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The effect of catch shares strength on management of marine resources


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Leon Leiva, RI (2015) The effect of catch shares strength on management of marine resources. PhD thesis, University of Tasmania.

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Catch shares or Individual Transferable Quotas (ITQs) are economic instruments used in fisheries to address common pool problems. They attempt to increase economic yield from the fishery by allocating exclusive and secure fishing rights and by promoting catch constraints that will lead to stock rebuilding. The catch shares are transferable, which results in a market for both sales and temporary leasing of quotas within the fishery. Fishers are expected to make their decisions in line with good stewardship practices because they benefit from future improvements in the stock, and efficiency of harvesting increases as quota is transferred to more efficient operators. There is empirical evidence that some successes towards these goals has been achieved by ITQs, such as fleet rationalization, however, some issues arise when fishers do not behave as expected. Therefore, knowing how fisheries respond to ITQs and how the incentives change with changing stock abundances is critical in assisting fisheries managers when designing polices. In this thesis the total allowable catch (TAC) setting process in Australian and New Zealand ITQ fisheries were analysed to identify factors that prevent fishers exercising good stewardship. The Tasmanian rock lobster fishery (TRLF) was then used as a case study to analyse the sale and lease quota market. Changes in quota transfers and interactions between operators in response to changes in stock abundance were assessed. Finally, an experimental economic approach was used to assess factors that may promote cooperation when restocking is used as a tool to address stock and congestion externalities that result in spatial stock heterogeneity. The aim of the thesis was get a higher understanding of factors that may prevent expected outcomes emerging from ITQ systems.
A fundamental and expected outcome of ITQ systems is resource stewardship through the setting of conservative TACs. This is anticipated to be promoted by increase in catch share values that results from higher catch rates, in combination with security and exclusivity. Despite most of the analysed fisheries behaving as expected, a nontrivial fraction consistently showed lack of stewardship, keeping constant and even increasing the TACs when stock status and asset values were trending downward. Several reasons were identified as a cause of this behaviour, the most frequent being a lack of understanding or acceptance of the principle underlying the ITQ systems. For instance, TAC constraints were interpreted as a reduction in profitability which indicated no understanding or value placed on the economic benefit of higher future catch rates. This analysis showed that despite the fact that stewardship is possible in ITQ fisheries, it is not inevitable and additional conditions are required to promote stewardship.
Stock abundance can change as a consequence of a lack of stewardship and/or natural causes such as recruitment failures. This can potentially be reflected in the quota markets, as they are expected to respond to variations in economic rent from the fishery. Since the ITQ system was introduced in the TRLF, the stock has shown two periods of trends in abundance - a period of stock growth between 1998 and 2006, followed by a period of stock decline between 2007 and 2011. These changes affected quota markets in the fishery with a trend of increasing activity in the permanent quota trade market during the period of stock growth and during both periods in the quota lease market. The transfer of quota units was not associated with the operators’ technical efficiency (i.e. catching capability) as predicted for ITQ fisheries, but linked to their financial capacity (i.e. number of owned quota units). The stock decline changed fishers’ behaviour, with those previously active reducing their activity in the quota lease market, and those inactive becoming involved in the market, resulting in an expanding fleet with more small operators.
Stock abundance changes also affected the lease quota trade network with increased interactions during the period of stock growth, which lasted until the second year of the period of stock decline. Individuals had greatest level of connection (traded quotas) with other fishers at this time, following which the trend reversed as the stock declined. The social capital of active operators and position in the lease quota trade network was mostly influenced by the fishing operation characteristics, and by quota ownership in the case of investors. Different dimensions of social capital influenced the success of operators in the fisher and caused them to modify their trading interactions in response to changes in stock abundance. There were some indications of asymmetry in bargaining power, such as between small and large quota owners and this relationship changed when the stock declined and the lease quota trade market became less competitive.
In addition to temporal variations, stock may vary spatially in terms of abundance and/or resource quality. ITQ systems do not delineate who can fish in each specific patch; therefore, fishers target more profitable areas, which generates stock and congestion externalities. An economic experiment was used to assess the effect of different factors promoting cooperation, including when restocking was used to address stock and congestion externalities and the consequent rent dissipation. When policies involved compulsory actions and economic punishment some extent of cooperation was reached. The highest level of cooperation occurred when the policy design gave the option of choosing between getting involved in the restocking plan or not. Nonetheless, evidence showed that the voluntary option should be complemented with a measure that provided those individuals who are intrinsically cooperative with security that those liable to free-riding are either physically excluded from or punished for fishing in the restocked area. When the design only included a voluntary setting, free-riders dominated. Thus, depending on signals conveyed by the rules, intrinsically cooperative individuals may lead the economic exchanges to an equilibrium of low rent dissipation and vice versa.
This research makes a contribution to the discussion of factors that affect fishers’ decisions, and how in some cases these decisions prevent expected outcomes of the ITQ system. This provides guidance on the design of management policies in the context of ITQ systems.

Item Type: Thesis (PhD)
Keywords: ITQ, fisheries, stewardship, quotas, leasing, network, experimental economics, Tasmania
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Copyright 2015 the author

Additional Information:

Chapter 3 appears to be the equivalent of pre-copyedited, author-produced version of an article accepted for publication in ICES journal of marine science following peer review. The version of record León, R., Gardner, C., van Putten, I., Hartmann, K., 2015. Changes in the lease and permanent sale quota markets of a rock lobster fishery in response to stock abundance, ICES journal of marine science, 752(5), 1555-1564, is available online at:

Date Deposited: 22 Nov 2016 00:03
Last Modified: 11 Sep 2017 02:30
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