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HAVBRUK2-Stort program for havbruksforskning

The Impact of Biophysical Shocks on Salmon Production, Prices, and Economic Sustainability of Norwegian Salmon Farming Firms

Alternative title: Hvordan biofysiske sjokk påvirker laksepriser, produksjonsvolum og den økonomiske bærekraften til norske laksoppdrettsbedrifter

Awarded: NOK 0.46 mill.

Project Manager:

Project Number:

338112

Project Period:

2022 - 2023

The production volume of Norwegian salmon farming has almost grown exponentially during the last decades. Meanwhile, salmon farming is a risky business due to biophysical shocks caused by climate change, sea lice, diseases/parasites, and ocean acidification, which may affect the industry’s future development and sustainability. This project aims to explore how biophysical shocks affect salmon farming firms and the industry. This project first examines the causes of ecosystem changes and how the changes lead to biophysical shocks in salmon production. We further evaluate the impact of biophysical shocks on the economic sustainability of Norwegian salmon farming firms. At the industry level, the project assesses the impact of biophysical shocks on salmon prices, production volumes, and other indicators of economic sustainability. Past research has mainly focused on the relationship between the ecosystem and sustainable development at the salmon farming industry level. This project will explore the economic sustainability at the level of individual salmon farming firms. The impact of biophysical shocks on salmon farming firms’ profitability and other financial ratios will be examined. The results of the project will be helpful in assessing the future development of the salmon farming industry. The revealed interdependence between salmon production and the coastal ecosystem will further provide policy suggestions for improving the regulatory system.

The production of farmed salmon has increased substantially during the last decades and is expected to keep growing in the future. However, the development of salmon farming depends on how well the industry responds and adapts to ecosystem shocks caused by climate change, sea lice, diseases/parasites, and ocean acidification. Such shocks affect the economic sustainability of salmon farming both at the firm and industry levels. For example, harmful algal blooms increase salmon mortality, leading to sales losses and social costs. While climate change is the primary reason for ecosystem changes, mariculture also plays a role in the changes. Few projects/studies have used firm-level accounting data to evaluate the economic sustainability of the salmon farming firms and how the industry development is affected by ecosystem disturbances. This project first examines the causes of ecosystem changes and how the changes lead to biophysical shocks in salmon production. This project further evaluates the impact of biophysical shocks due to ecosystem disturbances (e.g., global warming, harmful algal blooms, and sea lice) on the economic sustainability of Norwegian salmon farming firms. At the industry level, the project assesses the impact of biophysical shocks on salmon prices and production. We will use econometric methods and counterfactual analysis to explore the relationship between biophysical shocks and salmon prices, production, or the indicators of economic sustainability of salmon farming firms. This project sheds insight into risk management and sustainable development of the Norwegian salmon farming industry. The revealed interdependence between salmon production and the coastal ecosystem will provide context to a complete regulation system.

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Funding scheme:

HAVBRUK2-Stort program for havbruksforskning