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Thai Shrimp FarmingHow much should be taxed?

Presented by Tipparat PongthanapanichDepartment of Environmental and Business Economics

Faculty of Social Sciences, University of Southern DenmarkNiels Bohrs vej 9, DK-6700 Esbjerg, Denmark

Tel: +45 6550 4151; Fax: +45 6550 1091; E-mail: tpo@sam.sdu.dk

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SOME FACTS…

Thailand is one of the world largest producers 27% of global farm production 0.3 m ton; 32000 farms; 75000 ha Mostly intensive farms The Gulf of Thailand & Andaman Environmental tax has NOT been imposed

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IN THIS PAPER

Derive optimal corrective tax corrected for environmental problems

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IN THIS PAPER

Introduce taxation?

As an alternative instrument among others (C&C and voluntary adoptions—likely inadequated) To encourage farmers to “change”from pollutive farming (common practice) to env.friendly farming (e.g. CoC, GAPs)

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EXTERNALITIES

3 main environmental impacts of coastal shrimp farming * effect of cumulative nutrient to the sea (eutrophication) * mangrove conversion * abandoned farms

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CONCLUSION…

TAX: USD/kg G1 G2 A1 A2 Total

1. Mangrove 0.72 - 0.54 -

2. Abandoned farm 0.22 0.06 0.17 0.04

3. Discharge 0.41 0.41 - -

1+2+3 1.35 0.48 0.71 0.04

Social.opt.prod (tons)

127,545 9,496 20,682 10,055 167,778(72%)

1USD=40THB; Avg.YG=3.125 ton/ha; Avg.YA=5 ton/ha; Avg.shrimp price 4.75 USD/kg

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…CONCLUSION

TAX: USD/ha/yr G1 G2 A1 A2

1. Mangrove tax 57.26 - 69.65 -

2. Abandoned farm tax 17.51 4.93 21.29 5.48

3. Discharge tax 1,292.42 1,292.42 - -

1+2+3 1,367.19 1,297.35 90.94 5.48

1USD=40THB; Avg.YG=3.125 ton/ha; Avg.YA=5 ton/ha; Avg.shrimp price 4.75 USD/kg

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MODEL...framework

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u

v

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d

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D

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Figure 1: Trade, tax and welfare

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…MODEL

)(),(21

0

22

0

1121 NDTtndQSdQSpQpQWQQ

00,0

)(21

dtWeMax t

QQ

NQQN

2211

0)0( N^

)( NTN

s.t.

given

))(()( 2211 NQQtWH

..initial level

..D(N) exerts when N stock reaches threshold

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RESULT…

))((* )( tTev

t

vt)(*

vt)(*

vt)(*

0<t≤T T≤t<∞

1))((

11*1 /}{)( be

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*2 /}{)( b

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0

2000

4000

6000

8000

10000

12000

14000

16000

18000

t

THB/ton

μ*G

μ*A

Terminal time: TG = 30 yrs, TA = 150,696 yrs

Implies cumulative nutrient N has a negligible effect to the Andaman sea but significant to the Gulf of Thailand.

…RESULT…base case

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Socially optimal production (SOP) paths decline after T

0

20000

40000

60000

80000

100000

120000

140000

1600001 5 9 13 17 21 25 29 34 39 44 49 54 59 120

200 t

tons

Q*G1

Q*G2

Q*A1

Q*A2

…RESULT…base case

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To achieve SOP, overall productions should be reduced 20-30% of POP From where? * Farming in ex-mangrove both on G & A should be decreased in higher proportion than in outside mangrove * And production from G should be reduced more than from A

…RESULT…base case

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SOP will provide higher “net welfare” than those from POP, if steady-state tax regime is in place. SOP provides higher “net gain from trade” through times Tax revenue = 160-200 m USD/yr

…RESULTS…base case

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Numerical results are very sensitive to biogeochemical parameters (N assimilative rate, N load concentration, threshold), which could cause extremely varied the interpretation of the results On the other hand, shrimp price & env.value only affect the scale of the results

…RESULT…sensitivity analysis

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For G , the steady-state tax can be applied as indicated by the result of short terminal time. For A, the initial tax—a zero discharge tax can be applied.

DISCUSSION…

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Good farm practices should be encouraged as options for pollution management… …As the results show that, IF shrimp industry can reduce overall load concentration to at least 50% lower than the present level, then the adoption of POP could be seen as more economical as well as politically acceptable than SOP

…DISCUSSION

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“If Thai shrimp farming were taxed, would it make farmers’ behavior change?”

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THANK YOU…