Sunday, 25 September 2016

Enforcement is key for sustainable fishing quotas

Many economists agree that sustainable management of common resources like fish stocks can be achieved using transferable quotas. Unfortunately, New Zealand's quota management (or rather, mis-management) has been in the news quite a bit recently. Consider this New Zealand Herald editorial:
The beauty about New Zealand's quota management system for commercial fisheries was that it would be self-policing, in theory. Once fishing companies were allocated a quota that could be traded, they would have a financial interest in the future of the fishery.
Therefore, it would be in the interest of each owner of a quota to catch no more than it was allowed and thus ensure the resource could be sustained and the quota would hold its value. It was also in the interest if each of them to see that all obeyed the rules. So they jointly set up a company that is contracted to police their catch.
This system has come under severe criticism this year following academic research that estimates fishing companies are catching more than twice their quota of some species and dumping the excess at sea. Even dumping filmed by CCTV cameras on board boats had not resulted in prosecution of their skippers by the Ministry for Primary Industries...
Unsurprisingly, many are saying the whole system is flawed, questioning the wisdom of giving the policing task to an industry-owned company ("putting a fox in charge of the chicken coop") and calling for a ministerial review or a commission of inquiry into the quota management system...
I wrote about fishing quotas very recently, in a post about kereru (emphasis added):
Quotas regulate the number of fish that are allowed to be removed from the sea in a given period of time. The total quota is set by determining a total allowable catch for a year (in theory at least this is roughly equal to the growth in the fishery stock), with some allowance made for recreational fishing. Quotas work well because they make fish excludable (no quota means no fishing) and are backed up by monitoring and enforcement.
Transferable fishing quotas create a property right (the right to fish). In order to be efficient (welfare maximising), property rights need to be universal, exclusive, transferable, and enforceable. In the case of fishing quota, universality means that all fish need to be covered by quota, and all fisherman must have quota in order to fish. Exclusivity means that only those who have quota can fish, and that all the costs and benefits of fishing should accrue to them. Transferability means that the quotas must be able to be transferred (sold, or leased) in a voluntary exchange. Enforceability means that quotas should be able to be enforced by the government, with high penalties for fishermen who fail to comply with the system.

The current system is failing in the last criterion (enforceability), and probably the first (universality) as well. A fishing industry that polices itself has little incentive to ensure that it is following the agreed management system. Discarding fish that are caught, and not recording them, is something that must be penalised. All fish that are caught (including those that are dumped) must be considered for the universality criterion to be satisfied.

The Herald editorial notes that the Ministry for Primary Industries' director of fisheries management wrote in an email that "If we found the golden bullet to stop discarding we would probably put half of the inshore fleet out of business overnight." If that's what it would take in order to ensure that fishing is sustainable, then it is the price that must be paid. Otherwise, the fish stocks are on a short road towards collapse from over-fishing. 

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