Tradable permits for fishing rights

April 30, 2003

Free Market Foundation

A quarter of the world’s fisheries are on the brink of collapse because of over-fishing. The conventional wisdom says government-mandated restrictions will bring back depleted stocks. The answer is to adopt the same type of innovative policy that has been used for decades in the realm of pollution control: tradable permits.

Sixteen countries, some with economies more dependent than Americas on fishing, have successfully adopted such systems.

New Zealand has had one in place since 1986; it has put a brake on over-fishing, restored stocks to sustainable levels and increased fishermen’s profits.

There are several tradable quota systems already in operation in the United States, including for Alaska’s Pacific halibut and Virginia’s striped-bass fisheries.

The first step in establishing a quota system is to determine the total allowable catch. The next crucial step is to allocate shares of that total limit to fishermen in individual quotas that are theirs and theirs alone (read: well-defined property rights).

Allocation of the individual quotas should be guided by simple pragmatism. It’s even possible to use the allocations to build support for the system.

Making the quotas transferable eliminates over-capitalisation and increases efficiency, because the least efficient fishing operations find it more profitable to sell their quotas than to exploit them through continued fishing.

In addition, these systems improve safety by reducing incentives for fishermen to go out (or stay out) when weather conditions are dangerous.

Tradable quotas also eliminate government’s motivation for curtailing the length of the fishing season:

Prior to the establishment of quotas for Alaskan halibut, for example, the government had reduced the fishing season to just two days.

Subsequent to the introduction of the system, the season grew to more than 200 days. That means a longer season of fresh fish for consumers.

Source: Robert N. Stavins, Taking Fish to Market: Why not trade fishing rights the way business trades pollution credits? Forbes, April 28, 2003.

For text http://forbes.com/forbes/2003/0428/040.html
For more on Environmental Regulations http://www.ncpa.org/iss/reg/

FMF Policy Bulletin/22 April 2003