Grantee Research Project Results
2004 Progress Report: Future Growth of the U.S. Marine Aquaculture Industry and Associated Environmental Quality Issues: A Comprehensive Assessment
EPA Grant Number: R829804Title: Future Growth of the U.S. Marine Aquaculture Industry and Associated Environmental Quality Issues: A Comprehensive Assessment
Investigators: Jin, Di , Powell, Hauke Kite , Hoagland, Porter
Institution: Woods Hole Oceanographic Institution
EPA Project Officer: Hahn, Intaek
Project Period: October 1, 2002 through September 30, 2005
Project Period Covered by this Report: October 1, 2003 through September 30, 2004
Project Amount: $282,191
RFA: Futures: Research in Socio-Economics (2001) RFA Text
Research Category: Environmental Justice
Objective:
The objectives of this research project are to develop a framework to project the future long-term growth of the U.S. marine aquaculture industry and the effects of this growth on marine environmental quality. The framework is designed to capture the key components of the economic-environmental-regulatory system, including economic growth and demand for seafood, supply of seafood from fisheries, imports and aquaculture, future technological and policy impacts on the aquaculture industry, and marine environmental quality variables.
Progress Summary:
Year 2 of the project involved two efforts: (1) development of a firm-level investment and production model under risk and uncertainty; and (2) development of a regional model of aquaculture growth and water quality. These efforts are discussed below.
Modeling Firm-Level Investment and Production
The firm-level model is an essential building block for economic and environmental assessment at the regional level. We have improved our firm-level investment-production model that simulates a specific growout project. In the model, several key economic and biological variables (such as environmental conditions and market prices) may be specified as stochastic variables. As a result, the model may be used to calculate both the expected return from an investment and the variance associated with that return.
Based on this firm-level model, we have developed a framework for risk assessment in open-ocean aquaculture. The framework consists of three components: the firm-level investment-production model estimates a project’s benefit-cost values, a second model calculates the risk premium for a risk-averse investor, and a third model quantifies the option value for a risk-neutral investor. We show that under uncertainty, the traditional net present value rule for making an investment should be modified. We illustrate our models using a case study of open-ocean aquaculture of Atlantic cod (Gadus morhua) in New England. The results suggest that investment level is inversely related to the risk level and the risk aversion parameter. As the risk level rises or the investor becomes more risk averse, the amount of investment will decline. The scale of an aquaculture operation under uncertainty is smaller than that under certainty. The timing of investment is affected by the dynamics of project value. Both growth in project payoff and uncertainty in the payoff can create a value to waiting or delaying investment (option value).
Modeling Future Growth of Open-Ocean Aquaculture in New England
Using the outputs from the firm-level model, we have developed a capability to assess aquaculture growth at the regional level. Existing studies typically project local future expansion of marine aquaculture according to the assimilative capacity of the coastal environment. We developed an alternative approach based on market supply and demand equilibrium. We considered supplies from both harvest fisheries and open-ocean aquaculture. In our framework, net demand for farmed fish determines the size of the aquaculture industry and in turn the level of pollution discharge. The socially optimal industry size is affected by the environmental damage associated with effluent discharge.
We illustrate our analytical approach using a case study of the New England groundfish fishery and proposed open-ocean aquaculture of Atlantic cod. The results suggest that the socially optimal solution involves a combination of harvest fishery and aquaculture as long as the production cost for aquaculture is competitive. For our baseline data, t he optimal industry size implies 11 farms producing 23,000 metric tons per year, when the groundfish stock is rebuilt (with annual landings of 156,000 metric tons). The optimal industry size is much smaller if its effluent discharge causes significant damage to the marine environment. The scale of the aquaculture industry also may be substantially larger if pollution control measures are effective and/or there is a significant growth in fish demand in the future.
Future Activities:
We will complete the theoretical and simulation models and develop additional case studies in Year 3 of the project.
Journal Articles on this Report : 1 Displayed | Download in RIS Format
Other project views: | All 19 publications | 4 publications in selected types | All 2 journal articles |
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Type | Citation | ||
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Jin D, Kite-Powell HL, Hoagland P. Risk assessment in open-ocean aquaculture: a firm-level investment-production model. Aquaculture Economics & Management 2005;9(3):369-387. |
R829804 (2004) R829804 (Final) |
Exit |
Supplemental Keywords:
estuary, effluent, discharge, aquatic, integrated assessment, public policy, socioeconomic, social science, Northeast, Atlantic coast, modeling, Economic, Social, and Behavioral Science Research Program, ecosystem protection/environmental exposure and risk, aquatic ecosystem, aquatic ecosystems and estuarine research, ecology and ecosystems, economics, economics and decisionmaking, oceanography, decisionmaking, aquaculture, aquatic ecosystems, aquatic resources, assessing ecosystem vulnerability, deliberative policy, econometric analysis, economic research, ecosystem response, ecosystem valuation, environmental decisionmaking, environmental policy, environmental policy impact, fish communities, fisheries, marine biogeochemistry, policy impact, policymaking, water quality,, RFA, Economic, Social, & Behavioral Science Research Program, Scientific Discipline, Ecosystem Protection/Environmental Exposure & Risk, Aquatic Ecosystems & Estuarine Research, Oceanography, Aquatic Ecosystem, Economics, decision-making, Ecology and Ecosystems, Ecological Risk Assessment, Economics & Decision Making, Social Science, environmental policy impact, deliberative policy, ecosystem valuation, watershed management, aquaculture, assessing ecosystem vulnerability, economic research, policy making, decision making, environmental decision making, fish communities, fisheries, marine biogeochemistry, environmental policy, policy impact, aquatic ecosystems, water quality, aquatic resources, ecosystem responseProgress and Final Reports:
Original AbstractThe perspectives, information and conclusions conveyed in research project abstracts, progress reports, final reports, journal abstracts and journal publications convey the viewpoints of the principal investigator and may not represent the views and policies of ORD and EPA. Conclusions drawn by the principal investigators have not been reviewed by the Agency.