The Deadliest Catch, a television series broadcasted by the Discovery Channel, shows the dangers of one of the deadliest professions: fishing in the Bering Sea during the Alaskan king crab season. Fishing in these waters had turned into a race so intense that the crab season only lasted a few frantic days. The race caused overfishing and the prices to drop as crab flooded the market.
As Edward Poulsen, director of the Alaska Bering Sea Crabbers, described in an interview with CNN, “the gun went off and everyone scrambled. Some boats loaded too many crab pots and capsized. Others pushed their crews to work too long” (2012). The fatality rate of fishermen in this region was 80 times that of the average profession in the United States.
Since the introduction of the Crab Rationalization (CR) Program in 2005, all that has changed. Overfishing no longer occurs, fishing is now safer and more profitable, and the crab season spans a longer time period.
The CR Program is a form of Individual Transferrable Quota (ITQ). In this blog, I will discuss the economics and science of ITQs in general and discuss the policy specifics along with its advantages and disadvantages.
The story of crab fishing in Alaska more generally displays the strengths and weakness of ITQs as policy instruments.
The Economics & Science: why fishermen can be made better off with ITQs?
Very simply, fishing represents a classic example of the “tragedy of the commons”, where individuals acting in their own self-interest behave contrary to the group’s long-term interest by depleting a common resource – in this case, fish. The logic behind this outcome is clear: the cost of depleting resources is shared by everyone but the benefit is reaped by individuals.
To add to the economics of fisheries, it is important to recognize the science. The growth of fish stock follows a logistic trajectory: growth increases until it reaches a maximum level and then declines as the fish population reaches capacity. Since fishermen must expend more effort to catch fish in a low-stock fishery for the same harvest, it is clear that fishermen would be better off maintaining stock levels at or beyond the growth peak. For the same effort, they can catch more fish. However, as discussed above, each fisherman is better off over-fishing (irrespective of the group’s actions) making the group worse off. This is the intuition of the Gordon-Schaefer model, which is at the center of bioeconomics.
It is worth noting that at very low fish stock levels, fish mortality rate is greater than the reproduction rate, so the growth rate is negative, leading to the depletion of fish (even in the absence of fishing).
Economists provide various solutions to the tragedy of the commons, the most classic of which is providing property rights. ITQs are a form of property rights: only ITQ owners are allowed to fish and only in the amount specified by the quota. Therefore, fishermen have an interest in good management of the fishery because it increases the value of their share of it. And because the shares can be traded, an efficient allocation of the quota is reached. Further, fishermen who want to catch more can buy additional quotas instead of resorting to brutal fishing tactics.
Regulatory Context
In the United States, the Magnuson-Stevens Act (MSA), originally enacted in 1976, is the primary law governing marine fisheries management in federal waters. The MSA created eight regional fishery management councils – including the North Pacific Fishery Management Council (NPFMC), which is responsible for Alaska among other regions. The CR Program is managed by the state of Alaska and reviewed by the NPFMC.
Another important agency is the NOAA’s National Marine Fisheries Service (NMFS), which “assesses and predicts the status of fish stocks, ensures compliance with fisheries regulations and works to reduce wasteful fishing practices.”
In 2006, the MSA was amended to include new major requirements: the use of annual catch limits (TAC) and accountability measures to prevent overfishing.
CR Program Summary
Under the CR Program, the NMFS issued harvest shares (QS) to harvesters and processor quota shares (PQS) to processors. QS are percentages of the total allowable catch (TAC) and dictate the number of yearly quotas received by each owner of quota shares. Of the QS, 90% are Class A shares that require delivery to the processor holding the respective PQS, and the other 10% are Class B shares that can be delivered to any processor.
The program allocated 10% of the shares to affected communities and 90% to qualifying participants based on historical participation in the fishery.
The matching of QS with respective PQS and the allocation of shares proved controversial, as will be discussed later.
Policy Fact Sheet
Policy name: Crab Rationalization (CR) Program
Policy type: Individual Transferable Quota
Implementation date: Fall 2005
Geographical reach: Bering Sea and Aleutian Islands (BSAI)
Biological reach: King and Tanner Crab
Catch Limits: limits vary by year and fishery.
Mechanism for trading quota: none.
Enforcement mechanism: Aircraft deployment, at-sea boardings, investigations of violations reported by fishermen, and fee issuance for violations.
Effectiveness
According to the five-year review of the CR program prepared by the NPFMC, since the implementation of the crab rationalization program, the total allowable catch has never been exceeded (unlike during the previous derby-style system). Further, according to the review, “the program is meeting its goals, and findings have been used to design additional improvements to the program” (NPFMC, 2010).
Impacts
The review reported significant levels of discarding, as fishermen sort their catch for the most valuable crab and discard the rest. This is a common side effect of ITQs and it is problematic, since it increases the mortality of crab discarded and results in fishermen expending extra effort to fish (which is economically inefficient). The problem is further exacerbated by the fact that most valuable crab – the cleanest and largest – is also the most likely to mate, further reducing the fishery’s growth.
Other impacts include the effect on Alaskan communities, in particular where fishing is the primary economic activity. As Alaska Report, a news agency, explains, the CR Program marked a shift in the industry toward market ownership by multinational processing companies. This outcome can be explained by the ITQ’s poor design.
First off, because class A shares (which represent 90% of total QS) must be delivered to a pre-specified processer, fishermen cannot unload their harvest to the highest bidder and, therefore, have little market power over prices.
Further, the regulation is very complex and burdensome, making it harder for small fishermen to compete.
Additionally, communities, which are important stakeholders of Alaskan fisheries were only allocated 10% of the total allowable catch. The rest was allocated according to historical catch.
A positive impact is, of course, the increased safety for fishermen who no longer resort to brutal fishing tactics to maximize their catch in short spans of time.
Looking Forward
The CR Program is in need of improvement. First, the regulation must be simplified, starting with eliminating the PQS. These shares are meant to provide stability for processors but are unneeded and hurt fishermen. Compliance must also be cheaper, especially for small fishermen. Further, the CR Program must implement a mechanism for trading quotas.
Broader Implications & Context
Despite the negative implications of the CR Program, ITQs have proven a successful model around the world. In combination with other fishing policies, ITQs have aided in the recent recovery of species including the New England scallops, mid-Atlantic bluefish and summer flounder, and Pacific lingcod.
Works Cited
“Alaska Crab Rationalization Program.” Alaska Crab Rationalization. N.p., n.d. Web. 23 Mar. 2014.
“Crab Rationalization.” North Pacific Fishery Management Council. N.p., n.d. Web. 23 Mar. 2014.
“The Deadliest Earmark.” – The Dark and Dirty Side of the Bering Sea Story You Won’t See on the Discovery Channel By Terry Haines. N.p., n.d. Web. 23 Mar. 2014.
“The Deadliest Earmark.” Deadliest Reports. WordPress, n.d. Web. 23 Mar. 2014.
Eilperin, Juliet. “U.S. Tightens Fishing Policy, Setting 2012 Catch Limits for All Managed Species.” Washington Post. The Washington Post, 09 Jan. 2012. Web. 23 Mar. 2014.
Five-Year Review of the Crab Rationalization Management Program for Bering Sea and Aleutian Islands Crab Fisheries. N.p.: NPFMC, 28 Dec. 2010. PDF.
“Lost Property.” The Economist. The Economist Newspaper, 25 Feb. 2012. Web. 23 Mar. 2014.
NEW YORK (CNNMoney) — The Nation’s Most Dangerous Job. “Crab Fishing: Most Dangerous Job Not so Dangerous Anymore.” CNNMoney. Cable News Network, 27 July 2012. Web. 23 Mar. 2014.
“Plenty More Fish in the Sea.” The Economist. The Economist Newspaper, 26 May 2012. Web. 23 Mar. 2014.
“A Rising Tide.” The Economist. The Economist Newspaper, 20 Sept. 2008. Web. 23 Mar. 2014.