Throughout history, fishery has been an important pillar industry in Norway. Norway has been one of the world’s leading fishery country due to its geographical characteristics, a more than 83000 km coastline and moderate climate. In 2006, with catches of around 2.4 million tonnes, Norway was the 10^th largest fisheries producer in the world. In 2009, Norway ranked eleventh in global capture fisheries production. Norway’s fishing and fish farming together account for 0.7 percent of the GDP in 2010 (FAO Fisheries and Aquaculture 2011)[i]. Cob and herring are the most important stocks in fishery industry in Norway along with sea and river fishing of salmon, and capelin.

Government intervention in fishery industry started early in Norway. In this blog, I will focus on one of the fishery policies in Norway known as the Individual Vessel Quota system (IVQ-system).

(1) What is IVQ-system and its implemented time, and specific limits?

In the last 1980s, there was a sudden and unexpected sharp decline of the Norwegian Arctic cod stock resulting in a most severe crisis in Norwegian fisheries in modern times. In response to the situation, first, the total quota was reduced significantly, from 630 000 tons in previous year to 340 000 tones. Besides, in 1989, the coastal fisheries were closed for almost the whole year (closed after only three and a half months). Then, in the fall of 1989, the Individual Vessel Quotas system (IVQ-system) was established and implemented for the 1990 season in the costal fleet (Fisheries Policy Reform: National Experiences 2011)[ii].

“IVQ-system is a management mechanism to distribute the Norwegian total allowable catch (TAC) amongst different segments of the fishing fleet. The fleet is divided into several groups according to size and fishing technique (trawlers, purse seine, etc). Each vessel group is then allocated a group quota which is then shared among the participating vessels in fixed and (more or less) guaranteed portions.”

–Fisheries Policy Reform: National Experiences 2011.

Therefore, IVQ-system’s geographic and biological reach would be consistent with that of Norwegian TAC.

Due to the special geographical location of Norway, most of its commercial fishery stocks are shared with other countries. IVQ-system is the quota for each vessel group (TAC divided by vessel groups), so it is implemented when the TAC is settled through international negotiations (mainly between Russia and other European countries). Important species included in TAC and IVQ-system are cod, haddock, salthe, herring, capelin, and so on (OECD Review of Fisheries 2011)[iii]. The specific limitation of different species are shown in the table below.

Table 1TACs and national quotas in 2008-09 for some important species

       Resource: OECD (2012), “Norway: Norway”, in OECD Review of Fisheries 2011: Policies and Summary Statistics.

According to the regulation, trade in quota is not allowed in IVQ-system, although there is an informal market.

(2) Enforcement mechanism

The IVQ-system was a two-tiered system. The vessels or fishermen were divided into two groups, the most active vessels and the less active vessels, according to the quantity of cod landed in the years from 1987 to 1989. For the most active vessels (the priority group I vessels), the quotas were exclusive, it means the vessel owner had the decision-making power to decide when or where to fish under the quota requirements. For the less active vessels (group II vessels), they were allowed to fish under a group quota, this implies the fishery activities would be more competitive. There were no restrictions for fishermen to participate to this fishery group, as long as they fulfilled the obligation and requirements of being a registered fisher. The difference of quota levels between two groups was relatively large, the quota allocated to group II was only about 10% of that allocated to group I.

Figure 1Northeast Atlantic Cod. Distribution of National Quota 2002

           Resource: Country Note on National Fishery Management System – Norway

As shown in the figure above, the Norwegian part of the TAC is divided into quotas for each vessel group. Then each group quota is shared between vessels within the group according to the size of the vessels (OECD Environmental Performance Reviews: Norway, 2011)[iv]. There are three stages of the quota system: the negotiated national quota – the group quotas – IVQ-system.

(3) Potential advantages and disadvantages

The initiatives of the IVQ-system was to deal with the resource (cod stocks) crisis and supposed to be abolished once the situation returned to normal. However the IVQ system has become permanent. After the crisis, the main goal of the IVQ-system has been linked to two main pillars: one is the secure a decentralized ownership and the other one is to avoid unprofitable overcapacity as means to provide an economic viable fleet (Standal and Aarset, 2008)[v]. A major advantage of IVQ-system compared to the ordinary individual transferable quota system is that IVQ-system integrates quotas and vessels and is a bundled system. The IVQ-system has led to a huge concentration of quota ownership and severe changes in fleet structure.

However, there are some arguments about the disadvantages of this quota system. Some argues that political decision system cannot provides the most efficient allocation of a society’s resources, which is a common argument on the government intervention. Others argue that the system did not consider the vessels’ poor economy and the potential for changes in ownership, and Norwegian management regime seems to be the very suited for the strongest actors rather than some small companies in rural fishing-dependent areas (OECD Environmental Performance Reviews: Norway, 2011). These concerns may lead to the opposite side of the original goal of IVQ-system.

Together with other quota policies, the Norwegian fishing industry has changed from a heavily subsidized and capital highly concentrated industry to a relatively competitive one. Based on the results of-IVQ system, the government intervention has leave the duty of adjusting the capacity to those competitive power in the industry, which means it could secure high profit for who has the available resources to improve fishing technology. However, to be an efficient management instruments, IVQ-system requires improvement and adjustment, such as introduction of tradable quota which could encourage the fishermen’s per

Sweden could be one of the most attractive place for environmentalists. In 2007, Sweden made its mark on a list that did the most to save the planet. From year 1990 to 2006, the carbon emission in Sweden decreased significantly by 9%, while the Kyoto Protocol allowed for a 4% increase in emissions. At the meantime, Sweden still enjoyed economic growth of 44% in fixed price[1]. All this remarkable success has not happened on its own, one of the main reason is the introduction a carbon tax in 1991.

What is a carbon tax?

Carbon tax is a form of pollution tax. It is usually defined as a tax based on greenhouse gas emissions generated from burning fuels[2]. The government sets a price per ton on carbon, then translates it into a tax on electricity, natural gas or oil[3]. Since there is a price added on carbon emission, the price of electricity, natural gas or oil will, therefore, increase. It sends out a massage to the market that to reduce the conventional energy consumption. Under the affect a carbon tax, industries, business and individuals tend to pursue clean alternative energies and increase energy efficiency.

However, a main problem with a carbon tax is that by raising the price of energy it disproportionately impacts the poor. In the case of Sweden, introducing a carbon tax actually stimulated its economic growth. Since 2010, Switzerland has led the ranking as the most competitive economy in the world according to the Global Competitiveness Report 2010-2014, but it does not mean that there is no impact on the poor. We will discuss this later.

Snapshot of carbon tax in Sweden

• The origin of the carbon tax: Sweden enacted the carbon tax with the reformed of energy tax system in 1991.
• The goal is to discourage oil use.
• How it works: The tax is levied as a specific tax on oil, coal, natural gas, bottled gas, and petrol.

Which fuels are covered and which fuels are exempted?

As a complement to the energy taxes system in 1991, the carbon tax is a general level tax. The major taxed sectors are natural gas, gasoline, coal, light and heavy fuel oil, liquefied petroleum gas, and home heating oil[4].

The tax is not levied for biofuels, and peat is also exempt from taxation (Folke Bohlin, 1998). For energy intensive industries, like electricity production, no tax is applied but non-industrial consumers have to pay a tax on electricity consumption. Additionally, no tax applied on 50% of the general level on fuels used in industry (Bengt Johansson, 2000).

How does the policy implement over time?

The tax was initially set at a general level of UUS $133 per ton carbon. But since it put a heavy loan on industries that relied on natural gas, coal and oil (a double total tax for natural gas, 80% increase in total tax for coal and around 20% increase in total tax for oil), the tax rate was amended in 1993 considering the competitiveness of industry. After the emendation, industry, agriculture, forestry, and fisheries paid only about 21% of the tax and this remains the same today. Besides, these sectors can receive additional reductions (and refunds) depending on the company’s value of sales versus their tax payment. In year 2009, the standard tax rate was $104.83/metric ton CO₂ while the tax rate for industry was largely lower at $23.04/metric ton CO_2.

Potential negative distribution effects

“In 2011, for example, Swedish households faced the highest prices for natural gas which was 4.2 times more expensive than the cheapest gas prices in Europe – in Romania. Furthermore, nearly half the cost of natural gas in Sweden – 44.3 percent – was due to taxes and levies in 2011.” (James Burgess of Oilprice.com)

Distribution problem is reported as a primary issue on the carbon taxes application. The poor would suffer more because a larger proportion of their available income has to be paid for daily energy usage than their wealthier counterparts. In 1995, energy and environmental taxes generated a total national revenue of US $6 billion or 3% of the gross national product[5]. If the fiscal revenues collected from the carbon tax would be recycled to support R&D projects or just return some amount to the poor, some of the regressive impacts may be offset.

Is it a cost-effective tax policy?

Cost-effectiveness means that using the lowest cost to achieve a set target. Therefore, we need to know the degree to which carbon tax has achieved its goal as well as the cost.

As mentioned before, the goal of this carbon tax is to discourage oil use and hence decreasing the carbon emission. The result was very satisfying – by 2003, oil accounted for only 32% of Sweden’s energy, and Sweden is now pursue to become the first completely oil-free economy in the world by 2020[6].

The distributional implications discussed above is one part of the social cost of the carbon tax policy, competitiveness impacts could be another social cost.

Competitiveness implies the ability of an economic entity to sell its products and services in domestic and global market. Take a company as an example, if the company emit CO₂, a carbon tax will affect the cost structure and increase expense, thus loss its price advantages. The emendation of tax rate in 1993 in Sweden was a result of such concerns.

Another cost would be generated from a standard level of tax rate in different sectors throughout Sweden. This can result in some sectors do not operate in their most efficient way. In conventional economics, a tax policy would be cost-effective when the tax rate equals a company’s marginal abatement cost. However, it is very difficult for the government to know all the detailed information in all sectors. If the tax rate is higher for some industries, they need to pay higher than they should, but if the tax rate is lower for some high carbon emitting industries, they are required to pay less than they should and it may lead to more pollution as the tax is too low.

Policy makers prefer a carbon tax for its simplicity but it could be costly as well. So government of Sweden need to be thorough to keep their success of the carbon tax policy.