difference is cancelled only for a 20% discoun rae in his simulaion. There are differen conclusions o his paricular simulaion. Nowhsanding he decommissioning plan does no achieve s objecive expressed in kw, s effecs are posive from efficiency consideraion. Producer surplus increases wh he buyback program and he ne surplus is also posive for reasonable value of discoun rae. On anoher side, echnical progress incorporaed by fishers o heir vessels may lead o counerproducive effecs o he buyback program as well as for he saus quo suaion. The problem is ha increasing ren in he fishery will probably gives rise o compeing behaviour beween fishers, capal suffing (Townsend 1985) ha could dissipae he ren creaed by he buyback program. The oher main problem from public policy perspecive is he misuse of public budge because of he windfall gain problem. The definion of an opimal premium for each fishing firm a level a lle bu higher han heir individual WA gives he opporuny o save money. And his sum could be allocaed o buyback oher vessels and o reach MAGP objecive and increase efficiency. Table 8. Producer surplus and ne surplus (producer surplus minus public cos) under differen scenarios. Discoun Producer Producer Balance* Public Ne Surplus* rae surplus* surplus* S3-S0 cos* Balance including Scenario 0 Scenario 3 Scenario policy cos 3 0% % % % * Figures in Million Francs.Noe: As he scallops revenues accoun for 30% of he vessel urnover, we use he assumpion ha 30% of he oal public cos plan is dedicaed o his fishery. In France, public assessmen of public scheme 10 acually use discoun raes (opporuny cos) values beween 2% and 8%.

11 CONCLUSION In fac, public auhories may adjus he premium level on a rial and error basis in order o minimise windfall gains. Unforunaely, his behaviour can lead o adverse effecs examined by Daures and Guyader (2000). In an adminisraive sysem, he core of he problem is o mach he premium level wh he minimum willingness o accep o leave he fishery in order o spare public budge or o allocae hese budges in a beer way. Assessmen of he minimum willingness o accep o leave he fishery exhibs huge variaions o sensivy analysis fishery of including or no some of hese variables The simulaion showed ha is no whou risk o reduce he premium if does no give fishers he righ incenives. I may pospone he vessels exs, delays he achievemen of MAGP objecives and finally increase he oal policy cos if he adminisraion has o pay a higher premium o fishers. Of course, governmens can use a endering sysem o selec he bes offers bu leads also o some problems like collusion beween fishers (Anon 1997a). Anyway flee raionalisaion or simply exclusion of marginal fishers hrough buyback schemes may lead under specific condions o increase in average willingness o accep. The cos of capacy adjusmen should hen increase if he MAGP reached heir objecive o improve he economic suaion of European Union fisheries. REFERENCES Anderson L. G. (1998) A closer look a buyback programs : a simulaion approach in Eide and Vassdal (Ed.) Proceedings of he IIFET conference, The Norvegian College of Fishery Science, Universy of Tromso (1) Anonym, (1990) Repor of an independan group of expers on he guidelines for he preparaion of he muli annual guidance programmes in relaion o he fishing flees for he period , Inernal documen, European Commission, Brussels, (The Gulland Repor) Anonym, (1996) Repor of an independan group of expers o advise he European Commission on he fourh generaion of muli-annual guidance programmes XIV/298/96-EN (The Lassen Repor) Anonym, (1997a) The economic evaluaion of he fishing vessels (decommissioning) schemes, Nauilus Consulans, Edinburgh, Sepember, 106 p. Anonym (1997b) Muli-Annual Guidance Programmes: Review of Naional Experiences, Working Documen n 8 of he Concered Acion (AIR CT ),, April. + Annexes. (classé biblioannex) Boncoeur J., Le Gallic B., Enquêes économiques sur les floilles de la Manche, Rappor CEDEM, non publié. Boucher J., (1985) ) Caracérisiques dynamiques du cycle val de la coquille Sain-Jacques (Pecen maximus) : hypohèses sur les sades croiques pour le recruemen. CIEM, C.M. 1985/K23/sess. Q : 10 p. Chuang, C. T. and X. Zhang (1998) Review of Vessel Buyback Schemes and Experience in Chinese Taipei, Paper presened a he Workshop on he Impac of Governmen Financial Transfers on Fisheries Managemen, Resource Susainabily, and Inernaional Trade. Manila, Philippines, Aug. Chuang C.T., (1999) On he Fishing Vessel Buyback Program: The Taiwan Experience, mimeo 14 p. Food and Agriculural Organizaion of he Uned Naions (1997). FAO Technical Guidelines for Responsible Fisheries No. 4: Fisheries Managemen, Rome. Fifas S., Dao J.C., Boucher J., (1990) Un modèle empirique du recruemen. Exemple de la coquille Sain-Jacques (Pecen maximus, L.) en baie de Sain-Brieuc (Manche, France). Aquaic Living Resources, 3(1) Fifas S., (1993), Un modèle de capurabilé pour le sock de coquilles Sain-Jacques (Pecen maximus, L.) en baie de Sain-Brieuc (Manche, France), in Les recherches françaises e évaluaion quanaive e modélisaion des ressources e des sysèmes halieuiques. Halieumérie, Rennes 29/06-1/07/93, Aces du colloque Fros H., Laners R., Sm J., Sparre P., (1995), An appraisal of he effecs of he Decommissioning Schemes in he case of Denmark and he 11

12 Neherlands, DIFER, Souh Juland Universy Press, Esbjerg, Denmark, 251 p. Giguelay T., (1999) French decommissioning schemes : appraising heir place in public assisance o he fishing indusry and heir impac on fishing capacy. A preliminary analysis, Xh annual conference of he EAFE, Dublin, 7-10 April, 13p. Greboval, D. and G. Munro (1997) Overcapalizaion in World Fisheries: Underlying Economics and Mehods of Conrol, Food and Agriculure Organizaion of he Uned Naions, Rome. Gréboval D., Munro G., (1998) Overcapalisaion and excess capacy in World Fisheries : underlying economics and mehods of conrol, FAO Technical Working Group on he managemen of Fishing Capacy, La Jolla, USA, April. Guyader O., (1998a), "Evaluaion économique e simulaion des effes des régulaions sur les comporemens des agens : le cas des pêcheries de hon germon de l'alanique Nord-Es".- Thèse de docora es sciences économiques, universé de Rennes 1, juin 1998, 421 p. Guyader O. (1998b) "Transion from Open Access o Regulaory sysem wh Subsidies : he case of he French Drifne Flee".- Proceedings of he firs Concered Acion Workshop on Economics and he Common Fishery Policy, UK, ocober, CEMARE Miscellaneous Publicaion n , Guyader O., Fifas S., (1999),. Modélisaion bioéconomique de la pêcherie de coquilles Sain- Jacques de la baie de Sain-Brieuc, Rappor inerne IFREMER, forhcoming, 113p. Hacher A., Robinson K., (eds.), (1998) Overcapacy, Overcapalisaion and subsidies in European fisheries, Proceedings of he firs Concered Acion Workshop on Economics and he Common Fishery Policy, UK, ocober, CEMARE Miscellaneous Publicaion n , vi+282p. Hacher A., (1998) "The European Communy s srucural policy for he fishing indusry", in Hacher A. and Robinson K. (Ed).- Proceedings of he Workshop on Overcapacy, Overcapalisaion and subsidies in European Fisheries: UK, Ocober, CEMARE Miscellaneous Publicaion no , Hacher A., (2000) Subsidies for he European fishing flees : he European Srucural Policy for fisheries , Marine Policy (24)2, Holland D., Gudmundsson E., Gaes J. (1999) Do fishing vessel buyback programs work : a survey of evidence, Marine Policy (23)1, Holland D., (1999) On direc and indirec managemen of fishing capacy, Marine Resource Economics (14) Ikiara M. M., and J. G. Odink (2000) Fishermen Resisance o ex fisheries Marine Resource Economics (14)3, Mezner R., and P. Rawlinson (1998) Fisheries srucural adjusmen : Towards a naional framework, Prepared for managemen commee sanding Commee for fisheries and aquaculure Ausralia. Fisheries Vicoria Deparmen of Naural Resources and Environmen, Deparmen of Primary indusries and Energy, Camberra. 253 p. Newon C., (1998) Review of issues for he conrol and reducion of fishing capacy on he high seas FAO Technical Working Group on he managemen of Fishing Capacy, La Jolla, USA, April. OCDE (1997) Towards susainable fisheries : economic aspecs of he managemen of living marine resources Paris, OCDE publicaions. Kirkley J., Squires D., (1999) Capacy and capacy uilizaion in fishing indusries, Universy of California, San Diego, Deparmen of economics, Discussion Paper 99-16, 38p. Townsend R.E. (1985), On capal Suffing in regulaed fisheries, Land Economics (61)2: Wenninger, Q. R. and R. E. Jus (1997) An analysis of he ransion from Limed enry o ransferable quoa: non marshalian principles for fisheries managemen Naural Resource Modelling 10(1), Noes 1 For a clarificaion of he concep of fishing capacy, see Kirkley and Squires (1999) 2 In France, he scallop landings are prohibed from May o Ocober due o sanary reasons. 3 These buyback programs consis in financial subsidies delivered o a vessel owner who is fishing in he European waers and applies o ex his vessel from he fishery acivy. The design of buyback programs in each member sae has o obey o some European recommendaions if he UE conribuion is required for he financing of he ex. Three major regulaions mus be noiced : he council regulaions 4028/86, 3944/90 and 2080/93 which have successively fixed : a maximum subsidies amoun per size caegory of vessel (Gross Regisered Tonnage caegories), some resricive creria such as he age of vessel, he EU conribuion o he funding of he ex if hese creria are respeced. The French flee is disribued among six GRT caegories o fix premium rae and for each kind of ex/ GRT caegory, he premium is composed wh a variable par and a fix par. In addion o he PME sysem, buyback programs have been regularly implemened o achieve he MAGP objecives when some delays appeared. Over he period , four buyback programs have been implemened. The firs plan (he so called Mellick plan implemened in 1991) was predominan and has concenraed around 70% of he oal public expenses o reduce he flee capacy over Meanwhile, he amouns allocaed by he EU and French Governmen o decommissioning schemes represened only slighly more han 12

13 1% of he oal expendures of hese auhories in aid o he fishery secor over he same period (Giguelay, 1999). 4 Vessel size lim has been bounded a 13 meers and engine power mus no go beyond 185 kw since 1990, excep for vessels using a licence before his dae and benefing for hisorical righs. 5 Fishing perms as Permis de Mise en Exploaion. 6 Premium is expressed in erm of gr bu adminisraion used a correcive facor o he premium/gr o ake care of he relaion beween gr and kw. 7 The measure of he saisical analysis impac of he differen facors is he furher sep. 8 The resuls are que he same if we do no consider mean age bu percenage of vessels older han a specific age. 13