Are Catch Share Systems a Viable Solution?

Global catch share systems have produced positive economic and biological returns at various implementation sites – although to varying degrees. Still, lackluster oversight and flawed management strategies/technologies make success determination an imperfect science. Until the scientific data improves and more robust ecosystem assessments occur, the true implications of such systems will remain elusive to define. More investment in research and monitoring should make quota systems more effective going forward, but might meet resistance from the fishing industry.

An Industry on the Brink

Some estimates suggest commercial fish stocks have declined by as much as 90 percent. The trajectory for some species indicates populations fast approaching the point-of-no-return in terms of biological viability. As fish population levels fall, fishing production continues to climb, further intensifying pressure on species’ stocks (Figure 1). According to the World Bank, the cost of mismanagement, in lost economic output, can prove staggering, at close to $50 billion per year. Clearly, financial motivation exists to protect current reproductive populations and grow those stocks approaching collapse. However, an explicit path to remediation has yet to materialize.

The Emergence of Catch Share Systems

As commercial fish stocks (e.g., tuna, cod, salmon, etc.) continue to diminish at a rapid rate, countries have experimented with the implementation of market-based catch share systems to incentivize more sustainable harvesting practices and protect their lucrative fishing industries. These catch share systems give ‘rights’ to a certain proportion of a designated species total, calculated annually by scientific agencies (often at the national level). Biological data and fisheries information inform this total allowable catch (TAC) number, which ultimately dictates the amount of a species that can be sustainably caught.

In turn, fishers own or lease a certain portion, or quotas, of this TAC. Most catch share systems allow free, or close to free, trade of these quotas. So, if fishers do not have enough of an allotment, or annual catch entitlement (ACE), to meet their needs, they can purchase quotas from another holder or incur heavy fines from government regulation in order to catch more. Conversely, if quota owners do not have the ability to fulfill their allotment or find it not cost-effective to extract a bounty (the market price for their quota may exceed their projected harvest costs), they can sell or lease to a willing buyer.

In theory, annual ownership rights to a certain proportion of a species should promote conservation, as individuals, corporations, communities, associations, etc. possess long-term secure privileges to that stock and will want it to endure. Additionally, if the population stability of a target species improves, the TAC should increase and drive up the value of the quotas. Essentially, a higher TAC equates to more potential yield per quota. In contrast, fishers in an open-access market rush to exploit an area as fast as possible to beat competitors and observe the highest possible yield. Without ownership, no incentive exists to behave in a sustainable way and preserve overall populations, leading to significant biomass degradation in a short period of time. Ideally, market forces should create optimal harvesting outcomes – for both those hoping to generate profit and the marine species.

As of last year, 640 commercial fish stocks had an established TAC, representing approximately 620,000 metric tons of fish. The economic value of these catch share systems varies significantly by report, but consensus puts the number in the tens of billions range. Fish products continue to comprise a significant portion of overall food commodities traded worldwide, with more than half of fish exports of value originating from developing countries, where limited or no catch share systems exist.

Assessing Catch Share Effectiveness

Developed countries with economies that hinge greatly on aquaculture and fisheries have led the development and deployment of modern catch share systems (ancient models did exist – e.g. feudal Japan). Need often drives action. Many of these countries have observed diminishing returns with their fish production and have moved to implement market-based solutions to meet this mounting resource challenge. Both Iceland and New Zealand implemented similar management systems to preserve and rejuvenate this important economic asset class. Fisheries in New Zealand and Iceland leverage a similar set of management tools: “licensed commercial fishing vessels, key stock (the most economically valuable) assessments, and limitations placed on the catch of those stocks through input controls (e.g. restricting capacity/effort or regulating gears) and/or output controls (e.g. restricting landings or catch)”. Each system has increased profit margins for its fishing industries. Although similar in structure, each sovereignty’s model has unique dynamics in play.

• New Zealand – New Zealand uses individual transfer quotas (ITQ) to distribute rights to its fishing industry constituents. The country’s quota management system (QMS) allows open transferability of quotas with no restrictions. However, New Zealand must make allowances for indigenous groups (Maori), recreational take, and other sources of mortality. These allowances get deducted from the overall TAC before quota distribution. In addition to these considerations, the country must appease an extensive group of stakeholders when formulating the TAC, and this often immobilizes the allowable catch number as different groups neutralize one another. Opponents to the QMS cite poor governance and inaccurate stock assessments as factors that make success hard to quantify. Moreover, the nature of the ITQ system allows for the aggregation of quotas by dominant enterprises. Five companies own the rights to 80 percent of the New Zealand quotas, with foreign charter vessels claiming 60 percent of the total catch. Critics claim open transferability undermines local fishers and outsources all ancillary value (i.e., processing, distribution, etc.). Funding for stock assessments has decreased 45 percent since the 1990s despite an almost three-fold increase in stocks under the QMS, further diluting governance capabilities and making true impact convoluted.
• Iceland – Iceland has a much more restricted catch share model in place. Unlike New Zealand, Icelandic entities must control Icelandic fishing companies, with no more than a 25 percent stake controlled by a foreign entity. With the fishing industry generating close to a fifth of its entire GDP, Iceland wants to keep the economic productivity generated by fisheries within its borders. Additionally, in Iceland, the Marine Research Institute (MRI), a government institute, alone provides the Ministry with scientific advice and TAC recommendations based on its research. This allows Iceland to quickly adapt its TAC without push-back from other stakeholders. This agility enables Iceland to react more adeptly to sudden changes in stock conditions (e.g. disease). Also, Iceland’s system distributes quotas to vessels, rather than individuals. This ensures more equity in the distribution and mitigates trends towards monopolistic control by a few powerful entities.
• Alternative Models – Alternative management systems include area-based programs, or TURFs, where governing bodies allocate exclusive, secure areas to industry participants. These prove more effective when aiming to conserve more static species (e.g. scallops), but fail to protect more mobile species as well as catch quotas. Some hybrid models exist that attempt to capitalize on the strengths of each system. Voluntary catch share markets have also emerged and rely on industry buy-in and self-reporting to meet their stipulations. These markets empower non-participant stakeholders to engage in the conservation effort.

How to Improve Catch Share Systems

Empirical evidence reveals increased profitability of fisheries after catch share system implementation. For example, as implementation becomes more pervasive and encompasses more stocks, operational and technology costs decrease with the need to rapidly exploit dissipating. Despite these economic wins, the broader environmental effects remain difficult to prove. Often, the overall impacts on ecosystems get overlooked in favor of specific species impacts. More thorough ecosystem assessments need to occur to understand the holistic implications of prioritizing the conservation of certain commercial species (e.g. yellowfin tuna v. reef sharks) over others.

Assessing the health of the key species’ stocks has its own set of challenges. Self-reported fishery catch and effort data inform most of the limits and this data is subject to manipulation and error – for obvious reasons. Technology limitations and the continuous movement of many of these key species in expansive underwater territories compound accuracy concerns. Better scientific processes and more advanced technology could drive more accurate assessments, but precision will likely never be easy to achieve. More investment in research and technology specific to this space should yield more confident results.

Figure 1: World Capture Fisheries and Aquaculture Production

Source: FAO

Note: Production information only illustrated through 2013, but continues its current trajectory through 2017.

Bycatch also gets underrepresented in current systems (as this also relies on self-reporting) and, if severe, could significantly alter the ‘success’ stories of these catch share systems. There are several opportunities for immediate action: (1) the creation of additional markets that aim to promote efficiency (specifically for bycatch products); (2) more focused management that leans on science to drive policy (like Iceland); and (3) a cap on the number of shares an entity can hold to protect more players in the market. Overall, catch share systems create layers of benefits and have led to the stabilization of some stocks, but more comprehensive oversight needs to occur in order to gain validation from all stakeholders.

Conclusion:

Hopefully, catch share systems become more ubiquitous in the near-term and, at the least, get adopted in emerging markets. Improving stock and ecosystem assessment methods should validate market-driven quota systems as a vital instrument to the conservation of rapidly disappearing species. Despite concerns, the benefits of these systems outweigh the costs and could stabilize an essential industry that drives global food production.