The impact of environmental regulations on industry growth : an analysis of the Norwegian salmon farming industry

Abstract

Increasing the production of farmed salmon in Norway is an aspiration of the Norwegian government and domestic salmon farming companies. However, given the growing relevance of the environmental movement worldwide, no industry should be operated without considering the correlation between environmental externalities and industry growth. This thesis navigates through the extensive landscape of the salmon farming industry in Norway to understand the dynamic connections between environmental externalities, innovation, and industry growth. Furthermore, this thesis utilizes a qualitative approach to demonstrate why the industry deems sea lice to be the most significant negative externality and barrier to growth. The importance of ecological innovations in addressing this externality is introduced, and innovations are classified based on the public and private benefits they provide. A detailed overview of the organizations and funding involved in developing these innovations is also presented. However, the development of innovations is not enough. To achieve environmental goals, companies must adopt them. This thesis aims to understand if widespread adoption of a sustainability enhancing innovations would be possible. A simulation using game theory was conducted to predict companies' strategic behavior in response to environmental regulations. The analysis revealed that sustainability enhancing innovations that are socially desirable might not achieve widespread adoption. To overcome this, an increase in pre-competitive collaboration amongst salmon farming companies is suggested as a solution.