Economic Insights into the Costs of Design Restrictions in ITQ Programs
Decades of overfishing have decimated world fish populations, spurring governments to implement policies to help fisheries recover through catch limits, bans, and other policies. However, these measures must also take into account the economic needs of affected fishing communities. Market-based programs can help balance these concerns and have gained popularity in recent years.
In a new RFF report, “Economic Insights into the Costs of Design Restrictions in ITQ Programs,” Kailin Kroetz and RFF Nonresident Fellow James N. Sanchirico assess the trade-offs involved in designing a particular type of market-based management program: individual transferable quotas (ITQs).
In traditional “Derby-style” management, fisheries are opened for a limited period of time, resulting in a race to catch as many fish as possible in that window. Conversely, under an ITQ system, a limit (called the total allowable catch, or TAC) is set for a given year or season. Shares of the TAC, called quota, are then allocated to fishermen. With this guaranteed share of the harvest, fishermen no longer have an incentive to race to fish.
ITQ programs already exist across the world, but vary widely in their design and provisions. A reason for this variability is that these programs are designed not only to encourage economic efficiency, but to maintain vibrant coastal and fishing communities and promote healthy ocean ecosystems. Balancing these concerns with a single policy increases the complexity of the system. Restrictions on species coverage, permit trading, banking and borrowing, and other provisions can help address social and ecological concerns but can also reduce the economic gains from the program. A natural question to ask and the one at the core of the report is, what is the opportunity cost of imposing these rules?
Kroetz and Sanchirico present a straightforward method to evaluate the trade-offs and potential costs of varying restrictions, using the West Coast groundfish fishery as a case study. The proposed ITQ program for this area, located in the federal and state waters off the coasts of California, Oregon, and Washington, focuses on the trawl sector of the fishery. Findings of the report include that there are significant economic gains from the proposed gear-switching provision. However, the opportunity costs of the exclusion of non-trawl sectors from the ITQ program are high.
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