The elephant in the room: The hidden costs of leasing individual transferable fishing quotas

Despite the increasingly positive reviews of individual transferable quotas (ITQs), few studies have considered how quota leasing activities can reduce the economic benefits to society and to fishermen operating under the ITQ fisheries system. This analysis reveals negative economic impacts of ITQs previously overlooked by examining the extent of quota leasing and the relationship between the catch value, the cost of fishing, and the quota lease price in the BC halibut fishery, long considered a poster child for ITQs. Findings challenge assumptions of economic theory used to promote the benefits of ITQs.     

A rejoinder to E. Pinkerton et al., the elephant in the room: The hidden costs of leasing individual transferable fishing quotas

The purpose of this rejoinder is to respond to and question the many assertions made by Pinkerton et al. in the recently published Marine Policy article entitled: “The elephant in the room: The hidden costs of leasing individual transferable fishing quotas”. Particular attention is paid to the assertion that 79% of the British Columbia Pacific halibut TAC is being leased out by “armchair fishermen”. The rejoinder also discusses how ITQs, when used with other fishery management tools, such as catch monitoring, creates incentives that align more closely the fishermen harvesting behaviour and practices with the objectives of the resource manager.     

Using individual transferable quotas (ITQs) to achieve social policy objectives: A proposed intervention

ITQs offer environmental and economic benefits, including better conservation of a fish stock and greater profitability for fishers. With some limitations, they achieve fairly good alignment between the profit incentive and stewardship objectives. Nevertheless, critics have objected to ITQ schemes because of such factors as the “armchair fishing” phenomenon, unfairness to the public (the owner of the fish), economic and social damage to remote communities, and increased concentration within the fishery. Economists generally dismiss these as distributional issues rather than matters of efficiency or economics, but economic principles are clearly not the only factors that may require attention or action from a government or regulator. This paper proposes an intervention that addresses these concerns within the context of an ITQ scheme. The intervention does not reduce the permanence or values of ITQs, and therefore retains the benefits that ITQs are designed to deliver. Nevertheless, the intervention addresses the criticisms identified above. Modifications of the intervention may enable additional goals and benefits to be achieved as well.     

Ex ante evaluation of the costs and benefits of individual transferable quotas: A case-study of seven Australian commonwealth fisheries

Individual transferable quotas (ITQs) have been introduced in a number of different countries, including Australia. Using seven Australian commonwealth fisheries the paper undertakes an ex ante cost–benefit analysis whether to introduce ITQs into these fisheries. The analysis uses five cost–benefit criteria, and in particular the gross value of production (GVP), to evaluate whether ITQs should be introduced or not. For fisheries where the net benefits do not currently justify ITQs, a pathway is provided to improve management outcomes with the use of individual transferable efforts units (ITEs).     

Lesser-known consequences of managing marine fisheries using individual transferable quotas

Managing marine fisheries using output controls in the form of individual transferable quotas (ITQs) can be an attractive alternative to more traditional input controls. There are now a number of examples of where ITQ-managed fisheries have been able to reduce the impact of the major management problems in global fisheries, namely, gross over-capitalisation and effort. However, ITQs are not the perfect management tool and one of the lesser known consequences of ITQ-managed fisheries where ITQs consist of a harvest right is the implicit relationship between ITQ property rights and rights of access to the fishing grounds. This implicit spatial right to the grounds can provide obstacles in the way of allocating water-space within fishing grounds for alternative uses such as marine-protected areas, large-scale aquaculture, and wind farms. These lesser-known consequences of ITQ-managed fisheries are discussed here.     

The economics of the Swedish individual transferable quota system: Experiences and policy implications

Sweden and other European Union countries are currently carrying out extensive work aimed at improving the marine and freshwater environment. The adaptive management approaches typically used for this require the development of new policy instruments and measures when needed, but also evaluations of instruments and measures already in use or under way. This paper reports on a study of the Swedish individual transferable quota system introduced in 2009 for the pelagic fishery. The new system was motivated mainly by economic arguments and, thus, the need to get incentives right. Despite this, the design of the Swedish system weakened the intended incentive effects in several ways, compared with the foreign systems that served as models. Moreover, the information needed for future evaluations was not collected, even though the need for future evaluations had been expressed explicitly and the data needs for this could be identified at the time that the system was introduced.     

Individual transferable quotas versus auctioned seasonal quotas: An experimental investigation

Fishery policies have largely developed in response to revealed problems with existing policy instruments. The last major innovation is the introduction of individual transferable quotas, ITQs. Experience thus far is promising. However, if history repeats itself, it is pertinent to start exploring further improvements. Among other things, concerns may be raised about the efficiency of ITQs, financial risks to owners of quotas and fishing vessels, and problems with fairness and collection of resource rent. These issues are studied with a laboratory experiment. Different from previous experiments it allows for trade of both quotas and vessels. In addition, the experiment tests an alternative institutional arrangement, namely auctioned seasonal quotas, ASQs. Neither of the two systems turns out to be as perfect as economic theory predicts. While the two systems are similar in some respects, the ASQ system allows for taxation of resource rent, and surprisingly, it may be the system with the lowest financial risk for fishing firms.     

Fisher's behaviour with individual vessel quotas—Over-capacity and potential rent: Five case studies

Internationally, individual vessel quotas (IVQ) have become an increasingly popular management tool. The main attraction of IVQs is the incentives they create for cost savings, autonomous capacity adjustment and, subsequently, rent generation. In this paper, the extent to which different IVQ systems have facilitated resource rent generation and capacity adjustment in five European countries—Denmark, Iceland, Norway, Sweden and the UK—is examined. The potential economic rents and the capacity reduction necessary to achieve these rents in each of the fisheries are also estimated. Reasons why IVQs have not achieved their potential economic benefits in these fisheries are also examined.     

Free form property rights for fisheries: The decentralized design of rights-based management through groundfish “sectors” in New England

Harvest cooperatives were implemented in several US fisheries over the last decade during a period when US law prohibited implementation of any new individual fishery quota (IFQ) systems. Harvest cooperatives provided an alternative to individual quotas as a means to end the race for fish and increase fishery profitability. The prohibition on new IFQ systems in the US was lifted, but harvest cooperatives remain a more feasible and perhaps a superior alternative to IFQs for some fisheries. The New England Fishery Management Council is on the verge of implementing a new management system for the groundfish fishery based on harvest cooperatives known as “sectors”. This paper describes the New England sector management system and discusses a number of advantages but also some drawbacks relative to IFQs. It argues that a hybrid of the two approaches could have advantages over either.     

Development in fleet fishing capacity in rights based fisheries

Individual Transferable Quota (ITQ) fisheries management systems are supposed to remedy the over-capacity problem associated with traditional command-and-control management systems. This paper provides some insight with respect to the impact of ITQs on vessel numbers in six different countries. The results indicate that the number of vessels was reduced by at least 30% within a few years of the implementation of individual vessel quotas. Thereafter a slow reduction in vessel numbers continued, indicating that it may take time period before over-capacity is fully removed. Moreover, the total effect on vessel numbers is surprisingly similar across countries and fisheries despite different degrees of transferability in the different cases analysed.     

Individual transferable quotas in Argentina: Policy and performance

The purpose of the article is to describe the Argentine ITQ system during the early years after the initial allocation in 2009 and introduce the Argentine case in the discussion on ITQs. This paper has been elaborated based on statistical information derived from fleet and catch data of the Fishing Log System of the Undersecretariat of Fisheries and Acquaculture and Management Reports on the Individual Transferable Quotas regime. The implementation of the Argentine ITQs regime took into account issues learned from other countries and from the theoretical debate about the pros and cons of the ITQ system. The Argentine ITQ regime introduced enough flexibility to dismiss the disadvantages of this system pointed out in other international experiences.     

Stakeholder perceptions of the northern Gulf of Mexico grouper and tilefish individual fishing quota program

The Gulf of Mexico Fishery Management Council determined that previous management of the grouper and tilefish fisheries in the northern Gulf of Mexico were not meeting management goals, and developed a catch shares program using individual fishing quotas (IFQs) beginning in January 2010 in order to more effectively manage these fisheries. An IFQ is a management method in which individual fishers and corporations are allocated the right to harvest a percentage of a fishery's total allowable catch, thus specifying how much of a particular species each fisher can harvest. This study makes use of a mail out survey to document the perceptions of fishers, seafood wholesalers, fisheries managers, and academics with an interest in the (northern) Gulf of Mexico grouper and tilefish IFQ program. While fishers, seafood dealers, fisheries managers, and academics all acknowledge that the IFQ program will create some problems, commercial fishers and dealers were far more skeptical of the alleged benefits of IFQs. Moreover, larger commercial operators were more inclined to agree with managers and academics that the IFQ program will produce several benefits for their operations and the fisheries. Some smaller operators believe that they will be driven to ignore the new rules or be forced out of business. In the future, the Gulf Council might do two things: put a bit more effort into making fishers aware of the potential benefits of IFQs, and develop alternatives with more flexibility perhaps working more closely with communities of fishers, who prize their independent way of life above all else.     

Perceptions and preferences of commercial fishers for dedicated access privilege framework in a multispecies fishery

The decline of the world's fisheries and the inability of traditional management frameworks to maintain them, has led managers to adopt alternative management frameworks. The use of dedicated access privileges have often been shown to have varying popularity among factions within the commercial fishing industry and managers. Here, we examine commercial fishers' preference for alternative management frameworks in the context of a unique multispecies fisheries of the Florida Keys. By surveying commercial fishers, we find that that the size of operation plays no role in affecting fisher perception regarding dedicated access privileges. Furthermore, fishers who are organized are less likely to support dedicated access privilege frameworks. Overall, we do not find enough support in the fishing industry for the implementation of dedicated access privileges in the Florida Keys. These findings can provide inputs in developing effective management plans in the region.     

Beyond individual quotas: The role of trust and cooperation in promoting stewardship of five Australian abalone fisheries

Private property rights, such as individual transferable quotas, are thought to encourage fishers to act as resource stewards. To achieve this, however, fishers must be able to cooperate with each other. This paper examines the relationship between trust, cooperation and stewardship in five abalone (Haliotis) fisheries in southeastern Australia. Industry-led resource management initiatives are used as indicators of stewardship, sometimes including substantial sacrifice of catch quota. Higher levels of trust and cooperative capacity enabled greater levels of industry-based resource management in four of the five fisheries. In one case, however, high levels of trust and cooperative capacity did not translate into associated levels of resource management. It is suggested that additional factors, such as perceptions of resource condition, are key determinants of resource stewardship. Private property rights may, therefore, be less important than previously argued.     

New Zealand seafood firm competitiveness in export markets: The role of the quota management system and aquaculture legislation

New Zealand's quota management system (QMS) was implemented in 1986 to address problems caused by a regulated open entry management system in place for the previous two decades. Excess capacity in the inshore fisheries caused several stocks to become depleted and conflicts to intensify between fishing sectors. The allocation of individual transferable quota (ITQ) was viewed as the best way to improve efficiency within the over-capitalised inshore fisheries and provide incentives for developing the deepwater fisheries. The expected benefits of the QMS fit with the political climate at that time, as the government was using market forces to address the deteriorating economy. This article outlines the results of a research project that involved four medium to large-sized, highly vertically integrated New Zealand seafood firms. The purpose of the project was to identify these firms’ sources of competitiveness in export markets and the process the firms used to develop sources of competitiveness, while adapting to rapid and radical changes to the political and business environment and transformation of the fisheries management system. The project's results show that the basis to seafood firm competitiveness is the security of supply to the fisheries resource provided by the QMS and aquaculture legislation. The project also outlines the role that government policies have in sustaining firm- and industry-level competitiveness. This article contributes to the broader discussion on the application of ITQ and other types of long-term access rights to the management of fisheries and does not express the views of the Ministry of Fisheries.     

ITQs under illegal fishing: An application to the red shrimp fishery in Chile

We study an individual transferable quota system with imperfect enforcement. We apply a model of individual fisherman behavior to the red shrimp (Pleuroncodes monodon) fishery in central-southern Chile. Simulation results suggest that illegal fishing could generate a 21% increase in fishing effort, resulting in a 13% increase in catch and a 2% lower quota price in comparison with the results of a system that operates under perfect compliance. The results are sensitive to changes in the level of fish abundance, total allowable catch, and the design of enforcement to induce compliance.     

The economics of ending Canada's commercial harp seal hunt

The roots of the Canadian harp seal hunt can be traced to the 16th Century. But in the mid-20th century, opposition to the commercial hunt became widespread after television images of seal pups being killed with clubs on the pack ice off the coast of Newfoundland were broadcast around the world. International conservation groups, animal welfare groups, animal rights groups, and foreign governments have been calling for the Canadian government to end the commercial seal hunt on the grounds that it is inhumane and that harvest levels are unsustainable. The Canadian government defends the traditional practices of hunting harp seals, argues that seal pelts are an important source of income for sealers, and insists that the killing methods are humane and that harvest levels are sustainable. Emotions run high on both sides of the debate. The purpose of this paper is to evaluate whether or not there is a purely economic argument for ending Canada's commercial seal hunt. The paper finds that the benefits of ending the commercial hunt exceed the costs, but not unequivocally. However, the paper argues there should be a higher criterion—the Pareto criterion—for ending the commercial hunt; that is the hunt should end only if winners compensate the losers. The paper goes on to argue that an effective way to satisfy this criterion is to introduce a system of individual transferable quotas (ITQs) and let the market reveal the value of the commercial seal hunt. In addition to many other advantages such as improving the safety and efficiency of the hunt, the ITQ market could provide a mechanism by which those willing to pay to end the hunt could do so directly to sealers thereby ensuring that the hunt is scaled back or ultimately ended only when it is economically efficient and unambiguously welfare-improving.     

Economic gains from introducing international ITQs—The case of the mackerel and herring fisheries in the Northeast Atlantic

Achieving a balance between fishing capacity and fishing opportunities is one of the major challenges in European fisheries. One way to achieve this is to introduce individual tradable quotas or similar management measures. In several mackerel and herring fisheries in the Northeast Atlantic, such systems have already been introduced on a national basis and the long term economic gains of this have been acknowledged. This paper takes this a step further and investigates the potential economic gains from introducing individual tradable quotas between countries. Overall, the results show that the gross cash flow can be improved by 21% by allowing the mackerel and herring quotas to be traded internationally in the Northeast Atlantic. This rent gain arises mainly from increased productivity by allowing tradability between areas and fleets. The analysis also shows that the Danish pelagic fleet will gain from increasing its share of mackerel and herring quotas, whereas the Irish fleets are incentivised to sell quota, if individual quotas are allowed to be traded among countries. This result is in line with the qualitative analyses that show that Irish fishermen targeting herring in the Celtic Sea are negatively oriented towards international individual tradable quotas, whereas the Danish pelagic fishermen have strong preferences for international individual tradable quotas.     

Into the scrap iron business: Transaction costs for fleet sustainability in Norway

For decades the need to reduce surplus fishing capacity has been a fisheries political priority. While decommissioning schemes (buyback programs) usually is a publicly financed measure to reduce capacity, the Norwegian decommissioning scheme is privately financed. Whereas market-based transactions are assumed to lead to cost free adaptations, the Norwegian version reflects public policy aims which impose severe transaction costs on private actors. This article examines the use of market mechanisms for fleet capacity reduction, how private actors adapted to the new order, and the transfer of quota transaction costs from the public to the private sphere.