Salmon Lice. The effect on Reputation, Economics and Industry Development

During the last decade, salmon lice has been the salmon aquaculture industry's largest environmental challenge together with escapes, and it constitutes the most significant barrier to further production growth. Salmon lice influence the governance structure in a number of ways, where the direct impact on the production cost, the development of the regulatory structure, access to production sites and a poorer reputation is among the most important. In this project, we investigate effects of these factors. The direct cost effect is investigated using Havbruksdata, a data set where biophysical and economic variables including lice count are recorded at the farm level monthly. This allows us to empirically measure the effect of salmon lice and treatment on biomass growth. These costs are significant as they can make up to 13% of a farm's turn over. Using harvesting models which include interaction terms that account for influences between farms, we can simulate the effect of various regulatory schemes. Good regulations can significantly reduce lice costs. There are indications that small farmers will benefit more from a stronger regulator that coordinate actions than larger companies. However, there are also important elements in the current regulations that is productivity reducing, and that do not provide incentives for farmers that satisfy the environmental criterions to continue to improve. An analysis of media coverage's impact on the demand for salmon indicates that the focus on diseases and negative environmental effect has not influenced the reputation of salmon to such an extent that there has been a negative shift in demand. There are accordingly no indications that consumers provide incentives for the industry to reduce environmental effects through their purchasing behavior.

The main objective of this project is, from a social science perspective, to obtain a better understand of the consequences of increased prevalence and attention to the salmon lice in the salmon farming industry. For the industry, the salmon lice have a s eries of consequenses, the salmon grow slower and feed conversion rate as well as mortality increases. In addition increased lice population might lead to possible regulatory changes and even restrictions in future industry growth. We will estimate the co sts related to these issues at the plant level. With the strong media attention on the issue, the industry's reputation has been challenged and there are numerous calls for stronger regulations and reduced access to production locations, possibly influenc ing the future viability of the industry. We will therefore also model and estimate the effect of a weaker reputation via a reduced demand for salmon and tighter regulations at the industry level. The project will be carried out in close interaction with the PrevenT project, a project that focus on reduction and treatment of salmon lice from a biological perspective. Hence, the project will estimate the reputation and economic consequences also of the different recommendations and treatments based on this project. Combined, this gives the opportunity to get a holistic perspective on an issue that has strong biological components as well as important societal and economic effects. The models developed will enable us to simulate consequences, benefits and c ost of different treatments and regulatory measures, providing support in the process of how to handle an important issue in the most efficient way when addressing industry as well as societal concerns.