Individual Transferable Quota Management Research Articles

Conflicting perceptions of quota-based systems in Australian fisheries

Individual transferable quotas (ITQs) have been implemented in many fisheries in Australia and elsewhere, primarily in response to stock management challenges. However, unanticipated economic and social outcomes are also apparent, particularly for small-scale fishers. In December 2020, the Australian Senate initiated an Inquiry into the operations of ITQ management systems in Australian fisheries. Submissions were made by individual fishers, industry organisations, fisheries managers, research groups and others, detailing their perceptions on performance in terms of environmental, social and economic outcomes. We summarise the key points raised in the submissions, identifying areas where claims and perceptions were similar or diverse for the different groups. We find that the individual fishers who made submissions were largely negative about the impacts of ITQs in terms of all three outcome domains, whereas industry organisations and others were mostly positive overall. Social issues, particularly ownership of quota by non-fishers (i.e. investors), were flagged by most groups as a problem with the current system. Addressing these concerns with ITQ systems may be difficult. Enshrinement as user rights means that small-scale fisheries and local communities may be disadvantaged in the long-term due to past trade-offs favouring economic and ecological sustainability over social impacts.

Priced out of ownership: Quota leasing impacts on the financial performance of owner-operators

Individual transferable quotas (ITQs) have been widely promoted as a means to improve the conservation and economic outcomes of fisheries by enabling the transfer of quota access privileges to the most efficient operators who in turn have a strong financial incentive to safeguard the long-term sustainability of the fishery. The British Columbia Pacific halibut fishery has long been held up as an example of successful ITQ management. An in-depth investigation of this fishery, however, has identified significant failings of the ITQ system. The ownership profile of the fishery has changed dramatically under ITQs, transitioning from predominantly owner-operated to absentee owners and lessee fishermen. An analysis of fishing enterprise financial performance demonstrates the overwhelming impact of leasing on the viability of fishing enterprises. A representative owner-operator fishing enterprise leasing more than 80% of the quota that it fishes, which characterizes all of the owner-operators that have entered the fishery since 2001, cannot earn enough from the fishery to re-invest, including replacement of the vessel or purchasing of quota. The fishery, under current leasing and purchase price conditions, is not self-sustaining as an owner-operator fishery. Socio-economic objectives for the fishery are not being met, raising important questions about the design and implementation of ITQ management systems.

The landing obligation in view of different management regimes

The European Union adopted a landing obligation in 2015 implying that all catches of fish subject to quota management must be landed. We compare and contrast the economic consequences for fisheries of the landing obligation in view of the management system on which it is super-imposed. Four types of management are assessed: open access, shared quota, individual transferable quotas and economically optimal fishery. A standard non-linear programming bio-economic model is applied, providing illustrative numerical examples based on hypothetical parameter values. It is shown that the landing obligation has the strongest influence on both industry profitability and catch of unwanted species in the case of management with shared non-transferable quotas. In addition, the move from management with shared quotas to individual transferable quotas (ITQ) increases industry profitability and reduces unwanted catches. It is concluded that the effects of introducing the landing obligation in ITQ management systems are complex, but small.

The role of government and industry in resolving assignment problems in fisheries with individual transferable quotas

Fisheries managers often face the challenge of addressing multiple, conflicting objectives. Historically, the focus has been on biological objectives but there has been an increasing appreciation of the importance of economic and social objectives. A desire to address economic objectives has partly driven the increasing use of individual transferable quotas (ITQs). However, ITQs are insufficient to achieve the economic objectives as a suite of other decisions and regulations affect outcomes. Assignment problems are common in ITQ fisheries and can reduce economic yield. They occur through misallocation of fishing effort, particularly when there is spatial and temporal heterogeneity in the stock, leading to inefficient timing of supply and overexploitation and congestion in parts of the fishing grounds. Clubs in the form of fishing cooperatives have the capacity to resolve these problems through coordinating the fishing effort of their members. The likelihood of a single fishing cooperative forming and uniting to resolve assignment problems however, may be diminished under ITQ management due to the increasing heterogeneity in business structures, incentives and motivations among fishers generated by market-based mechanisms. This heterogeneity can also have ramifications for fishers trying to reach an agreed industry position that can be presented to government when negotiating on management changes that deal with assignment problems. In this situation, the absence of an agreed industry position should not act as an impediment to government in prioritising, articulating and taking the lead in implementing measures that reduce assignment problems and concurrently meet their overarching economic objectives.

Productivity change and fleet restructuring after transition to individual transferable quota management

Productivity change after transition to an individual transferable quota (ITQ) management system is driven by exit of some vessels, entry of other vessels, and changes in productivity of existing vessels. Generally, it is thought that an ITQ system boosts productivity due to the exit of less productive vessels. However, ITQ management systems also create an additional barrier to entry, and more productive vessels may not be able to enter the fishery. This study constructs the Färe–Primont index to measure productivity change for the Mid-Atlantic surf clam and ocean quahog fishery over a 32 year time period, which includes both pre and post-ITQ time periods. The index is then combined with a biomass change index to arrive at a measure of biomass adjusted productivity change. Results show that when biomass changes are considered, positive productivity gains occurred throughout the time period. Further examination of contributions from entering and survivor vessels show that entering vessels had little impact on aggregate productivity, but on an individual basis, they eventually were equal in productivity to survivor vessels.

The effects of fisheries management on the Icelandic demersal fish value chain

Iceland׳s fishing industry has outperformed fishing industries in neighboring countries in recent years. This paper identifies key factors in market structure in recent decades that contribute to long run profitability of the Icelandic fishing (and fish processing) industry using semi-structured interviews with industry participants, and compares those with similar results from Norway. Further, the development of profitability in the Icelandic and Norwegian demersal fishing industries is used to assess the long run effects of different management systems on quality, product focus and profitability. The results indicate that three key changes in Icelandic regulation during the 1980s were important to the development of long run profitability within the fishing industry: the abolition of export barriers, the introduction of an individual transferable quota (ITQ) system and the establishment of fish auctions. A large and growing literature supports the role of ITQs in ensuring long run profitability. The importance of market structure for profitability has only recently been identified, affecting the ability of value chains to become market oriented and supply homogenous product flow from heterogeneous raw material. Comparison with Norway indicates that while individual transferable quota management does improve profitability in fishing to a certain extent, management systems must facilitate a strong market connection from consumers, through the stages of retail and processing, to fishers for the full realization of profit potential in the fishing industry.

In pursuit of maximum economic yield in an ITQ managed lobster fishery

A bioeconomic analysis of the Tasmanian rock lobster Jasus edwardsii fishery was conducted using a length- and sex-structured population dynamics model. This model was also spatially- and temporally-structured to account for differences in costs of fishing and prices as well as differences in abundance and productivity among regions within the fishery. The current total allowable commercial catch (TACC) was found to be higher than the level that would maximise economic yield, and this left the industry vulnerable to temporal changes in productivity. Alternative pathways to lower TACCs were explored, but these had less effect on economic yield than the final TACC. The TACC did not move towards MEY through normal decision-making based on biological stock assessments despite the fishery operating under individual transferable quota (ITQ) management for over a decade. This is because industry and government have struggled to accept that economic yield and asset values could increase with lower catches. Bioeconomic analysis assisted in debate on decreasing the TACC, suggesting formal economic analysis is required for effective ITQ management.

Renegotiating property rights in the Florida golden crab fishery

The golden crab ( Chaceon fenneri ) supports a small, economically healthy fishery in south Florida. Crabbers in the fishery have successfully protected themselves against larger outside fishing interests in the past, and management has been stable for over fifteen years. Why, then, did a portion of the fleet propose shifting to individual transferable quotas (ITQs)? Our findings suggest that proponents sought ITQ management because they believed it would further limit the ability of other crabbers to enter the fishery and act as a mechanism to legally preserve the informal and formal property rights that they have previously negotiated among themselves. Opponents believed that a shift to an ITQ regime would destroy those same property rights. We explore the implications of these findings to a broader understanding of property rights and natural resource management institutions, noting that the currently existing system closely resembles a territorial use rights fishery (TURF).

Renegotiating property rights in the Florida golden crab fishery

<p class="Normal1">The golden crab (<em>Chaceon fenneri</em>) supports a small, economically healthy fishery in south Florida. Crabbers in the fishery have successfully protected themselves against larger outside fishing interests in the past, and management has been stable for over fifteen years. Why, then, did a portion of the fleet propose shifting to individual transferable quotas (ITQs)? Our findings suggest that proponents sought ITQ management because they believed it would further limit the ability of other crabbers to enter the fishery and act as a mechanism to legally preserve the informal and formal property rights that they have previously negotiated among themselves. Opponents believed that a shift to an ITQ regime would destroy those same property rights. We explore the implications of these findings to a broader understanding of property rights and natural resource management institutions, noting that the currently existing system closely resembles a territorial use rights fishery (TURF).

Productivity Change under an Individual Transferable Quota Management System

This study examines productivity change in the Mid‐Atlantic surfclam and ocean quahog fishery, which has been managed since 1990 using Individual Transferable Quotas (ITQ). Productivity change is estimated through a Malmquist index from 1981–2008, capturing change before and after implementation of the quota system. We then decompose the index to examine changes in technical efficiency, scale efficiency, and technical change. Our findings indicate that the ITQ system has not sustained gains in vessel productivity. These results are thought to be driven by spatial changes in biomass and the inability to access more productive fishing grounds.

The Effects of ITQ Management on Fishermen's Welfare when the Processing Sector is Imperfectly Competitive

In this paper we use a general model of imperfect competition to predict welfare changes within an open-access fishery transitioning to individual transferable quota (ITQ) management. Although related research has explored the effects of market power in the harvesting sector on ITQ performance, none have considered the implications of an imperfectly competitive processing sector. This study addresses this question specifically in the context of the Atlantic herring fishery, although its implications are relevant to all fisheries with similar industry structure. Our results show that ITQs could have a negative impact on fishermen's welfare when processors have market power and the cap on aggregate harvest is binding or becomes binding with the implementation of ITQs.

Modelling the economic and ecological impacts of the transition to individual transferable quotas in the multispecies US west coast groundfish trawl fleet

AbstractToft, J. E., Punt, A. E., and Little, L. R. 2011. Modelling the economic and ecological impacts of the transition to individual transferable quotas in the multispecies US west coast groundfish trawl fleet. – ICES Journal of Marine Science, 68: 1566–1579. There is a need to understand the potential impacts on ecosystems and economies from shifting fisheries management towards individual transferable quota (ITQ) programmes. Multispecies fisheries present the challenge of understanding spatial patterns in fisher behaviour as they strive to balance profitable target catches while avoiding species with low catch limits. A spatially explicit model of biological and fleet dynamics was constructed to evaluate how the limited-entry groundfish trawl fleet off the US west coast and selected groundfish species (targeted Dover sole, and overfished darkblotched rockfish) were affected by two approaches to management: trip limits and ITQs. The model includes regional populations for both species, provides biological and socio-economic outputs, and determines quota price endogenously when applied for ITQs. Under ITQ management, effort and the total landings of the overfished species, darkblotched rockfish, were lower, coastwide profits higher, and the centre of fishing activity shifted south to areas with lower landing rates of darkblotched rockfish. The framework presented holds promise for obtaining insight about how new, untested management alternatives affect coastal and marine resources and those who rely on them.

Are input controls required in individual transferable quota fisheries to address ecosystem based fisheries management objectives?

This study examined the use of Individual Transferable Quotas (ITQs) to effectively manage fishing impacts on all ecosystem components, as required under Ecosystem Based Fisheries Management (EBFM) principles. A consequence of changing from input controls to output-based (catch) management is that the control of the regulating authority tends to be reduced, which may affect the outcomes for ecosystem management. This study reviewed the use of input controls across six fishing methods in 18 ITQ fisheries, which have been independently accredited as ecologically sustainable by the Marine Stewardship Council (12 fisheries) or under Australian environmental legislation for Wildlife Trade Operation (six fisheries). Input controls were retained across a range of ITQ fisheries, with non-selective fisheries such as trawl, gillnet and line employing more input controls than selective fisheries such as purse-seine, pot/trap and dredge. Further case-studies confirmed the widespread and recent use of input controls (spatial and temporal closures) with the aim of managing ecosystem impacts of fishing. The retention of input controls, particularly closures affects the security (quality of title) characteristic of the fishing use right and the theoretical ability of fishers to manage their right for their future benefit. The security characteristic is weakened by closures through loss of access, which undermines industry trust and incentive for long-term decision making. By reducing the security of ITQs, individual fisher incentives and behaviour may separate from societal objectives for sustainability, which was one of the foremost reasons for introducing ITQ management.

Network analysis of a rock lobster quota lease market

Individual Transferable Quota (ITQ) management systems are typically introduced to promote better capital utilisation by the fishing fleet and other efficiency gains. ITQ management was introduced in the Tasmanian rock lobster industry in 1998 and led to a range of economic, social and cultural changes including an increasing proportion of the catch taken by fishers dependent on quota leasing. Quota owners who lease out their entire quota increasingly dominated ownership of the fishery. Temporal changes in lease quota trade networks and network characteristics were analysed, which showed that the lease quota trade network has become more integrated and the influence of personal connections less important. Change in the network structure of the market indicated that a smaller number of quota owners have become increasingly dominant in this market although there was no evidence that this had an effect on quota lease prices. Processors also participated in the lease quota market and influenced interactions and dependencies. In other jurisdictions processor relationships have been found to affect lease quota price developments. However, disproportionate quota ownership by processors and market manipulation did not occur here. This was due to a successful input control where quota ownership by one legal entity was capped. Because market control cannot be gained through investment in quota, another logical way of gaining it would be for processors to operate as pseudo brokers and distribute lease quota for quota owners. Although processors in Tasmania operate as pseudo brokers, the absence of structural changes in the processor market indicated that this produced no change in market power or quota owner loyalties.

Targeting ability and output controls in Australia's multi-species Northern Prawn Fishery

The degree to which individual species can be targeted will influence how quotas are set in multi-species fisheries managed through individual transferable quotas (ITQs). In this paper, a multi-output distance function is used to examine fishers' ability to control output mix in a fishery about to move to ITQ management. The parameters of the model are estimated using Bayesian techniques, with monotonicity and homogeneity conditions imposed to ensure theoretical consistency. The results suggest that the ability of fishers to change their output mix is relatively limited, and a single quota may be sufficient to control catches of the key species. Oxford University Press and Foundation for the European Review of Agricultural Economics 2010; all rights reserved. For permissions, please email journals.permissions@oxfordjournals.org, Oxford University Press.

An agent-based model for simulating trading of multi-species fisheries quota

Individual transferable quotas (ITQs) are increasingly seen as a way to make fisheries more profitable and halt over-capitalisation. ITQs allocate to users of a resource a share of a total allowable catch (TAC) which they are free to use, lease, or sell. We outline an approach to modelling the effect of an ITQ system in a multi-species, multi-sector fishery and apply it to the Coral Reef Fin Fish Fishery (CRFFF) in Queensland, Australia. An ITQ model, based on the assumption that operators seek to maximize profits, simulates the use of tradeable quota units by operators in the fishery, taking account of the initial quota allocation to operators, seasonal fish prices and individual operator variable costs, their fishing efficiency and experience, and constraints on vessel movements. Rationalization of the fishery is predicted to occur under an ITQ system for the CRFFF, which will lead to reductions in effort, increases in profits, and changes over time in quota prices. The ecological consequences of transferable quota in the multi-species fishery are seen in the catch and discard levels of the less profitable species, even though a TAC was set. This had flow-on effects on biomass. For example, simulations showed that the TAC for the primary target species, coral trout, was used more fully than that for a less valuable target species, red throat emperor, and that this was achieved through increased discarding of red throat emperor. Catches of both coral trout and red throat emperor that were derived from the model were higher than those recently observed in the fishery. The effort predicted by the model, however, closely approximated the actual effort observed in the fishery following implementation of ITQ management.

A New Zealand ITQ Fishery With an In-Season Stock Externality

This paper explores the economic performance of a fishery that operates under an individual transferable quota (ITQs) management system and that is subject to an in-season stock externality. While Boyce (1992) and others have established theoretically that ITQ management is not fully efficient under all conditions, this is the first study that empirically estimates the efficiency losses due to an in-season stock externality in an actual fishery. We study the New Zealand southern scallop fishery, which has been under ITQ management since 1992. Our analysis provides evidence of a race-to-fish in the fishery, and estimates that individual firm profits were approximately $2,300 and $2,000 (20% and 10%) less in 1996 and 1997, respectively, than they would have been under optimal management. We recommend modifications in the ITQ policy to improve the economic performance of the fishery.

Socioeconomics of Individual Transferable Quotas and Community-Based Fishery Management

In many fisheries around the world, the failures of centralized, top-down management have produced a shift toward co-management—collaboration and sharing of decision making between government and stakeholders. This trend has led to a major debate between two very different co-management approaches—community-based fishery management and market-based individual transferable quota management. This paper examines the debate over the relative merits of these models and undertakes a socioeconomic analysis of the two approaches. The paper includes (1) an analysis of differences in the structure, philosophical nature, and underlying value systems of each, including a discussion of their treatment of property rights; (2) a socioeconomic evaluation of the impacts of each system on boat owners, fishers, crew members, other fishery participants, and coastal communities, as well as the distribution of benefits and costs among fishery participants; and (3) examination of indirect economic effects that can occur through impacts on conservation and fishery sustainability. The latter relate to (a) the conservation ethic, (b) the flexibility of management, (c) the avoidance of waste, and (d) the efficiency of enforcement. The paper emphasizes the need for a broader approach to analyzing fishery management options, one that recognizes and properly assesses the diversity of choices, and that takes into account the interaction of the fishery with broader community and regional realities.

Ecologically Sustainable Fishing in Theory and Practice: Individual transferable quotas in Australia's South East Fishery

In 1988, responding to international legislation that requires sustainable fishery management, the Australian Fishery Management Authority (AFMA) implemented an individual transferable quota (ITQ) management system to address the environmental crisis in the South East Fishery. Defining sustainability in its broadest context to include social as well as economic and ecological dimensions, this paper firstly describes the environmental crisis and the South East Fishery's ITQ management system. Secondly, Christy's (1973) paper is employed as a catalyst to compare the theoretical socio-economic outcomes with the actual operation of ITQs. The brief South East Fishery experience suggests that the logic behind ITQs is correct. Production has become reorganised. Operators are not only fewer, but also embrace professionalism, quality, efficiency, and the operation of the free market within the industry. However, because of the local idiosyncrasies of this multi-species fishery, the legislation over territorial waters, and the absence of alternative employment, fishers have adopted non-quota fishing techniques and entered seas under New South Wales jurisdiction. Without a social re-adjustment policy or buy-out scheme, the AFMA's objective of ecologically sustainable development cannot be attained.

AN ANALYSIS OF TRANSITION FROM LIMITED ENTRY TO TRANSFERABLE QUOTA: NON‐MARSHALLIAN PRINCIPLES FOR FISHERIES MANAGEMENT

Static analysis shows that individual transferable quotas (ITQs) can dramatically increase economic efficiency comparable to a limited entry (LE) management by releasing excess capital. However, the transition from LE to ITQ management presents further efficiency questions. This paper shows that the rate of retirement of excess capital is determined by the opportunity cost of holding ITQ harvest rights on cost inefficient vessels. While restructuring is immediate with perfect foresight, delayed exit occurs with uncertainty and low opportunity costs of holding ITQ. Nearly cost‐efficient fishers anticipate increasing their payoff by waiting for higher ITQ prices, e.g., game theoretic principles rather than static Marshallian principles apply. The results raise policy questions about allocating ITQ to incumbent fishers at no charge. The Mid‐Atlantic surf clam and ocean quahog fishery which switched from LE to ITQ management in 1990 is analyzed as a case study. Results show that a large surplus was possible but unattained under LE management but also that adjustment has been slow and costly, consistent with the results of this paper.