Norwegian salmon aquaculture faces rising biological and financial risks as sea surface tempera- tures (SSTs) increase. Salmon lice, growth variability, and high mortality jointly affect profitability and complicate harvesting decisions. Existing models typically treat these factors in isolation and deterministically, limiting their policy and investment relevance. To address this gap, we develop a bio-economic model integrating interdependent biological and abiotic variables, yielding valua- tions and managerial insights under various climate scenarios. We model the farming cycle as an optimal stopping problem using a stochastic process simulating SST variability. Biological fac- tors such as growth rates, mortality, and lice dynamics are modeled as interdependent stochastic functions of SST, and are calibrated with national farm-level data. We solve the optimal harvesting problem numerically across climate scenarios and varying production conditions.
Our results indicate significant spatial variation in both economic outcomes and managerial decision-making under projected climate change. Specifically, northern and central regions of Norway, e.g., production areas (PAs) 8 and 11, exhibit improved salmon growth rates and increased profitability, while southern sites (PAs 2 and 5) face growth stagnation and higher mortality risk. Cumulative mortality is projected to exceed 60% under extreme warming in south- ern regions, with large uncertainty ranges that complicate financial planning. Disease-related mortality rises across scenarios, underscoring the need for countermeasures. Lice costs decline in southern areas due to higher mortality, though at the expense of fish welfare, whereas northern farms face stronger lice pressure but still achieve higher profitability.
Across all climate scenarios, farms tend to har- vest earlier. We find that farms that adopt adap- tive harvesting schedules achieve substantial economic gains, with flexible strategies yielding up to a 4.8% increase in valuation per cycle. In PA 2, the 95th percentile Value-at-Risk declines by roughly one-third between current and ex- treme climate scenarios, indicating that although average profitability remains positive, the likeli-
hood of financially fragile outcomes increases.