One instrument, two goals: Using taxation to achieve efficiency and rent capture in fisheries management

As an alternative to rights-based commons management, we illustrate how open access combined with taxes can be used to optimally structure a fishing fleet and efficiently allocate harvest across a portfolio of species between vessel groups within a static setting. Biological over-exploitation is prevented through externally imposed limits on total output. A case-study based on data from Norway’s fisheries sector is used to illustrate our tax-based framework. Greater tax flexibility brings the solution closer to the first-best outcome. If implementing a flexible tax proves challenging for social or political reasons, even less flexible taxes can capture a significant portion of the resource rent and improve the composition of inputs as a second-best alternative. The taxes are easy to administer as they are collected on first-hand delivery.