Table of Contents
Boom-and-Bust Shrimp Aquaculture; a Feebate Policy for
Sustainability
Steven Arquitt®, Xu Honggang”, and Ron J ohnstone*
*Centre for Marine Studies
Univesity of Queensland
Brisbane QLD 4072 Austalia
Telephone 61 7 3365 4333
Fecsimile 61 7 33654755
enail: sarquitt@mailbox.uqeduanr
*School of Earth and Environmental Sciences
Abstract
Well intentioned policies which fail to perceive environmental feedback often
exacerbate over-exploitation of renewable natural resources, especially when the
resource exploitation is driven by powerful market forces. The purpose of this paper
is to consider such a situation, the world shrimp aquaculture industry, and to explore
one localized case where a policy intervention of “feebate’ may offer a potential
balancing effect.
Key words
Introduction
Tn this paper we examine the implications of a feebate policy in the management of a
commodity production system heavily dependent on renewable rau resourcss.
Feebates are combinations of fees and rebates designed to enlist market foroes to
emoourage desired pattems of resource usage (Collinge 1997, Ford 1999). Feebaies
have been proposed for reducing vehide emissions (Ford 19%a, 1995b, Jansen and
Denis 1999) and promoting conservation of water resources (Collinge 1996). Feebates
are considered appealing because they achieve ther ams without resorting to
jaescriptive regulations and are self-financing (Collinge 1997, Ford 1999).
industy has grown impressively over the past two decades but has displayed recunent
boomand-bust pattems linked to over exploitation of renewable natural resources
With the aid of a system dynamics model we examine how a fomm of feebde nay
help the industy achieve sustainability and presave the natural resoutve bese on
which it is dependent by favouring produces with decisionniles that foster long tam
benefits.
Tn the next section we provide background for our case study and devdop a poblen
definition The section after daborates our hypothesis of the casa stucue
undedlying the problem scemaio and describes the suche and behaviour of the
modd. We then describe simulations of export taxation and feebele polices and
discuss their implications for promoting sustainability of the industy. We condude
with a disoussion of key assumptions underlying the feebate policy that ae rdevant to
the feasibility of a fechate policy in this instance.
Problem description
Boomand bust in the international shrimp aquaaulture industry
Growing intemetional demand for shrimp and stagnating caiches of wild simp in the
ealy 1980s created an opportunity for the devdopment of export orientated shrimp
aquaculture industries (Csavas 1995). Countries with climate and natural resources
suitable for simp fanving paticialy in Asia and Lain America sazed on the
opportunity, transforming vest stretches of coastline into sirimp famms Growth in the
sector has been spectacular over the past two decades (figwe 1). In 1982 simp
aquacultare accounted for only about 5% of word shimp supply, by 1994 this figure
had risen to 30% (Haherty, Vandeyeest, and Miller 1999). Globelly, fammer eamings
from shrimp faming wee estimated at over US$6 billion in 1996 with real value 3
times that amount (Hahaty add Mill 1999). In Thailand amenily the wolds
largest produce; the industy genaaied over US$1.7 hillion in export eamings in
1996 (Hahety and Miller 1999). Significant potenti for export eamings and mad
enpoymet hes pomped govemments and intemaiiona devdoprent institutions to
promote the growh of the industy through subsidies and tax breaks (Huitic 4 d
2002).
Shrimp production
400
— ~~ Bangladesh
--China
~- India
Indonesia
~~ Philippines
— Taiwan
~- Thailand
Vietnam
- -Eouador
Total World
Production (x 1000 mt)
Figure 1. Growth of worldwide shrimp aquaculture production (source: Kautsky,
Rombéck, Tedengren and Trodl, 2000).
Despite the apparently bight picuwe of gowh ad export eamings a& the global
scde, the simp faming indsty bes exhibited an extemdy insable pattem of
devdopment strongly associded with ecologic damage add soda disupiions
Careful examination of figure 1 reveals a pattem of boom and bust in the industy. In
the early 1980s the industry grew rapidly in Taiwan and China only to suffer dramatic
ymoduction crashes within a few yeas. Similar pattems can be obsaved for The
Philippines, Indonesia, and India Thai production grew dramatically as production in
Taiwan and China oollapsed, and then took a significant downhm in 199-1997.
These boom and busts have been observed both at the naionl sce and within
counties. In Thailand, for example the industry has devdoped rapidly in one region
only to cash and migale to another region (Huitic, Polke and Kautsky 2002). The
ymoduction collapses have left a trail of depleted natal resources and have caused
sodal damage through loss of employment in simp faming ad raed sie
industries.
Why have these production crashes ooomed? A brief background desaiption of
strimp fanning and its rdationship to the ewionment wil facilitate our discussions
of the causes of the boom and bust phenomenon.
Background: brackish water shrimp farming and the environment
The form of shrimp faming we ae examining is known as “brackish weer” shrimp
fanning. Several species are farmed but all ae marine species and require salt water
For this reason sirimp fams ae typically found dong ocestal margins, often on the
shores of estuaties and embayrrents lined or formally lined with mengove forests.
Mangroves ae the dominant ecosystem type found in shrimp faming awes and ae
for maintaining weer quailty though asmilain of mies ad
pollutants and for a host of other ecological services important to the wel bang of
fisheries, biodiversity, and rural incomes to name a few (Baan and Hamhey 1998
Huitric 2002, Rommback 1999).
Shrimp faming is usually considered to fall into three categories “Extensive” strimp
farming hes been practised in Asia for centuries. The fanmer relies on feed ooaming
naturally in the ooestal waters, inputs ae minimal and ther is litle release of waste
into the ewironment Yidds ae compardivey low, in the range of 05 to 15 metic
tons per hectare of pond per year. “Intensive” fanning is dependent on heavy inputs of
commercial feed and cemicel teetmenis, and invesinens in fatlitis suh a
dectric lights, pumps, and aaation devices Yidds ae much higher in the range of 7
to 15 tons (Kautsky & al 2000). Demands on the ecosystem ae also much greater
Intensive fanving produces large amounts of westewater contaminated with dissolved
feed, dead siimps, faecal matte; dc which nust be flushed from the pond and
replaced with dean intake weler on a daily basis. Also, 100 to 500 MT of sediments
per hectare per year of extremdy high organic oontent are produced and must be
disposed of (Flaherty and Miller 1999, Lin 1995). The third category “semtintensive’
faming is intemedide to extensive and intensive in tems of imps, yidds ad
environmental impact It follows that the grear the faming intensity, the greater the
demands placed on the ecosystem for waste assimilation and dean intake water and
the more poblenaiic the environmental sustainability of the fanning operation.
Kautsky @& a (2000) have devdoped the conceps of “eoologicd footpint’ ad
canying capecity for shrimp fams. The ecological footpint is the area of intact
ecosystem required to sustain production per unit aa of shrimp pond, and the size of
the footprint is directly rdated to fanning intensity Kautsky @& al 2000). The footprint
concept then provides a useful indication of the canying capecity of a given ara to
support shrimp fanys. If the canying capacity is exceeded, water quality deerioraies
and yidds fal de to pollution ad in patiala, high concentaiions of disease
Causes of production crashes in shrimp aquaculture
Boom and busts pattems of shrimp aquacultwe devdopment have ocoued because
public policy hes failed to (i) perceive the ecological feedback structure of which the
industy is a pat (Huittic 2002) ad (ii) consave common popaty resouves on
which the industy is dependent Compdling expaimenta work by Moxnes (2000)
has demonstrated that these two policy failings are dosely rdated. Quoting Moxnes:
..-Misperceptions (of environmental feedback) disguise the need for policies and institutions to solve
commons problems in due time before the exploitation rates exceed limits for maximum sustainable
resourve extraction.
The above quite simmaiss wel th policy falues undelying the repesed
collapses of shrimp faming industries In the sh to cesh in on high pices, fams
have been allowed to polifeate over ooestal areas in mimbas far exceeding the
ecological canying capacity (Flaherty 1999, Kautsky 2000). High profit potentid hes
dso encouraged intensive faming in oer to meximize yidds, puting een more
ywessure on the camying capacity. The majority of fans often have been established
in commonly owned ovcestal mangrove forests, which has diredly reduced the
ecological carrying capacity through the deaing of mangoves for pond fatlities
canals, and acoess roads. The common property nature of coastal mangroves and the
services they provide hes greailly oontibuted to the poducion cashes Common
yoperty resources are typically ove-exploited because, in the absence of popaty
tights, no single appopiaor can capure the befits of oonsaveiion (Collinge
1997). This is the essence of the “tragedy of the commons” descibed by Hardin
(1967). In the case of simp faming fames who have appopiated commonly
owned mangroves have no incentive to invest in consavation measures, and instead
opt to maximize farming intensity, and profits, in the short nm Because mangroves as
common property ae undervalued (Ronnbéck 1999), it is more cost effective for
fames to dedde mangrove resources until yidds drop to umeconnnic leds
abandon the area, and move their opaations on to unspoilt mangroves, in place of
investing in facilities or following management practices that would provide for more
sustainehle production Thus failure of policy in regad to requaiing the shimp
aquacultwe industy and managing the commonly owned mangove ecosystem has
contributed not only to boom ad bss in the shimp fami indsty bt tb
widespread =destuction of eoologicdly ani eoonnicdly impotent meangove
ecosystems.
Sustainability in the shrimp farming industry
Regulation of land use is a key to achieving swhairdbility in the daimp faming
industry. Shrimp fanving generally occus on two broad dasses of land mangioves
and ooestal inland The “ooestal inland’ we consider to be inland aes adjacent to
Tmangrove aress, suitable for various forms of agriculture, but sill near enough to the
shore for shrimp fams to economically access coastal water. We have discussed
above how the common property characteristic of mangroves, and the decisionniles
of simp fammes in mangroves, render mangroves unsuitable for sustainable shrimp
faming. Also, faming within the mengove aces destoys the vay hese of
ecosystem services on which shrimp fanys are dependent Inland farmers, in contrast
to mangrove fammes, genadlly hold title to ther land ad ae comeamed about long
tem reums to their investment, in other words their decisionmles ae more likely to
foster sustainable production Inland producas have inoattive to produce siimp
sustainably, making use of the ecological savices of adjacent mangroves. However
the historical pattem has been that famms have cowded into the mangive aess,
ovawhedming the ecological canying capecity for both theamsdves add ajjacent
inland famms (pas. conv. D. Fagan, Aquastar Co, Thailand; S. Blanchard, Bectel
Corp, Thailand). It follows that policy for sustainability in the industry should protect
the mangrove ecosystems and promote sustainable inland fanning.
Shrimp aquaculture in Thailand
Extensive shrimp faming for howehold omsinpiion ad the locd meet had
traditionally ben prctised for many decaks in Thala with insignificant
environmental impact Commercial scale production for export began in eamest with
the intoduction of intensive simp faming technology from Taiwen in the ealy
1980s (Huitric e al 2002). The collapse of the strimp farming industy in Taiwan in
1987 opened a niche thet Thailand quiddy filled and by 1991 Thailand had become
the largest producer and exporter of fanned shrimp in the wodd, a position it has hdd
to date The growth of the industy in Thailand has ben given impeus though
govemment subsidies and tax breaks and by implicit nazual subsidies in the fons of
undervalued mangrove lands, fiee intake weer and weste disposal (Huitic a4 d
2002).
Sequertial boom and bust of the commacia shimp faming industy in Thailand hes
been well documented (Huitic & al 2002). Since its beginnings in the ealy to md
1980s, the incusty hes shifted from one ooesta region to another first from the
central to the westan Gulf of Siam, then to the eestem Guff, and finally to the
Andaman seacoast. It is estimated that Thailand lost agpoxineidy half of its
mangroves during this time and that af leest half of this loss resulted diecly from
expansion and migrtion of the daimp faming inisty (aber add Cox 202,
Huittic & al 2002). Most recently there has been a significant move of strimp faming
into the inteior inland, in paticidar to the oad Chao Phraya River basin, using
seawater brought in by tuck and special rearing technology (Hahaty add Mille
1999). This recent move far inland is due in lage pat to the gowing diffiallty of
obtaining dean weier in costal areas suitable for simp faming (Huitic & a 2002).
Recent govemment restictions on inland shrimp faming have evoked concans that
renewed pressure may be placed on coastal mangroves (Barbier and Cox 2002). As
we wite Thailand remains the lagest producer of famved shinp in the wold
However; the growth tend in aggregate rational producion bes bdied a mumber of
production booms and aeshes within Thaland add a shifting pattem of faming
which hes resulted in much ecological and economic damage. The industry appears to
be at a cossioads at this time as much of the ooastal ecosystem is depleted of
mangrove cover and saious ewironmental poblers ae exaging with inland shimp
faming.
Shrimp farming policy in Thailand
Tn the ealy stages investors rushed into simp faming with vitally no reguadion
The govemment encouraged rapid growth of the incisty by poviding subsidies
feeds and other inputs, tax breaks and low interest loans (Huitic & al 2002). The
Word Bank and the Asian Deveoprent Bank identified simp fanving a a key
industy for mma devdopment and supported gowh of the inksty in Thilad
(Hahaty 1999). As ration and inferatioml iecogiitio of th ewiomentd
damage wrought by the industry increased through coverage in the poplar press and
through research studies, the Thai govemment changed its fonval position on the
industy. The 1991 Thai Fisheries Act enacted a muimber of measures to regude
shimp faming induding a ben on al gimp faning within mengove aes ad
rohibited loans for famms in mangroves. Ministerial regulations placed requirements
on pond effluents and required that al strimp be regisered Inland simp faming
dso presents its shae of e@wionmentd chllerges Sdirisaion of smouncings
problems associated with disposd of westewder and sudge add onflid with
neighbouring rice fame has pompted the govanmeat to ben ciimp faming in
inland areas with the exception of designated areas fringing the coasts (Hahety and
Miller 1999). Thus, the legally sanctioned aces for simp faming in Thailand ae
now the inland aees adjoining the coasts and offidally designded as suitable for
shrimp farming (Flaherty 1999).
Policy changes in Thailand indicate that thee is now paception among policy makes
of the feedback processes linking the industy and the environment However policies
addressing environmental problers of the simp faming indisty hae not povn
edfectual to dae For example despite the ben on faming in nmengovs
emavachment on officially protected mangroves continues. Also, reguldions on pond
eluents ae commonly ignored (Huitic @ a 2002). Reasons cited for nn
compliance of regulations indude inadequate fines and inadequate departmental staff
to monitor mangove encoachment faming peciss and aenfore reqidions
(Haharty and Miller 1999, Huitric e al 2002, MIDAS 1995).
Prescriptive policies can create conflict with resource agpopiiators and are expensive
to imerent In light of the fale of presoiptive polices to reguae the shimp
farming industy, we suggest that polides involving make imatives ae woth
investigating. In the section that follows we descibe a modd in which we ditempt to
capture the key economic and ecological feedbacks and agent decisioniules that lead
to the problenstic pattem of boom and bust shrimp aquecilture in Thailand We then
use the modd to expaiment with policies that alter market incentives in order to push
the system towad sustainability.
Model description
The modd is divided into three infecting sectors, (1) world shrimp commodity
system, (2) Thai mangrove shrimp production, and (3) Thai inland shrimp production,
The world shrimp commodity system sector is based on Meadows’ General Dynamic
Commodity System modd (1970) add mimics the dymmics of wold shimp
consumption, word production (exduding Tha agenitwe producion), ad pice
deamination The Thai mangrove shrimp production and the Thai inland shrimp
production sectors are disaggregated from word production in oer to study
ecological feedbacks and decision nies influencing the asarmdbility of shimp
yoducion in mangove add in ina ewionments Figue 2 shows the pincple
interactions between the sedors and lisss key assumptions embodied within each
sector.
= Price adjusts to maintain desired
PRODUCTION inventory PRODUCTION
+ Price moves production and
consumption toward equillibrium
PRICE + World production not constrained PRICE
by natural resources
Thai inland shrimp production Thai mangrove shrimp production
- Natural resource dependent NATURAL + Natural resource dependent
+ Farmers hold title to land RESOURCE + Farmers do not hold title to land
- Farmers seek long term profits DEPLETION + Farmers seek short-term profits
+ Decision rules promote stewardship = Common property decision rules
Figure 2. Moda sectorinteractions and key assumptions
In figwes 3 though 6 we use cad loop diagans to eqian the infometim
structure of each modd sector In the casal loop diagrams we have not egpicitly
indicted stock and flow variables. A positive causal link polaity should be inteypreted
as an increase (decrease) in the independent variable causes the dependent variable to
be greater (less) than what it would be otherwise A negative polaity should be
interpreted as: an increase (decrease) in the independent variable causes the dependent
vatiahle to be less (greater) than whet it would be otheawise (Richardson 1997,
Stenman 2000).
World shrimp commodity system
The basic infomation structure of the world shrimp commodity system sector is
shown in figuwe 3. World price is deemmined by the oollective action of wold
inventory holdas who seek to maintain inventories at a desired led. The two
belancing feedback loops act in concat to equilibrate production and consumption in
accordance with a desired levd of inventory. Delays associated with adjustment of
consumption, price recognition, up scding or down scding production capacity, ad
qaop poducion give rise to commodity cydes In the wold shimp commodity
system sector we assume that production is always able to meet demand by moving its
bese to unexploited regions and thus we do not oonsider land tente or other issues
effecting sustainability. The commodity cydes induced by the infonmation ddays in
the sector structure should not be confused with the boom and bust pattems associated
with environmental degradation induced by shrimp fanning.
invento!
vows
production
mM | w&
+
balancing balancing consumption
production and consumption and
inventory inventory
desired Production.
delay]
Y
pce
Figure 3. Information structure of world shrimp commodity sector
The purpose of Meadows moda (1970) wes to devdop a dynamic theoy of
commodity cydes and explore policies for moderating these cydes Our purpose is to
study the causes of boom and bist in simp aqecitwe and eqdor policies for
environmental sustainability of the industry. Thus, we have made use of the Meadows
moda as an achetypal stuchre to mimic the infometion flows of the wodd shimp
commodity system that drive natural resource exploitation This approach wes taken
by Arquitt (1995) in his study of Thai shrimp incisty and by Johnston, Soldaquist
and Meadows (2001) in ther study of the word shimp market The two sedos
described =bdow mode enological feedbacks and decsion nies influndng
sustainability of shrimp production within specific geographical settings.
Thai mangrove shrimp production sector
We assume that all sirimp fams in the Thai mangrove shrimp production sector are
situated in coastal mangroves that are publidy owned We assume that the mangrove
ecosystem saves as both a soutve of intake weler and as a sink for westes from
strimp fans and that it hes a limited canying capacity for sustaining fams. We
further assume that individual fammers cannot capure the benefits of conservation
and, hens follow decision nies that maximize shot nm befits as discussed
yreviously.
Figure 4 shows the infomation structure that drives expansion of the Thai mangrove
shrimp production sector and its linkage to the world shrimp commodity system.
Poa podcioi population of
(exogenous)
& A akinf
fanning 4p retemcing | taming eOnsumption
=~ production: at \
+
mangrove shrimp
farm area
production
intensifying
‘mangrove stock expected profit per capita consumption
mangroe ae ~\ gate
appropriation costs.
of shrimp (exogenous)
mangrove
Figure 4. Information structure of Thai mangrove shrimp production sector and its
linkage with the wodd shtiimp commodity system sector.
Tnceasing sirimp consumption woddwide decrease wodd inventories Invenio
holdes respond by raising prices Expected pofits ae attractive because of high
ice, high expected yidds assodiaied with intesive faming and lw cost of
appopidiing mangroves. Investors respond by conveting mangroves to shrimp fans
and intensifying production This increases aggregde production, which links with the
world shrimp commodity system sector. The balancing influence of the feedback
“balancing production” has limited modaating influence on mangrove convasion
and intensification in the ealy devdopment phese becase Thai podicion is a
idativey insignificant fraction of word production However as Thailand gains a
lager share of word production this feedback becomes stronger The balancing loop
“reaching the limit” becomes dominant as mangroves ae dedeed, incessing
mangrove + appopidion oots and deaessing expeded ofits Mangove
appropiiation costs can be construed as the actual price paid for the right to ue
mangroves through legal concessions or increased risk of punitive action or increased
illegal compensation in the cease of encoachment on legdly potected mangoves
This structure gives rise to an sshaped growth pattem of production Howeve; when
feedback from the ecosystem and common propety decision miles ae ackded to the
structure the story is different
Figue 5 induces environmental feedbacks Reseach by Kattsky, Romnbeck
Tedengen, and Tioel (2000) demonstaies that Simp faming depts on
ecological savices provided by rete induding wesewder asimilaion and supply
of dean intake water We have borrowed concepts of “evological footpint’ and
“canying capacity’ which were developed by Kautsky e& al (2000) to aid in planning
and decision meking for the stimp faming incdksty. The ecological footpint is the
unit area of intact mangrove ecosystem required to swiain a unit aea under shiimp
fanning. The ecological canying capacity for shrimp farming is then the area of fans
that an area of intact mangroves can sustain. The area of the ecological footpint is
diecly rdated to farming intensity.
mangrove shrimp
inland shrimp farm area
farms
abandonment
fenay crowding, farm lifetime
> EB} e inventor
saag Producti population of
alos 3 by ad 7, consumers
carrying capactty yin sent production (exogenous)
‘payback to intensity intensifying f
P » Gs skimp
arming consumption
+ balancing: balancing sa
ecological intensity
production | consumption
mangrove stock re) expected profit per capits consumption
‘environmental payback * rat) of shrimp (exogenous)
tomarorearicton —mangrofe Wf Nag NE
appropriation costs
Figure 5. Structure of Thai mangrove shrimp production sector with environmental
feedback loops in place
Two reinforcing feedback loops, “environmental payback to mangrove depletion”
and “environmental payback to intensity’ cause production crashes. As mangroves
ae oonveted to simp ponds, the mangove sock is diminished and the evologica
canying capacity declines Intensification places greater devand on ecologic
services and increases the ecological footpint, which also reduces the canying
capecity. As intensive simp famms cowd info a area, the ecologic canying
Capacity is exoseded, and the average fam lifetime drops due to contamination and
associated disease outbreaks. Fanms are then abandoned, decreasing the total area of
mangrove shrimp fams This puts downward pressure on aggregate production and
upward pressure on price through the inventory mechanism Expected poofits remain
attractive and shrimp famas move on to egploit unspoilt mangove aces until the
mangrove agpropiiation costs becomes prohibitive.
Thai inland shrimp production sector
Tn the inland shrimp production sector we assume that fans ae located in the inland
immediately adjacent to the mangrove bat We assume thet the inland fans also
depend on the mangrove ecosystem for intake water and weste assimilation and that
the mangrove ecosystem has a limited canying capacity to sustain adjacent inland
fams. We assume that inland fames own ther land and will take consavation
Teesures to sustain longtem production and propety value In particilar we assume
that farmers will reduce their faming intensity when ther yidds dedine de to
feedback from the ecosystem.
Figure 6 shows the infonveation stucte for inland fans including feedbacks for
mangrove
shrimp farms
inland shrimp,
farm area
ayapiey »\
environmental viel
mangrove stock
i reese
pepsin
payback to intensity ~* Production’ consumers
LU) (exogenous
ological o-intensitying ty @ if
footprint ao) tolancing | balancing constimption
inland farming sae reduction | consumption
Se intensity iteoeliying rowel mm +
+ +
suitable inland HA expecta pont ‘consumer purchasing
remaining > eee aah power exogenous)
inland land cost “igh eI
reaching the linit
‘convert inland to
shrimp farms
Figure 6. Structure of Thai inland shrimp production sector and its linkage to the
wodd shrimp commodity system sector
The stucure for growth of inland fam poduction is similar to the stucure for
mangrove fanms. The ecosystem feedback structure, however, is somewhat different
Canying capacity is affected by intensity and ecological footgint as in the Tha
mangrove shrimp production sector Howeve; oonvesion to sitimp fams does not
impact canying capacity since fam oconvesion does not involve the deaing of
mangroves. Still, the canying capacity is influenced by the mangnve stock, and by
aowding of mangove siimp fams modded in the Thi magove shinp
oduction sector Inland famers acting in ther personal best interest respond to
exvironmental pressures in ways that foster sustainability. In the inland sector fams
ae not abandoned. When yidds decline due to environmental degradation and disease
outbreaks, inland fanmers scale back their fanming intensity in order to decrease the
volume of weer intake and the likelihood of contamination (Huitic & a 2002). This
also decreases wastewater decreases the evological The
ese meee i ty eres ce Rape
capacity and helps to sustain production If yields fall to the point whee expected
ywofits are no longer attractive, inland strimp fares will convat to other land uses
and conversion of coastal inland to shrimp farms will cease.
Base simulation
Figure 7 shows the dynamic behaviour reailting from the modd structure desciibed
above. The modd is simulated in time incements of years over a time horizon of 100
yeas. DT is se to 125, The mode is sf into @ initia equilibrium At time 5 a Sep
fundion is used to mimic implerention of initia invetmetis in Tha shimp
famming in mangrove and inland sectors. Also af time 5 another step fumction is used
Figure 7. Baserun simulation. Total Thai shrimp aquaculture production (metic tons)
Figure 8. Base simulation. Time path 1 =mangrove shrimp production metic tons); 2
=inland shrimp production (metic tons); 3 =mangrove stock (hectares).
In the bese nn smilation shown in Kgue 7, the pattem of growth and dedine of
total Thai strimp production comesponds wel with the historical pattem shown in
Figure 1, lending us a degree of confidence in our modal structure.
Figure 8 shows the bese nn behaviour of Thai mangove simp poducion (time
path 1), inland shrimp production (time path 2) and the mangrove stock (time path 3).
Mangrove fam production grows exponentially while mengoves ae plentifil ad
appropiiation costs low. However the eoosystem’s canying capacity is quickly
exceeded as intensive shrimp fams replace mangroves. The initial growth of inland
ywoduction conesponds dosdy with mangrove production bit qucdy peeks ad
dedines steeply due to dropping yidds caused by the aowding of intensive mangiove
farms. As mangoves are deplded and the ecosystem’s camying capacity diminishes,
mangrove fam lifeéime shortens, the abandonment rae inceasss and podictio
pummes. Inceesing mangrove appopiation costs pevenis new mangove fam
start-ups and some areas of intact mangrove ae thereby presaved Based on the
ecological savices provided by the remaining stock of mangroves, inland fameas are
able to inceese ther production As the canying capacity for inland faming is
approached, farmers downscde ther faming intensity ad ae able to sstan
ymoduction in balance with the ecosystem’s canying capacity. Inland fam sit-ups
ceese when expected reums from shimp faming ae egel to res fiom
altemative land use The final levd of sustainable inland production is deéenmined by
the extent to which the mangrove ecosystem is preserved.
Policy simulations
As discussed in earlier sections prescriptive policies such as bans on shrimp faming
in certain areas or requirements that wastewater be treated before release have not
woven effective in regulating the simp faming incisty in Thailand We suggest
that market incentives through taxes and rebates may provide a more effective means
of regulating the industry.
Export tax on shrimp
Export taxes on Thai strimp exports have been proposed by MIDAS (1995) and
Arquitt (1995). In Thailand over 90 pacent of simp podidion is for expot
markets. The export tax policy operates under the key assumption that the tax would
be passed down from export merchants to producas. The idea is that the tax would
force some of the extemalised costs of production onto produces and would thereby
slow the rate of ecosystem exploitation.
Figure 9 shows the simulation results when a 10 parent export tax is placed on
shrimp exports, implemented at time 10.
Figure 9. Simulation of export tax policy, implemented at time 10. Time path 1=Thai
mangrove shrimp production (matric tons), time path 2=Thai inland shrimp
yoduction (meizic tons), time path 3=mangrove stock (hectares).
The export tax slows the rae of mangrove exploitation because expected piofits ae
less attractive. Still, by time 75 mangrove cover has been reduced by over 50 percent.
The gowh of simp production is dowed but is sill not sustainable because the
decision niles of mangrove poduoas remain unaltered Inland poducas whose
decision rules foster sustainability ae taxed af the same rae Inland podctio
increeses to a sustainable leve after collapse of mangrove fam production, however
approximately 25 years later than in the bese simlation (figure 8). The export tax
slows resource exploitation but does not comsave mangrove resources or sisiain
yroduction.
Feehate policy
The results of the bese simulation imply that it is desirable to halt saimp faming
within the mangrove ares and to presave mangrove resouves to sian inland
shrimp production A means of accomplishing this might be to plae a tax on
mangrove sirimp farmers while not taxing inland fammeas. This, however appears to
be impracticable owning to the fact that many mangrove shrimp fame ae operating
illegally. We suggest that a form of fecbate may be a more workable solution The
feebate program would assess an export tax on the shtimp aquenilture industy and
refund the forthcoming revenues to inland produoas. As with the export tax described
above a key assumption is that the oost of the tax is pessed down from export
merchants to producers. Then the revenues are refunded to registered produces who
are operating in areas deemed suitable for shrimp farming.
Figure 10 shows the simulation results when this fechae policy is put into place a&
time 10. The fecbate involves a 20 percent tax on exports and rebeie of the tax
revenues to inland produces. We assume that 10 percent of the tax revenue is allotted
to administative costs and that thee is a oneyear delay before the iehate is
reallocated.
Figure 10. Simulation of fechate policy implemented at. time 10, Time path 1=Thai
mangrove shiimp production, time path 2=Thai inland shrimp production, time path
3=mangnove stock (hectares).
Cee Se ne aay eee
begins to dedine exponentially. Inland production increases shaply, reflecting its
costs advantage under the feebate policy. Mangrove convesion halts because the
lower price associated with the export tax is inadequate to atfact new mangove
shrimp famers. Based on the ecosystem savioes of the intact mangoves, inland
fames ae able to aain a sstaireble levd of podction smilar in volume to the
peak of mangrove production in the base simulation.
The simulation bdow is a sensitivity analysis of a range of paoantage values for the
tax. In the simulation we compare the effects of varying tax rales on mangove
eqpoitaion
Figure 11. Sensitivity analysis of mangrove stock (in hectares) to taxation with.
feebate. Time path 1=no tax, 2=5 percent, time path 3=10 percent, 4=15 percent,
5=20 peroent
Figure 11 indicates that mangrove exploitation is sensitive to taxation Only when the
tax is significant enough to give a clear oost atlvantage to the inland producers is the
feebate effective. It follows that detenvinations of the levd of agpopiale taxation
‘with feebetes should carefully consider rdative costs of production for both catagories
of strimp fames. Infonretion on shrimp faming production costs is scant (Shang,
Lang ad Ling 1998). Compadive poddio oss fo mangove ad inlad
strimp fames will be a important ine of investigation for effective implerentation
of a fechate policy.
Conclusion
cost advantage to producas with propaty rights and decision niles favouring long
tem benefits. Our moda, however does not consider the institutional challenges of
implarenting the fecbate program Some of these challenges ae reded to key
assumptions underlying the fechete policy that we have modded Inpotat
The system is taxable. We assume that exports ae registaed with govenment
authorities and, hence, can be identified for taxation Threats that would have to be
assessed include the possiility that produoas could tum to valueaked shrimp
products and escape taxation, or that exporters would tum to the domestic market
The export tax is passed down to producers. This would depend on the dative
bargaining power of the producers and the export merchants.
The sustainable producers can be identified An offical licensing or registration
system for shrimp fanns would be required Thai govemment regulations now require
that all stimp fames be registered Registered shrimp farmers have to met
requirements in tems of farm location.
‘The feebate beneficiaries believe that they will receive the rebate. Assessing fanmexs’
bdief that they will actually receive the rebele is cental to deéemining feasibility of
the progam
Without doubt the institutional challenges of implementing a feceie pogan ae
consideable and we ae not awae of ay aifempis, successful or otherwise to
implement a fecbate program to marge the ssiaindbility of a commodity system
However the ewironmental and soca oosts of the simp faming incsty have
been enonmous, and prescriptive policies have not proven successful in regulating the
industy. We believe that feebate policies may offer a effectual dtemative and
suggest that the feasibility of fecbate policies for the shimp faming insty or
similar systems would be a timay line of research.
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