106 when someone realizes monopoly rents193. Thus, economic theory is used to predict the effects of alternative policy rules. Finally, the authors argue that one with good operating characteristics is selected.
107 Production increases generally include granting of new licenses and/or an increase in the allowed MAB per existing license. The Aquaculture Act of 2005 is the act which provides the legal basis for the licenses. The act states that the Ministry of Trade, Industry and Fisheries is allowed to allocate licenses after an application have been submitted. Further, the ministry can write regulations pertaining aquaculture licenses which194
Set specific requirements and criterions to applicants
Stop or partly stop the granting of licenses in specific time periods or in geographical areas
How much, if any, the remuneration for licenses should be
Decide the number of licenses granted
Decide how much of the production capacity a single business can control
Decide the provisions that concerns alteration and withdrawal of licenses These are just some of the most important discretions the Ministry has relating to how licenses are granted, how much they cost and what requirements follows them. Note that the Aquaculture Act of 2005 also contains some general requirements which the Ministry must follow, such as ensuring that the granting of licenses is environmentally justifiable and that it follows other laws in society.
The government issued a strategy document for the aquaculture industry in 2007 with the purpose of ensuring the Norwegian salmon aquaculture industry keep its position as a leading international producer and exporter of fish. As part of the document, the government stated “A new license round will be held in 2009. Further, the government wants to grant licenses on an annual basis following the growth in the market to create predictable conditions for the industry”195. Today, six years later, it is clear that the government did not manage to follow up its statement which clearly represents the credibility problem that Kydland and Prescott found. Thus, policymakers were not able to commit to the policy statement.
194 Akvakulturloven, 2005
195 Fiskeri- og kystdepartementet, 2007, p. 21
108 The Aquaculture Act of 2005 and the history of how licenses have been granted since 2002 indicate that policy makers (the Ministry and the Directorate of Fisheries) have a high degree of discretionary power. The Aquaculture Act of 2005 is designed in a manner that opens for a lot of discretion pertaining licenses and increases or decreases in MAB, just as the bullet points above clearly indicates. Often, the ones that have managed to adapt to the Minister of Fisheries preferences have received licenses and consequently free money196.
The discretionary power of the Ministry creates uncertainty about the future growth in production volume and on what grounds this will be allowed. The green licenses granted in 2014 are a good example of the uncertainty that can be created. The Norwegian Seafood Federation stated in 2012 when the green licenses were first proposed that the term “green growth” for the green licenses were never properly defined197. The uncertainty this creates can decrease the willingness to use resources because the characteristics of “green growth” are unknown and the granting is done on a discretionary basis. Further, the Federation decided in 2010 that future growth preferably would be provided as an increase in MAB for existing licenses instead of granting of new licenses. The main reason for this was that the members felt that the grant round in 2009 created uncertainty about future growth198.
The grant round in 2009 created a lot of uncertainty about future license grants and what the criterions used to prioritize the applications should be. The two criterions in the grant round have been subject to several disputes afterwards which resulted in 38 complaints of which one ended up in court. The focus of these conflicts was tied to the fact that the criterions were unprecise. The license criterions were to prioritize firms which were either
Small and medium (1 – 19 licenses)
Or if the firm would facilitate increased processing with the aim of increased economic activity in coastal districts.
196 St. Meld nr 16, 2015, p. 4
197 Norwegian Seafood Federation, 2013
198 Norwegian Seafood Federation, 2013
109 Most of the controversy was tied to the second criterion regarding facilitation of increased processing. The term “processing” were supposed to be interpreted widely and include slaughtering, secondary processing and other processing199. Further, secondary processing was defined as processing beyond slaughtering and was given more weight than just
slaughtering. In addition, there was no demand that the applicant had to own the business that was going to perform the processing. The offices evaluating the applications were instructed to add weight to probability and documentation of the processing plans200. The Ministry wrote in the regulation concerning the license round that terms that contribute to ensuring that the criterions set forth in the round are complied with can be adopted201. However, the Directorate of Fisheries did not provide any guidelines to introduce such terms. Therefore, the
Directorate’s of fisheries regional offices did not implement them202. Thus, firms with plans that looked good on paper were prioritized with no obligation of actually following through on the plans.
The government issued White Paper no. 16 with the title “Predictable and environmentally sustainable growth in Norwegian salmon- and trout farming” that was presented to the Parliament in March 2015. The paper concerned the topic of how consistent and predictable growth combined with environmental concerns can be achieved in the future. Professor Atle Guttormsen at the Norwegian University of Life Sciences wrote a comment in the white paper called “The value of predictability” where he uses Kydland and Prescott’s work to argue that the way policies and regulations have been implemented up till now can lead to
misalignments in the industry. Investments in new technology and R&D have a high risk as emphasized in section 5.3.6. The industry is dependent on investments in R&D to overcome the challenges it faces and inconsistent policymaking increases the overall risk. Economic actors will always weigh the risk against the possible return, and mismatches in this relationship can lead to wrong investments or no investment at all.
199 Andreassen & Robertsen, 2014, p. 7
200 Andreassen & Robertsen, 2014, p. 7
201 Forskrift om løyve til havbruk med matfisk, 2009
202 Andreassen & Robertsen, 2014, p. 10
110 Kydland and Prescott found that a policy environment where policymakers have the
discretion to at each point freely choose the optimum at that time inevitably creates a
suboptimal outcome. The analysis above has revealed that the Norwegian policymakers (the Ministry) have a great deal of discretionary power and instruments to use. The analysis and selected aspects above leads to the conclusion that the policymaking with regard to
production increases have been far from satisfactory. The industry faces uncertainty about future growth and how this growth will be facilitated. The uncertainty relates to when licenses will be granted, how they will be granted, requirement for being awarded a license and how the price of the license should be set.
111