Individual Transferable Quotas in Fisheries

Abstract

To overcome the common property problem in ocean fisheries, individual transferable quotas (ITQs) have been extensively and increasingly used by fishing nations around the world. ITQs are property rights in harvest volume. To the extent that these rights are long lasting, secure, exclusive, and tradable, they allow individual fishers to achieve full dynamic efficiency in their own operations and, moreover, provide them with significant incentives to cooperate with other fishers to organize overall fishing from the ecosystem, so as to maximize joint profits over time. Importantly, these benefits should be reflected in the market value of the ITQ rights, which owing to trading should equal the present value of future profits from using the ITQ rights for fishing. Experience from numerous ITQ-managed fisheries around the world largely confirms these theoretical predictions. Under ITQs, profitability of fishing has invariably greatly improved, the ITQ rights have generally become highly valuable and the long trend of declining fish stocks is usually halted and often reversed. Encouraged by this, ITQs have been adopted by fishing nations at an increasing rate. Currently, close to 25% of the global ocean catch is taken under ITQs or ITQ-like systems.