Catch shares, part 1: them’s fighting words

A blog of Bridge Environment

Catch shares
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Catch shares, also referred to as individual quotas, are a system that assigns percentages of each year’s annual catch quota to individual fishermen or fishing companies. The concept has slowly been gaining traction in fishery management circles, though it still remains highly controversial. Some advocate catch shares a wonder tool to address all fisheries ills. Others oppose them on purely ideological grounds. In a two-part blog entry, we will discuss what catch shares can and cannot do. This week, we will discuss common fisheries problems and the potential for catch shares to help. Next week we will consider them the way that every management tool should be, in the context of a full fisheries management toolbox.

Economists like to talk about programs like catch shares as a property right, which has led to the impression that catch shares are tantamount to the public giving up control of the fishery. In reality, a catch share entitles a fisherman to ownership over a portion of current and future catches, but ownership of the fish population and responsibility for setting quotas remains with the public. As Dan Pauly pointed out over 15 years ago, people have negative reactions to the concept of catch shares because of various assumptions, among them that catch shares are part of a right-wing conspiracy to give the ocean away to big corporations or that this sort of system will lead to the concentration of a fishery into the hands of a privileged few while leaving most high and dry. These assumptions are still widespread today and are major themes of a recent article on catch shares by Suzanne Rust. Next week, I promise to come back to them.

Let’s first talk about why catch shares, or property rights in general, are at issue. In short, economic evidence and common sense dictate that people take better care of things they own than things that are common property. To describe this phenomenon, Garrett Hardin coined the term “tragedy of the commons” in an article of that name published in 1968, although similar ideas were espoused by H. Scott Gordon back in 1954. The idea that property rights matter to the state of public resources actually stretches much farther back. There was a political movement that began in late 18^th Century England aimed at dividing and privatizing public farming areas, known as commons. Data suggested that enclosing an area would increase its value, although thoughtful analysis published in 1998 by Gregory Clark would suggest that those gains were modest and mostly offset by the costs of building fences. In fisheries, the tragedy has three potential consequences, and catch shares can reduce or eliminate them if certain conditions are met.

Potential consequence #1: In a fishery without catch shares, competition for a bigger slice of the quota can lead to inefficiencies. This leads to a phenomenon known as the race for fish. Under these conditions, fishing operations may race to catch as much fish as possible before the fleet collectively meets the annual quota. As a result, a fishing fleet develops that is too big with too much fishing capacity, too few safety standards, and delivering a product en masse so that prices are low and supply only available for a short season.

Necessary conditions: In order for catch shares to address this consequence, there must be an established annual catch limit but no allocation of that among vessels. This condition is very different from the ones that motivate catch shares as a solution for the other two consequences.

An example: Catch shares have been used effectively in Alaska as detailed in a 2012 paper by Keith Criddle (see his homepage for details on several related projects). Previously, Pacific halibut fishing operations would race to catch as many fish as quickly as possible because the fishery closed when the annual quota was hit. As a result, there were too many boats fishing too intensively and recklessly. When this fishery switched to catch shares, the pace of fishing slowed dramatically. Now, fewer boats catch higher quality halibut and with far fewer accidents.

Potential consequence #2: An open access fishery can be unprofitable. Gordon’s 1954 paper on the tragedy of the commons elegantly lays out the logic behind this idea, and how property rights may help. When a fishery is open to anyone and healthy enough that it is profitable to fish, we can expect heavier fishing by existing operations and new entry by others seeking a share of the profits. The collective increase in fishing pressure will drive down the fish stock until it is no longer profitable for anyone. Thought of another way, the incentive to conserve is negated because anyone making a sacrifice today cannot be sure they will receive the resulting benefits tomorrow. Thus, people face economic incentives to heavily fish open access fisheries, to the detriment of the fish stock, their neighbors, and themselves. Catch shares change this dynamic in two important ways. First, they prevent new entrants. Second, they change the incentives for existing fishing operations. Because a catch share applies to the current and future fishing years, there is now incentive to conserve. This point is subtle. It is not in anyone’s interest to unilaterally make sacrifices, either by fishing below their quota or even passing up opportunities to catch more than their share. However, catch shares do give owners the incentive to collectively lobby for a quota that would allow for an overfished stock to rebuild. Conservation interests have taken note of this point and, in many cases, are the driving force behind the implementation of catch shares in fisheries today. Their hope is that catch shares will change the incentives of fishing operations towards more abundant fish stocks.

Necessary conditions: Here we have a couple of outstanding issues. First, let’s examine the concept of unprofitability. It’s not as bad as it sounds. Remember from the theory that people will stop entering the fishery when it’s not worth their while to do so. Since entering requires some investment in terms of a boat, fishing gear, permitting, and fuel, not to mention time and energy, we need to consider someone who is choosing between fishing and an alternate use of their money and time. The zero profit condition still allows someone to be paid for their time and investment. Zero profit simply means they will get the going rate. Second, other management measures matter, but we will cover this next week.

An example: Chile has a growing history of conservation-minded coastal management that has resulted from granting communities exclusive access to their local fishing grounds. I did a small project in Chile in the late 1990s when this program was still new and communities were already celebrating the exclusive access by adopting highly restrictive regulations for themselves. My favorite dive during that project was in an area that decided it would only allow a single day of fishing each year for the highly prized loco, an abalone-like snail. In short, in response to having control over their local marine resources, Chileans have adopted plans that include short-term sacrifices which have resulted in long-term benefits.

Potential consequence #3: When stocks are driven down to unprofitable levels, they are depleted well below natural levels, and brings up two conservation concerns: loss of ecological functions and, in extreme cases, risk of local extinction. These conservation concerns have led to the coalition that is currently increasing the use of catch shares in fisheries. They are also the most controversial.

Next week we will discuss necessary conditions, because they are intimately tied to other tools in the fisheries toolbox.

Have your own thoughts on catch shares? Leave us a comment.

Best,

Josh

For more information, read our other blog posts and visit us at Bridge Environment.