Environmental Valuation & Cost-Benefit News

Summary: Fell and Sanchirico discuss to what extent fish processors might be justified in claiming compensation when a quota system is imposed on the catch of individual fishermen; assessing the appropriate amount, if any, of compensation is a critical component in the political dealmaking required to move forward with more effective, and badly needed, regulation.
...
Overfishing is a classic example of the tragedy of the commons. Since no one owns the fish in the ocean, it's in everyone's interest to catch them as fast as possible, regardless of present or future damage to fisheries. Overexploitation and inefficient use of marine resources are the direct result of open-access conditions. For years, regulators have attempted to solve this problem by utilizing season-length restrictions, total allowable catch limits (TAC), and gear and vessel power restrictions. This has led to a cat-and-mouse game where fishermen adopt technologies and methods to work around these controls. The result is the infamous and wasteful, "race to fish," where fishermen catch the allowable limits for a season in hours rather than months.

An alternative approach to dealing with this issue--by addressing causes rather than symptoms--is to allocate shares of the TAC to individual fisherman and fishing vessels. With secured access to a portion of the TAC in a season, fishermen no longer need to race and they also have greater stewardship incentives. Individual fishing quotas (IFQs), or dedicated access privileges (the U.S. term), are an increasingly prevalent form of fishery management around the world, regulating more than 175 species in Iceland, New Zealand, Canada, and Australia. The United States, however, lags far behind in adopting IFQ systems.
...
If policymakers decide to capitalize on the changes in fishery management that go with the transition to IFQs in order to address the impacts of years of inefficient regulation, there are policy mechanisms other than an initial allocation of quota to processors. The list includes quota allocation to vulnerable communities, mandatory sunset contracts between harvesters and processors that guarantee fixed supplies of the product over a set length of time, and levies on quota owners for processor and community compensation funds.

Further Readings:
Fell, H.G. 2007. "Estimating Time-varying Bargaining Power with Nonlinear Kalman Filters: An Application to the Alaskan Sablefish Fishery." in PhD dissertation Essays in Empirical Industrial Organization Using Time Series Techniques: Applications to Natural Resource Markets. University of Washington, Department of Economics.
Fell, H.G. 2007. "Rights-based Management and Processors' Supply" in PhD dissertation Essays in Empirical Industrial Organization Using Time Series Techniques: Applications to Natural Resource Markets. University of Washington, Department of Economics.
Newell, R., Papps, K., and J. N. Sanchirico. Asset Pricing in Created Markets for Fishing Quota. American Journal of Agricultural Economics. 89(2) (May 2007): 259-272.
Sanchirico, J. N. and R. Newell. Catching Market Efficiencies: Quota-based Fishery Management, Resources, No. 150, Spring 2003.
Sanchirico, J.N., D. Holland, K. Quigley, and M. Fina. Catch-quota balancing in Multispecies Individual Fishing Quotas. Marine Policy, 30(6): 767-785, 2006.

by Harrison Fell 1 and Jim Sanchirico 2
1. RFF Fellow
2. associate professor of environmental science and policy at the University of California-Davis and RFF university fellow.

FOR FULL COMMENTARY GO TO:
http://www.rff.org/rff/News/Weekly_Policy_Commentary/This-Weeks-Commentary.cfm
Series Editor: Ian Parry; Assistant editors: John Anderson, Felicia Day
Resources For the Future (RFF) www.RFF.org RFF Weekly Policy Commentary
Series Editor: Ian Parry; Assistant editors: John Anderson, Felicia Day
October 22, 2007