Individual Transferable Quotas Research Articles

Economic gains from individual fishing quotas: The Norwegian coastal groundfish fisheries

AbstractMany rights‐based systems in fisheries use individual fishing quotas (IFQs) that allocate shares of total allowable catch to individual fishers, vessels, or groups of fishers. We analyze the performance of IFQs in the Norwegian coastal groundfish fisheries that substantially limit transferability. We use data from two similar fishing groups that were treated with different management. Difference‐in‐differences results show that IFQs increase productivity and prices for some of the main groundfish species. Results suggest that expected productivity gains and price gains from first‐best rights‐based policies that create highly transferable IFQs can result from second‐best policies that substantially limit transferability.

Discretion rather than rules in multiple-species fisheries

This paper evaluates the bioeconomic performance of individual fishing quota (IFQ) regulations in multiple-species fisheries. In our model, a manager chooses the aggregate quotas under uncertainty over the true stock abundances of two jointly-harvested fish species. Fishers conduct harvest operations under full knowledge of the species-specific productivities of fishing gear. We derive the profit maximizing fishing mortality and economic rent outcomes implemented by fishers under various regulatory designs. We compare bioeconomic performance of an IFQ regulation with discretion over the mix of harvested species against an IFQ regulation that bans at-sea discarding. Both regulations eliminate discards. Discretion allows closer alignment between fisher implemented outcomes and those that maximize long term expected fishery value. Incorporating discretion into regulatory designs provides new prospects for improving fisheries management.

Measuring Quality of Property Rights: Development of User Rights Quality in the Icelandic Fisheries

Strong user rights in fisheries are fundamental drivers of efficiency and profitability in the utilization of those resources. These user rights refer to the rights of fishers to harvest from fish stocks. The rights can be weak, or they can be strong, in terms of security, duration, exclusivity, and transferability. For this a definition of and a measure of the strength of user rights is needed, which we present in the property rights quality index, so-called Q-measure. By strong user rights in fisheries, we mean fishing rights that score highly on the quality of property rights, or Q-measure. Weak user rights are fishing rights that score low on the quality of property rights. We then explain how this approach can be applied to analyze and score the quality of actual user rights in fisheries. This we do first by relating the characteristics of property rights to harvesting rights or vessel quota systems in fisheries and we then look at the case of Iceland which implemented an individual transferable quota system in its fisheries in the latter half of the 20th century. We recount the story of the implementation and score the different property rights attributes. We then relate this to the change in performance of the fisheries by comparing the quality score to the economic value of the fishing quotas, and indirectly to the profitability of the fisheries. It turns out that there is a high correlation between the quality score and the value of the quotas.

Are Greenland’s inshore halibut fishers ready for individual transferable quotas?

Fisheries policy that is comprehensible and agreeable to fishers is a cornerstone of democratic and inclusive governance of living marine resources. However, policy designers struggle to systematically include diverse perspectives and they may not understand the breadth and depth of fishers’ knowledge about fisheries management and conservation. Failing to anticipate how reforms to management plans are received can spur policy rejection, distrust, and foster noncompliance. Knowing fishers’ knowledge of, inclination toward, and vulnerability to proposed changes can help fishery managers design and implement inclusive and forward-thinking fishery management plans. In a representative survey of Greenland’s inshore halibut fishers, we asked about current and proposed changes to the management of fisheries. From a response pool of experienced fishers, we found little to no knowledge about individual transferable quota programs, little to no inclination for or against these proposed changes, and a wide range of levels of vulnerability in the face of potentially curtailed access to fishery resources. Results suggest that fishers and fishery decision makers must increase the exchange of technical knowledge in understandable terms for Greenland’s fisheries policy to achieve sustainability outcomes and to secure small-scale fisheries livelihoods. We recommend that policy makers increase outreach efforts to show fishers “under the hood”, provide clear and accessible information, and seek suggestions and comments from fishers regarding proposed changes to the status quo. We further suggest that analysts conduct a transparent management strategy evaluation to model potential outcomes arising from any revised fishery management plan, fishing communities, and in turn, for Greenland’s entire small-scale fishing segment.

The Transitional Gains Trap in Grandfathered Individual Transferable Quota Fisheries

Trade in freely granted individual rights has been speculated to gradually reduce the political feasibility of reallocation, as the initial recipients who enjoy windfall profits are replaced by rights holders who purchased their rights and would unfairly become loss-making if the rights were subsequently reallocated. This hypothesis, sometimes referred to as a Transitional Gains Trap, may be relevant when evaluating alternative methods of allocating rights. This paper presents a potential indicator for investigating the Transitional Gains Trap in grandfathered individual transferable quota fisheries, based on the cumulative amount invested in quota after allowing for offsetting windfall profits, relative to the total value of all quota. The indicator ranges between 0% and 100%, with higher values indicating more net investment and a greater threat of a Transitional Gains Trap. Illustrative calculations for Iceland's ITQ system, introduced in 1991, yield a value of 29% by 2016, suggesting that the Transitional Gains Trap is not a major constraint, although the results vary by species and are sensitive to assumptions. Finally, the indicator is shown to decrease over time under certain conditions, implying that the potential relevance of the Transitional Gains Trap is context-specific.

Efficiency of a common natural forest exploitation by the system of individual transferable quotas with overlapping generations, capital, and monetary inheritance

This article focuses on the economic analysis of the exploitation of a renewable natural resource in common property, namely forests. In the Sahelian zone of West Africa with little forest cover, these natural assets are exposed to overexploitation despite the participation system established as a mode of their management for more than three decades. Thus, another mode of management is necessary to avoid the extinction of forests in certain countries like Niger to continue to benefit from the countless services that they provide. This paper proposes another mode of management by analyzing the effectiveness of the operating system through free distribution of transferable individual quotas with overlapping generations, capital, and monetary inheritance. From a general equilibrium model, the resolutions of the optimization programs using the Lagrangian show that the system in question provides the conditions for optimal management of the forest in common property. Moreover, it allows for an intergenerational transmission of renewable natural resources without any other incentive instrument such as taxes or subsidies despite the non-cooperative behavior of the actors.

Youth and newcomers in Icelandic fisheries: opportunities and obstacles

Privatized fishery management schemes, alongside other cultural and social changes, have led to a high average age in some fisheries, where youth and newcomers are not meaningfully present in the industry. This research explored the current and future opportunities and constraints for youth and newcomers in Icelandic fisheries, which are managed by an Individual Transferable Quota system. Data were collected through participant observation and 25 semi-structured interviews with key individuals in fisheries. Inductive qualitative analysis of interview data determined recurrent themes that illustrate how rural outmigration, cost, and changing social expectations have led to a decrease of youth and newcomers in Icelandic fisheries. Results show that the perception of fishers in Iceland by the general society fluctuates as the economic and cultural climate of the country changes. The ageing of the fleet in small-scale fisheries is explained by the limited access to consolidated fisheries rights, and the inability for youth to secure capital and invest in a fishery operation. Large-scale fisheries, on the other hand, have a different set of barriers for youth, such as lack of career advancement opportunities and a heavy workload. This research also documents how the absence of youth in small-scale fisheries is partially linked to a high turnover of youth in large-scale fisheries. Youth have more opportunities in large-scale fisheries, but over time, they do not receive adequate training or support to further an independent career, thereby creating a negative feedback loop leading to further reduction of recruitment in small-scale fisheries. Findings from the study support the continued call from academics and practitioners to include issues of access for newcomers in fishery management goals.

Quantifying the economic effects of different fishery management regimes in two otherwise similar fisheries.

In the southeast U.S., two very similar fisheries are managed by very different management regimes. In the Gulf of Mexico Reef Fish fishery, all major species are managed by individual transferable quotas (ITQs). The neighboring S. Atlantic Snapper-Grouper fishery continues to be managed by traditional regulations such as vessel trip-limits and closed seasons. Using detailed landings and revenue data from logbooks together with trip-level and annual, vessel-level economic survey data, we develop financial statements for each fishery to estimate cost structures, profits, and resource rent. By comparing the two fisheries from an economic perspective, we illustrate the detrimental effects of the regulatory measures on the S. Atlantic Snapper-Grouper fishery and quantify the difference in economic outcomes, including estimating the difference in resource rent. We find that the choice of fishery management regime shows up as a regime shift in the productivity and profitability of the fisheries. The ITQ fishery generates substantially more resource rents than the traditionally managed fishery; the difference is a large fraction of revenue (~30%). In the S. Atlantic Snapper-Grouper fishery, the potential value of the resource has almost completely dissipated via lower ex-vessel prices and hundreds of thousands of gallons of wasted fuel. Excess use of labor is a lesser issue.

Integration or separation? The future of the English small-scale coastal fishery

The decline of inshore or small-scale coastal fisheries (SSCF) in many countries across the world has been well-documented in major studies published during the last 10 years. Researchers report decreasing stocks of marketable fish, inadequate fish quota allocations, and virtual exclusion from fisheries management decision-making bodies. The situation in England is a case in point, where many SSCF are subject to these pressures to the point that their livelihoods are threatened. A recent initiative sponsored by an industry agency to safeguard the position of the inshore sector aims to protect SSCF in England from decline and possible extinction by integrating it into the mainstream fishing industry and ensuring its representation on a proposed co-management body which would share decision-making between industry and government. However, drawing on the literature, archival documents, newspaper articles, and personal communications, we conclude that integrating all parts of the fleet together and setting up shared co-management arrangements is not a guarantee of SSCF survival because integration would tie SSCF down to the agenda of the large-scale fisheries (LSF) sector with no certainty that the special needs of SSCF would be met if they conflicted with the interests of LSF. Instead, our findings lead us to recommend forging a separatist path for SSCF, recognising its distinctive identity as an inshore fishery closely connected with coastal communities. We propose, therefore, two independent fisheries each with its own mode of management: SSCF governed by a regime of community quotas and exclusive spatial access to inshore waters; and LSF governed by a regime of individual transferable quotas (ITQs).

Appropriation of economic values in a rights-based fishery

This study integrates resource-based and stakeholder theories to explore how values are generated and appropriated in a rights-based fishery. We argue that in the fish harvesting industry, a firm's ability to create values is critically dependent on stakeholders outside the firm's boundaries, such as society in general (the principal owner of the natural resource) and the fisheries management of the government. The latter protects the resource from being overfished, and it decides who will get the rights to fish. The empirical context is the seagoing Norwegian purse seine fleet, which has gradually created significant values relative to revenues through the 32-year study period (1985–2016). Specifically, the value appropriation between key stakeholders under a stepwise, more liberalized individual transferable quota system is described and analyzed. The findings show that the vessel owners' share of added values increased gradually from approximately 7% in 1985 to 45% in 2016. Conversely, the labor share dropped from 75% to 42% during the study period. The society's share of the values added (corporate taxes) increased from −5% (net subsidies) to +9% (net tax income). The present study concludes by discussing the findings and their policy implications.

Assessing the economic effects of the covid-19 pandemic on Swedish shrimp fishers

This paper explores the effect of the perceived risk of the Swedish people of Covid-19 on daily auctioned shrimp prices from the start of the pandemic to the end of the year 2021. This topic is of interest to see whether the government intervention in the shrimp market to aid fishers with possible losses was justified. The Swedish shrimp fishery was for a long time managed by Regulated Open Access, but in January 1, 2017, it was transformed to a Strong User Rights Fishery by the introduction of Individual Transferable Quotas (ITQs). We use empirical data from the period from 2018 to 2021. We find that auction prices were negatively affected by covid-19 cases by SEK 19.83/kg (−9.37%), and that fishers have suffered a loss of SEK 21.5 million.

Co-management of large-scale and medium-scale fisheries: An assessment of the fishery tax system in Indonesia

Many fish stocks are jointly exploited by industrial vessels that employ modern fishing technologies and small- to medium-scale vessels that rely on simple gears. For the effective management of these shared stocks, it is imperative to understand how different policy options influence the behavior of fishing vessels of different sizes. A fishery tax could be a viable option where other popular market-based instruments, such as individual transferable quotas, cannot be adopted. In this study, we developed a model that incorporates the interaction between large- and medium-scale fishing vessels to evaluate the impact of alternative tax schemes. The model is parameterized using the skipjack (Katsuwonus pelamis) purse-seine fishery in Indonesia, which has over 20 years of experience in fishery taxes. The results show that the current tax system has a limited impact on reducing fishing pressure, as tax payments are determined by the pre-production characteristics of fishing entities. Moreover, vessels below 30 GT are exempt from taxes, giving incentive for fishers to invest in vessels below or far above 30 GT. When taxes are imposed on only one vessel group, the harvest reduction by this vessel group could be offset by an increase in the harvest by untaxed vessels. Imposing a production-based tax on both large and medium vessels results in a more balanced outcome in terms of the distribution of fishery benefits and vessel capacity across regions. We discuss the social and institutional implications of implementing a production-based taxation system to promote efficient and equitable resource use in Indonesian fisheries.

Structural and productivity changes from introducing strong user rights in the Danish demersal fisheries

This study examines structural and total factor productivity changes given the transition to a management system introducing stronger user rights (SURs) embedded in an individual transferable quota (ITQ) management scheme for the Danish demersal fishery in 2007. The focus is on the four most profitable Danish demersal segments. A Malmquist index approach is applied over the 2000–2016 period, thus capturing possible changes before and after the management change. This is supplemented by a quantitative analysis of the structural changes in fleet capacity and catches over the period. The analyses first show that total factor productivity (TFP) decreased from 2000 to 2006 and increased after the introduction of stronger user rights from 2007 to 2016 for all segments. Segments with access to the North Sea experienced higher productivity growth than segment fishing in the Baltic Sea. Some segments experienced high productivity growth in the year just before the change and an influx of vessels, which is believed to have been caused by the strategic behaviour of the fishers. The overall conclusion is that introducing strong user rights has had a positive effect on TFP growth and has further led to corresponding capacity reduction in the Danish demersal fisheries.

A model of rational equilibrium in quota‐regulated multiple‐species fisheries

AbstractThis paper derives rational ecological–economic equilibrium outcomes—capital and variable input allocations, harvests, discards, revenue, costs, and stock abundances—in a spatially heterogeneous, multispecies fishery that is regulated with individual fishing quotas (IFQs). The production setting is decentralized; a manager chooses species‐specific, seasonal, and spatially nondelineated quotas. Industry controls all aspects of harvesting operations. We present a solution concept and computational algorithm to solve for equilibrium harvests, discards, and profits across species, space, and time (within the regulatory cycle). The rational equilibrium mapping that we derive, used recursively, can be used to implement management‐preferred bioeconomic outcomes. The model offers an essential IFQ regulation‐to‐outcome mapping that enables more precise implementation of management goals in multiple‐species and heterogeneous fishery settings.Recommendations for Resource ManagersKnowing where and when individual tradeable fishing quotas will be utilized across heterogeneous space and time in multiple‐species fisheries is essential for effective fisheries management.Ad hoc models, while simple, contribute to “implementation uncertainty” whereby predicted mortality, discards, cost, and rent outcomes across fish species, space, and time are poorly matched to the realized outcomes that are implemented by resource users.A model of rational equilibrium mortality, discards, costs, and rent across space and time offers and powerful tool to improve the management of quota‐regulated fisheries.

Reflecting on 25 years of quota management in a spiny lobster fishery: Lessons learned from a harvest strategy perspective

The Southern Zone rock lobster fishery of South Australia has been managed by individual transferable quotas since 1993, with annual catch limits set using harvest strategy decision rules. This work describes the performance of strategies over 25 years focusing on challenges experienced during periods of poor fishery recruitment. Early strategies identified indicators and performance ranges for the fishery but lacked detail on required management action when reference points were breached. Between 2002 and 2009, the fishery experienced a considerable decline in recruitment resulting in catch rate, the primary indicator, decreasing by 70%. The harvest strategy in place failed to reduce catch levels appropriately and despite consecutive years of decreasing catch rate, was unable to arrest the fishery decline. Explicit harvest control rules for quota setting were developed in 2010 and refined in both 2014 and 2019, with the specific focus of ensuring sustainability and rebuilding lobster biomass. Application of these strategies have been successful at achieving this objective, most notably since 2015. The study highlights that harvest strategies must include control rules that respond rapidly to recruitment declines. Specifically, based on harvest strategy testing and evaluation, required levels of quota reduction should be clearly defined. In combination with limit reference points that mandate the point of fishery closure, metarules and quota caps that promote biomass increase, such strategies serve to meet fishery objectives and ensure sustainability.

Which attributes of fishing opportunities are linked to sustainable fishing?

AbstractTo prevent the overfishing of marine fish populations, governments often limit fishing access through the allocation of fishing opportunities. While some studies have linked particular systems of fishing opportunities to sustainable outcomes (particularly individual transferable quota), it remains unclear whether it is the use of exclusive access (individual allocation), the use of a market (tradability), the duration of this access or the quota limits themselves that drive the sustainable outcomes. To determine which attributes of fishing opportunities are associated with sustainable fishing, we developed a novel method to systematically classify how fishing opportunities are allocated for 443 global fish stocks from 1990 to 2018 to produce the longest and most comprehensive dataset and longitudinal study of its kind. Our results revealed that quota limits and individual allocation are linked to a reduced probability of overfishing, with the most robust result for quota limits. No attributes were robustly linked to a reduced probability of overfished biomass. Whereas some previous studies have found that systems with market‐based features or strong property rights (i.e. a long duration) were linked to sustainable fishing, these benefits were found to be small or not significant once proper controls for other system attributes were introduced. These results highlight the importance of considering all attributes of institutional design in the governance of common pool resources.

The economics of deemed values

In 2001, New Zealand substantially modified its approach to implementation of the Quota Management System to make deemed values a central administrative tool. Catches in excess of a fisher’s annual catch entitlements (ACE) incur payments, called deemed values. Deemed values are an example of a price cap tool within a cap-and-trade regulatory system. The purpose of this paper is to develop four economic explanations for why deemed values may improve administration of individual transferable quota systems. First, deemed values can reduce transactions costs for catch balancing for both industry and government. Second, deemed values can provide liquidity in thin markets and improve the functioning of markets for ACE. Third, deemed values can reduce the incentives for discarding. These three administrative advantages are achieved because deemed values provide simpler administrative processes and because deemed values provide the industry greater flexibility in catch balancing. But the flexibility to land against deemed values carries the risk that deemed values could intentionally be set so low that intentional over-quota catches are incentivized. Fourth, differential deemed values can create an increasing marginal cost of overfishing incentive structure for harvesters.

Rent Generation Under the Norwegian Rights-Based Pelagic Fishery

As a general rule, only active fishermen can own fishing boats for commercial fishing in Norway. Thus, vertical integration is not allowed. Accordingly, the Norwegian empirical context is exceptionally well suited to study actual rent creation as a potential resource rent can only accrue to the catch stage of the value chain. This paper examines profitability and rent generation of 35 seagoing Norwegian purse seiners (around half the population) for 13 consecutive years. The study period starts in 2005, which saw the introduction of the latest version of the Norwegian individual transferable quota (ITQ) variant, or the so-called structural quota (SQ) system. First, this study investigates how profitable a purse seiner has become during the SQ regime. As per our findings, it was found that the average annual return on equity (ROE) was 20.8% and that the book value of equity more than doubled over the period (a 166% increase). Moreover, for the cohort of 35 vessels, rent operationalized as residual income (RI) was reported for every year examined (2006–2017). The discounted value of RI for the period was approximately 50 million NOK per vessel, which is equivalent to about 5 million EUR. This implies that the players generated substantial rent. The findings of this study draw a picture of a financially stable and lucrative industry. Finally, implications of the findings are discussed.

The distributional outcomes of rights-based management in fisheries

Fisheries managers have increasingly adopted rights-based management (i.e., "catch shares" or "individual transferable quotas" [ITQs]) to address economic and biological management challenges under prior governance regimes. Despite their ability to resolve some of the symptoms of the tragedy of the commons and improve economic efficiency, catch shares remain controversial for their potentially disruptive social effects. One criticism is that the benefits of rights-based reforms are unequally distributed across vessels and between fishery participants (e.g., crew and hired captains) and that stakeholders that do not receive an allocation of harvest rights may see their remuneration decrease. Yet, empirically assessing these claims is difficult in almost all ITQs due to poor availability of longitudinal cost, earnings, and employment data. This paper evaluates these claims using vessel-level data to characterize impacts of a long-established ITQ program for Alaskan crab fisheries on the level and distribution of payments to claimant groups. We find that the share of vessel proceeds accruing to captains, crew, and vessel owners declined under the catch-share regime to make room for new payments to quota owners. Average daily payments to captains, crew, and vessel owners declined, albeit slightly, yet retained their pre-ITQ premia relative to compensation in other sectors. However, inequality in payments to workers and vessel owners declined after ITQs, as did the interseasonal volatility in compensation to workers, a measure of financial risk. Finally, we find that consolidation-induced increases in leasing costs have had little effect on workers' remuneration, but have reduced returns to vessel ownership.

Analysis of Optimal Harvest and Management of Capture Fishery of Lake Ziway, Central Ethiopia

Even if there is fluctuation in fish species diversity and relative abundance of the species, Lake Ziway provides numerous environmental and/or ecosystem services. Despite to its importance, the Lake faces numerous threats because of its public good characteristics. Following the exponentially increased demand for fishes and the resource being public good, magnificent number of individuals are participated in capture fisheries in order to secure their livelihood. Free access to the fisheries, illegal fishing gears and environmental degradation are among the main reasons of decline in fish species and degradation of the Lake. From the current stock assessment survey, the study showed decline in biomass of fish over time. These negative trends in the Lake Ziway fisheries and poor water quality led to loss of livelihoods of many households who are directly or indirectly dependent on the Lake. Therefore, management of Lake Ziway fishery becomes very essential to manage the resource efficiently in a way that maximize fishers present and future benefits otherwise, the fish resource will disappear in the near future. Concerning management practices, most of the fishery regulations in this Lake put emphasis on the restriction of fishing gear, but the application of this instrument with its restrictions is almost zero. Moreover, Individual Transferable Quotas (ITQs) foster greater transparency and accountability for the management and enhancement of fishery resources by quota owners. In this regard, since it generates a sense of ownership and its versatility in providing a stable and productive market, ITQs are more effective than gear restrictions and in fact, it has major social benefits by controlling overharvesting. Due to this, to ensure the nutritional and food security of the country currently and in the near future, there is a need to enforce fishing gear restriction and set ITQs. Furthermore, there must be strong effort on studying the current stock of fish, and numbers of legal and illegal fishers to set Individual Transferable Quotas (ITQs) and Total Allowable Catch (TAC) for sustainable fishery management of Lake Ziway. Keywords: Ziway, capture fisheries, Individual Transferable Quotas, Total Allowable Catch, sustainable fishery management DOI: 10.7176/JESD/13-2-03 Publication date: January 31 st 2022