FRE 525
Nicole Hannay
Anuar Tuleshov
Tradable Fishing Allowances
Individual Transferable Quotas (ITQ) Policy – New Zealand (1986)
In the last two decades tradable allowance systems recommended themselves as a good approach to address many environmental and natural resource management issues such as water usage, pollution, and overfishing. Individual transferable quotas (ITQ) were introduced to the New Zealand fishing industry in 1986; the quota management system (QMS) changes were necessary to compensate for previous policy failures that had been occurring. In 1983, the government attempted to stop the overfishing of inshore fisheries; this overfishing was thought to be the result of a 1970s initiative to increase fishing and expand exports. The 1983 strategy decided to exclude permits to fishers: Earning less than 80 percent of their net income or $10,000 per year from fishing. This policy did nothing but widen the gap between the problem and the solution.
The creation of the ITQ scheme in New Zealand was centered on the assumption that the fisheries are part of a common property resource, the ocean, and that eventually it fell under government jurisdiction. The Maori population challenged this ITQ policy on the basis that common property was not entirely under government control; they were successful in this challenge. The labor party defeated the national party in the 1984 general election; results of the election saw the widened of the mandate of the tribunal to include objections dating back to the Treaty of Waitangi thereby allowing the tribunal to address the fisheries ownership problem.
The ITQ quotas are considered permanent but are subject to specific rules and regulations set out in the policy, such examples include restrictions on species type and fishable area. The quotas aggregate to a total allowable catch (TAC) this total acts as a safeguard to ensure that only a sustainable number of fish are harvested. The TAC can be increased or decreased depending on the health of the fish stock and the desired sustainable demands of the government. The benefit of this is mechanism is tradable individual property rights create the elasticity to lower production without large scale losses in profits.
Basic application of tradable allowances is when an authorized organization issues limited permits and sets allowable level of particular activities (in our case fishing) and allocate between users of that allowances, moreover, holders of the permit can sell or transfer their permits among users. Many studies have been conducted by researchers who develop the design of that kind of institutions. For example, research on the design of institutions for trading water and pollution rights has greatly improved the performance of these institutions.
Initially a fishing permit is issued by the ministry of fisheries, from 1986 onwards ITQs became a permanent right to a part of the fish harvested measured in metric tonnes this is further divided into specific zones or locations (QMA – quota management area) – Each individual QMA included a further identified fishery management area (FMA). The FMAs are used to help measure and analyze the effects of the specific changes in species number of the entire ecosystem and then to take that data and analyze the distribution of time. Within those zones the ITQ will be designated for a specific species or group of species to be taken annually. These rights were distributed at no cost to current fishers in the industry. There was unrestricted transferability of the quotas the condition being all transactions were reported back to the ministry, this would include prices paid, dates, quota amounts etc. These quotas themselves had limits imposed by the government aggregation limits of 20% for inshore or 35% for deep-water stocks. Additional restrictions on receiving a permit included mandatory new Zealand residency this was significant in private internationally owned companies, this mandated the company must be 75% new Zealand owned.
“Under the QMS legislation, a fishing permit was to be granted to anyone who fulfilled the minimum quota holdings requirement of five tonnes for finfish. The enterprise allocation system that had been in use for deepwater species since 1983 was unified with the new QMS, with enterprise quota being converted directly into ITQ. ” (www.fao.org)
This policy is very similar to the Cap-and-Trade mechanism. Like other cap-and-trade systems, in each of these tradable allowance systems, fishery managers determine a total amount of effort (traps or days-at-sea) or landings (quota) allowed, allocate it among fishery participants, and permit them to trade their allocations. According to the most recent review of experiences with tradable fishing allowance programs, ITQ At least seven major fishing countries use ITQs as a principal component of their fisheries management systems. Arnason (2002) estimates that “over 10% of the global ocean fish harvest is currently taken under ITQs.” Moreover, many other important fishing countries, such as Argentina, Peru, and Morocco are about to introduce ITQs in their fisheries. This policy allows for market forces to determine the distribution of quotas. In theory this can lead to economic efficiency by maximizing social benefits. ITQs are beneficial in enabling individuals to leave the industry without making a loss.
There are other appealing attributes of ITQs as well. Quota markets relieve managers of most allocation decisions and allow them to devote their time and resources to conservation decisions. ITQs provide fishers with the flexibility to scale their operations to a level that best suits them. Another appealing feature is that quota markets value the right to fish, which provides fishers with greater security for retirement than currently exists. The approach creates an incentive to leave the fishery and to sell quota to new entrants. Fishers also appreciate the opportunity to value explicitly their fishing skills, and the liberation from command-and-control regulation, which can be unpredictable. Some environmental groups support ITQs because of the environmental and ecosystem benefits that result from the
However, many advantages of ITQs could not overwhelm the numerous concerns about the overall merits of these tradable allowance programs. One principal concern is concentration of ownership; that a few large operators will control the quota (or other allowance) and small operators will be pushed out of the fishery. Another concern is that ITQs will harm the coastal communities that depend on numerous small-scale fishing operations. Some fishers and managers find such programs threatening and risky because of previous experiences with high levels of price volatility. They are anxious about how they and their fisheries will be affected by unfamiliar market institutions. They tend to prefer to rely on the management methods with which they are familiar, such as size and gear restrictions. In addition, some simply believe it is wrong to allow a market to determine who can fish and the quantity of fish any one individual can catch; wrong to ‘privatize’ our public resources; and wrong to allow some fishers to reap windfall profits from initial quota allocations (Macinko and Bromley 2002).
CONCLUSION
All in all, taking into account all above mentioned aspects, tradable Fishing Allowances can somehow solve basic environmental problems, however, from economics prospective, especially if we talk about distribution and allocation, fishing allowances have their own disadvantages. Our conclusion is that this policy is good approach but has its flaws. We would suggest to make some deep analysis on this topic because New Zealand has two sides of those who will be effected by the policy, those who will be hurt and those who will benefit from it.
http://www.motu.org.nz/files/docs/MEL0278.pdf
http://www.fao.org/DOCREP/005/Y2684E/y2684e21.htm
http://ssrn.com/abstract=978115 – New Zealand’s Quota Management System: A History of the First 20 Years
http://envstudies.brown.edu/theses/02Demarest.pdf
http://www.apec.org/Meeting-Papers/Ministerial-Statements/Environment/~/media/Files/MinisterialStatements/Environment/94_envmm_Summary.ashx
http://www.nber.org/papers/w8796.pdf