Topic Area: Individual Transferable Quotas (ITQ) in
Geographic Area: Australia
Focal Question: How successful has the introduction of ITQs been?
(1) Geen, Gerry and Nayar, Mark, "Individual Transferable Quotas in the Southern Bluefin Tuna Fishery: An Economic Appraisal." Marine Resource Economics. V No. 4 (1988): 365-388.
Reviewer: John Coombs, Colby College '97
By 1983 the Southern Bluefin Tuna (SBT) fishery was in a severe state of decline. Catch rates and recruitment to the parental stock were going down. In 1983, a group of biologists from the major bluefin tuna fishing nations concluded that the total SBT catch should not exceed its estimated 1980 level. This arbitrary target was set to stabilize the size of the parental biomass and create a sustainable fishery.
In response to this recommendation, the Australian government implemented a total allowable catch limit of 21,000 tons in the Australian fishery as an interim arrangement. This limit did not serve as a binding constraint to the actions of the Australian SBT fishery because the fishery was in an extreme state of depletion. During the 1983-84 fishing season, Australian fishermen were only able to catch 16,000 tons, thus falling 5,000 tons short of the total allowable catch.
The total allowable catch limit implemented during the 1983-84 season served as an interim arrangement while the Australian government developed a system of Individual Transferable Quotas (ITQs) to manage the fishery. In October of 1984 an ITQ system was introduced in the Australian SBT fishery with a catch quota of 14,500 tons. Quota allocations were based on catch history (75%) and investment in the SBT fishery (25%). Individual fishermen received quotas totaling an average of 40-60% of their total catch in the qualifying period.
An ITQ fishery management system was uniquely suited to the SBT fishery for a number of reasons. Having only one species to control eliminated the problems of balancing multiple species catches and quotas. ITQ systems work best with a long-lived species, such as the SBT, rather than shorter-lived species which exhibit larger annual variations in parental stock. Lastly, the SBT fishery was particularly amenable to a system of ITQs because the market outlets are relatively few and well defined, reducing both black market sales and the costs of enforcement.
The average market price of SBT rose from $988/ton during the 1983-84 season to $2000/ton during the 1986-87 season (both figures are in 1986-87 dollars). Although the rise in price of SBT is partially attributable to smaller catch levels, most of the price increase is due to a market change in the industry that resulted from the introduction of ITQs. Before the introduction of ITQs, most fishermen concentrated their efforts on catching as much SBT as possible, which resulted in a relatively large proportion of smaller fish (<10kg) being caught. These smaller fish were primarily distributed to canneries. After the introduction of ITQs, most fishermen concentrated their fishing efforts on catching the larger SBT (>15kg), which were primarily distributed to the higher paying Japanese sashimi market. The ITQ system allowed Australian fishermen to maximize the value of their catches by concentrating on larger fish rather than maximizing the total amount of their catch (as is the incentive with aggregate quota schemes).
ITQs caused drastic changes in the fleet structure of the Australian fishery. Because of the reduction in allowable catch limits with the ITQ system, most fishermen were faced with the choice of either selling their quotas and exiting the market or buying up additional quotas from other fishermen. Each of the three Australian states experienced different changes in their fleet structure as a result of the ITQ system. By the second year of ITQs, South Australian fishermen had purchased over half of the quotas initially allocated to Western Australian and New South Wales fishermen. Most fishermen in New South Wales had been operating at low profit levels during the period prior to the introduction of ITQs. Following the introduction of ITQs, most New South Wales fishermen elected to sell their quotas and exit the market.
The departure of the Western Australian fishermen from the SBT fishery seems illogical at first because they were the only fishermen in Australia to be operating profitably before the ITQ system. Most Western Australian SBT fishermen did not fish exclusively for SBT. Instead, SBT was one among several species they fished. Many Western Australian fishermen took advantage of the opportunity to sell their SBT quotas and concentrated their efforts on other fish species. Although the introduction of ITQs achieved its intended purpose of reducing the SBT catch, it had the unintended consequence of creating a spillover effect into other markets.
The ITQ system resulted in many fishermen selling their quotas and exiting the market. Those who remained were forced to purchase additional quotas and increase the scale of their operations because of the relatively low allocation of quota to individuals. The result was a smaller number of boats fishing for SBT, with higher average catches per boat. SBT fishermen in Western Australia who did not sell their quotas and exit the market after the introduction of ITQs had average catches per boat approximately 67% higher than if the aggregate quota system had been retained. Southern Australian fishermen had average catches per boat 28% higher than they would have had under an aggregate quota system. The increased average catches per boat reduced the variable costs associated with the SBT fishery, thus serving to increase efficiency. This increase in efficiency reduced the level of fishing effort needed to catch a given tonnage of fish by 20% in Southern Australia. By reducing the effort needed to catch a given tonnage of fish, the ITQ system harmonized short term and long term interests. Total resource rents under ITQs were equal to $6.5 million, compared to an estimated $0 under an aggregate quota system.
Although ITQs reduced the amount of SBT caught by fishermen and increased efficiency in the fishery, they failed to restore parental biomass to desired levels. By 1988 the ITQ system had been in place for four years, but recruitment to the fishery continued to decline. The continued decline of the SBT fishery was not due to the inability of the ITQ system to properly manage the species. Reductions in the amount of SBT caught under the ITQ system were insufficient to make up for the excessive fishing that had occurred prior to the introduction of the ITQ system, causing the SBT population to continue to decline. Although it initially failed to stabilize the parental stock, the ITQ system created an efficient allocation of permits while reducing the catch amount.
In 1994, the SBT fishery showed the first signs of recovery as parental stock finally stabilized. Currently, the total of quotas issued by Japan, Australia and New Zealand is about 11,750 tons per year. Under current conditions, this catch level appears to be sustainable. In response to declining quotas, many SBT fishermen have recently turned to fish farming to maximize the value of their catch by placing the tuna in containment facilities until they reach larger sizes.