The value of adapting to climate change for Norwegian salmonid aquaculture : a scenario-based analysis

Abstract

The Norwegian aquaculture industry accounts for 6.5 percent of total exports from Norway. The United Nations projects that by 2030 the world population will grow to 8.5 billion people. In order to maintain food security, the supply of fish is critical. Ectotherms such as Atlantic Salmon is highly dependent on the temperature of its surroundings. Hence, it is important to estimate what the effects of climate change will have on the Norwegian aquaculture industry. The aim of this master thesis is to analyze how changes in seasonal temperature may affect the Norwegian salmonid aquaculture industry. The existing bioeconomic theory does not consider that mortality rates for salmon is temperature dependent. The inclusion of temperature dependent mortality rates enables a more realistic estimation of how the projected changes in temperature due to climate change will affect the profitability of the Norwegian aquaculture industry. Mortality rates and price are estimated based on the empirical data obtained and used to adjust the growth model estimated by Lorentzen and Hannesson (2006) analyzing data from a controlled experiment executed by feed producers for the aquaculture industry. By analyzing different scenarios for changes to the seasonal seawater temperatures in Norway, I will estimate the value of adapting the decision variables to the changes. My findings suggest that within the range of projected changes the Norwegian aquaculture industry will benefit from changes in seasonal temperature even without it adapting to the changes. This is regardless of how temperatures are affected. For increases in average temperature between 0.5 and 4 degrees Celsius the beneficial effects ranges from 6.27 to 28.46 percent increase in the present value of all future profits. For changes to the amplitude of temperature the beneficial effect ranges from 1.34 to 8.63 percent, and for changes to both amplitude and average the effect ranges from 7.44 to 23.36 percent. By adapting to the changes, the beneficial effects of the projected changes is even higher. The best adaptation to the scenario based changes to temperature is dependent on how the temperature changes. The best response to increases in average temperature is to shorten the rotation time, which yields additional values ranging from 1.17 percent to 11.90 percent of the current value of the aquaculture industry for adapting to the projected changes. The best response to increase in amplitude is to start the rotation earlier, whilst the best response to increase in both amplitude and average is to shorten rotation and to start the rotation later.