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This Week's Commentary Previous Commentaries Future Commentaries Objectives

May 18, 2009
Series Editor: Ian Parry
Managing Editor: Felicia Day
Assistant Editors: John Anderson and Adrienne Foerster

Welcome to the RFF Weekly Policy Commentary, which is meant to provide an easy way to learn about important policy issues related to environmental, natural resource, energy, urban, and public health problems.

Relentless depletion of ocean fish resources has heightened interest in novel policy approaches to prevent the overharvesting of fish stocks. The most promising approach appears to be catch shares, which essentially limit the allowable harvest each year for individual species, and permit the trading of quota rights among individual fishermen. In this week’s commentary, Christopher Costello and Steven Gaines discuss issues in the design of catch shares and experience with this policy to date.

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Can Catch Shares Save Fisheries?
By Christopher Costello and Steven Gaines

Fishing Boat

The systematic decline of the world’s ocean resources is well documented. Dramatic collapses in top predators, ecosystems, and over one third of the world’s fisheries reflect weak or nonexistent institutions that govern fish extraction. This widespread mismanagement squanders precious biological and economic resources; present value economic losses may exceed $1 trillion and simple extrapolation of current trends suggests that all commercial fisheries could be unviable by the middle of this century. Yet a potential solution, grounded in economic incentives, is emerging and should be pursued more broadly. This novel and widely adaptable approach to fisheries management, known collectively as catch shares, holds tremendous promise if executed with care.

Traditional fisheries management relies on limited fishing seasons, gear restrictions, and limited licenses, which often induce a race-to-fish leading to overexploitation and economic collapse. Grounded in the incentives they provide for resource stewardship, catch shares are globally rare but increasingly implemented in many countries. The most common form of catch shares in the developed world is the individual transferable quota (ITQ), by which shares of the total allowable catch are allocated to fishermen, communities, or cooperatives. Unlike cap-and-trade programs for air pollutants, ITQs are allocated on a percentage basis and are granted over a long time horizon. These features accommodate the wide natural fluctuations in fish stocks that are common around the world. The total allowable catch is optimized annually depending on the bioeconomic conditions of the fishery. Because profitability is tied to setting the total catch appropriately, catch shares may enhance the role of science and economics in fisheries management. Beyond ITQs, other common catch share forms include spatial property rights (sometimes called territorial user right fisheries, or TURFs), temporal concessions, and cooperatives. Although these forms are less common in the United States, the developing world has extensive experience with them in places such as Mexico, Chile, and many African countries. Price instruments, such as landings taxes, may also be economically viable but have been politically unpopular and are not implemented in any substantial way in large fisheries.

Widespread adoption of catch shares in the developed world began in the mid-1980’s and 1990’s in New Zealand, Iceland, Australia, and to a lesser extent North America. Recent evidence suggests a strong empirical link between adoption of catch shares and significant reductions in fisheries collapse, as well as enhanced profitability.  While the United States is an emerging catch share leader (with over 10 catch share fisheries, and many more in development), fewer than two percent of the world’s fisheries operate with catch shares, likely because implementation poses challenges and controversies. Contentious issues include how the rights will be initially distributed, the longevity of the rights, whether consolidation will be allowed, and what additional restrictions should be placed on shareholders (for example, must share owners be fishermen?). A related issue concerns who should capture the economic benefits generated by catch shares, which can be substantial because transferable shares are valued as assets.

 

 Christopher Costello
Christopher Costello
is professor of environmental and resource economics at the Bren School of Environmental Science and Management at the University of California, Santa Barbara. His research covers natural resource management, with particular focus on uncertainty and incentive-based management. Topical interests include fisheries management, biodiversity, climate change, and marine policy.

Steven Gaines
Steven Gaines is professor of ecology, evolution and marine biology and director of the Marine Science Institute at the University of California, Santa Barbara. He is a marine ecologist with research interests in conservation biology, sustainable fisheries, and biogeography.

The appropriateness of these design features hinges on the ultimate goals sought by the communities they are meant to serve. When economic efficiency is the sole criterion, design strives to mimic the behavior of a sole owner, and thus imposes relatively few additional restrictions. When a community desires to maintain or enhance the fishing heritage of local ports, caps on consolidation are typical, and communities or cooperatives of fishermen are often allocated initial rights. A tension sometimes exists when objectives conflict owing to the inverse relationship between the degree of control retained by the state and the strength of stewardship incentives accruing to fishermen.

Design features can also affect ecological performance. Even under catch shares, an incentive may exist to discard low-value species that are inadvertently harvested as “by-catch.”  This becomes a particularly salient problem when species of ecological significance have life-history traits that make them more vulnerable to fishing than the target stocks. One solution is to assign separate ITQs over each species. Quotas on target species reflect the profits from harvesting those species. Quotas on by-catch species reflect the relative difficulty of avoiding their capture. If by-catch species quotas can be traded, the market provides an incentive to avoid by-catch.

Other mechanisms exist. For example, under TURFs, cooperatives or individuals maintain exclusive access to fixed areas of ocean. In addition to enhancing stewardship incentives, TURFs may catalyze the implementation of marine protected areas (MPAs), which act like parks in the ocean. This can occur for two important reasons. First, well-designed MPAs may actually increase the profitability of certain fisheries, essentially by protecting “source” areas where larvae originate. So TURF owners may voluntarily implement MPAs to increase profits, for example, by protecting spawning sites. This kind of private sector implementation of MPAs has been observed in several fisheries around the world. Second, the profitability of TURFs is enhanced when they are sited adjacent to MPAs. The spillover of adult fish across the boundary of an MPA can become part of the adjacent TURF holder’s yield. By combining catch shares with other approaches to ecosystem-based management, we are likely to enhance economic and ecological outcomes beyond what could be achieved via catch shares alone.

This optimistic recommendation notwithstanding, one substantial hurdle remains. Implementing catch shares often requires buy-in from incumbent fishermen. Despite mounting evidence in their favor, many fishermen view catch shares as the imposition of yet another costly regulation. A promising path forward is to allow subgroups of license holders to obtain exclusive spatial (or temporal) access to a portion of the stock. Rather than waiting for consensus or imposing changes in the face of intense opposition from some stakeholders, those fishermen who opt to undertake a catch share experiment would be ensured exclusivity—a necessary condition for success—to a fraction of the stock. Those opting out simply fish independently in the area allocated collectively to them. This approach is not without precedent or success: in the Chignik Salmon Cooperative, permit holders self-selected into either a cooperative or independent sector, and received allocations proportional to their membership.

Catch shares are not a one-size-fits-all solution. Instead, when viewed broadly, and when coupled with MPAs and other approaches to achieve simultaneous objectives for a target fishery and its ecosystem, catch shares show tremendous promise. By aligning economic incentives with desirable ecological outcomes, our use of ocean resources can shift from a story of increasing collapse to stories of recovery, sustainability, and profitability.

Further Reading:

Costello, C., S. Gaines, and J. Lynham. 2008. Can catch shares prevent fisheries collapse?  Science. 321: 1678–1681.

Costello, C. and S. Polasky. Optimal harvesting of stochastic spatial resources. Journal of Environmental Economics and Management. 56: 1–18.

Deacon, R., D. Parker, and C. Costello. 2008. Improving efficiency by assigning harvest rights to fishery cooperatives: evidence from the Chignik salmon coop. Arizona Law Review. 50: 479–509.

Grafton, R., D. Squires, and K. Fox. 2000. Private property and economic efficiency: a study of a common-pool resources. Journal of Law and Economics 43: 679–713.

Newell, R., J. Sanchirico, and S. Kerr. 2005. Fishing Quota Markets. Journal of Environmental Economics and Management 49: 437–462. Related RFF Discussion Paper 02-20.

Kerr, S., R. G. Newell, and J.N. Sanchirico. 2004. Tradeable Permits in Policy Evaluation, Design, and Reform. Paris: OECD.

Sanchrico, James N., and Richard G. Newell. 2003. Catching Market Efficiencies: Quota-Based Fisheries Management. Resources 150 (Spring).

Sanchirico, James N., Kathryn A. Cochran, and Peter M. Emerson. 2002. Marine Protected Areas: Economic and Social Implications. Discussion paper 02-26. Washington, DC: Resources for the Future.

Weitzman, M. 2002. Landing fees vs. harvest quotas with uncertain fish stocks. Journal of Environmental Economics and Management. 43(2): 325–338.

Worm, B. et al. 2006. Impacts of biodiversity loss on ocean ecosystem services. Science. 314: 787–790.

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Views expressed are those of the author.
RFF does not take institutional positions on legislative or policy questions.

The views expressed do not necessarily represent those of U.S. Environmental Protection Agency or other federal entities.

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