Fishermen on the Waikato are apparently going to be subjected to an environmental levy on their earnings by the iwi who own the river. The newspaper article seems a bit negative about the scheme and I can’t see why. To me this is a great idea on a number of levels. I just hope that the levy is a tax, rather than a one off charge.
First, fishing almost always imposes externalities on people and ecosystems. At the very least, the commercial value of the fish (eels here) is less than the social valuation, because it doesn’t take into account the value people place on having a river full of fish. A tax on fishing would be a great way to internalise those problems and reduce the level of fishing to the socially optimal level.
I realise that there are already quotas on fishing but these only aim to maintain a sustainable population, not reduce fishing to an optimal level. However, it would be good to have some knowledge of where that optimal level is relative to the maximum sustainable level. Having two control systems operating concurrently on the same activity, and managed by different groups, is probably unlikely to lead to an optimal outcome.
Secondly, the money will be used to fund environmental improvement projects. With the money being reinvested in the lake environment, the lake might be able to sustain a higher level of fish recruitment and permit a lower tax rate than would otherwise be possible. It’s fortuitous that the iwi seems to have a similar objective to the government in controlling and managing usage of the lake. Indeed, the Department of Conservation supports the tax scheme.
Finally, it’s great to see the Coase theorem in action. Giving property rights in the lake to a private party — the iwi — has resulted in a transfer between the fishermen and the iwi which prevents a tragedy of the commons and degradation of the lake environment. In this case the iwi’s ownership of the rights has resulted in them garnering the surplus from trade, but it could equally have been the other way around if the fishermen had the rights and iwi had to pay them to reduce their fishing.