Fishing quota - additional allocation from 2024: consultation - business and regulatory impact assessment

6. Options Considered

Following analysis of consultation responses, two options are considered in this BRIA. These are:

6.1 Option 1 – A Combination of A) Historic Track Record (HTR) (Of Landings), and B) Special Allocation for the Non-Sector Groups

This is the ‘Do Minimum’ Option as it is a continuation of the methodology used to distribute AQ in 2021-23.

A) The HTR method allocates fishing quota based on what a vessel landed previously for each fish stock. Under this option, the share of AQ each vessel receives would be based on the vessel’s share of all landings (across active vessels in that year) for stock for which there is AQ during the identified reference period – in the consultation we proposed to maintain the use of the period 2015-19 under Option 1.

Distribution of AQ, based on the HTR of vessels over a recent reference period, would increase allocations to vessels which have landed those quota species in the recent past. This would take account of in-year quota adaptations, where vessels have acquired additional fishing opportunities (such as through swaps of quota) and landed that fish product.

B) The HTR method restricts access to AQ primarily to vessels in Fish Producers’ Organisations and Quota Management Groups. The Scottish Government recognises that this restricts the ability of new sector entrants and smaller vessels in the non-sector to access AQ. To help mitigate against this, Special Allocations reserve a portion of AQ to the fleet of non-sector vessels. The previous allocation of quota under this system can be seen in Tables 1 and 2.

6.2 Option 2 – A Combination of A) Historic Track Record (revised), B) Equal share of in-year swaps, C) Special Allocations, and D) Application by vessels to access West of Scotland cod quota on environmental criteria

Following analysis of consultation responses, Marine Directorate has developed Option 2. Option 2 represents a combination of a modification of Option 1, with the equal share of in-year swaps and the introduction of retaining West of Scotland cod AQ for application by vessels on environmental criteria.

The key differences between Option 1 and Option 2 are:

• Historic Track Record allocations will be based on an annually updated reference period (from 2025) rather than 2015-19.
• Additional Quota that is received as a result of in-year swaps with other coastal states may be distributed on an equal basis between eligible vessels.
• Special Allocations to the non-sector will increase for three species: North Sea saithe, North East Atlantic mackerel, and North Sea cod. Special allocations for other species will not be increased.
• The introduction of an application process on environmental criteria to access West of Scotland cod quota (from 2025). This will potentially extend to other stocks from 2026.

A) Revising the HTR reference period to an annually updated window ensures quota allocation is matched to more recent fishing activity and allows new entrants to build a track record through the leasing of quota from others. Landings from leased quota will count to the track record of the vessel that landed it. The reference period will be a rolling 5 year reference period.

B) Where we get transfers of quota from other Coastal States, this can happen at short notice and the fishing opportunity needs to be utilised in the year the swap takes place – meaning that any additional administrative delay in allocating the quota could result in lost fishing opportunity. By referencing in the quota management rules, it provides businesses with some certainty about how stocks may be allocated in these circumstances.

C) Raising Special Allocations on saithe, mackerel and cod recognises the high utilisation of quota of these species by non-sector vessels as seen in Table 2: Saithe with a 66% uptake, North East Atlantic mackerel with an 83% uptake and cod with a 130% uptake Other stock allocations will be in line with levels in recent years. We may reallocate Special Allocations to the sectoral groups if certain landing milestones are not met by the non-sector by a certain period in-year, or exchange these for other quota.

D) It is proposed that all West of Scotland Cod AQ is retained for applications from Scottish registered sectoral vessels. Sectoral Groups are bodies recognised by a UK fisheries authority^[4]. They have devolved quota management responsibilities under the UK and national rules of the fisheries authority that recognises them. It should be noted that Scottish licensed fishing vessels can be in membership of a Sectoral Group recognised and operating under the rules of a fisheries authority in another part of the UK. So, we envisage that Sectoral Groups outside of Scotland would be able to apply for this quota on behalf of their Scottish administered vessels.

Applicants would need to demonstrate how the utilisation of this quota would deliver on both of the environmental criteria below:

• the use of selective fishing gear; and
• the use of fishing techniques that have a reduced impact on the environment (for example that use less energy or cause less damage to habitats

Other criteria may also be utilised and will be developed in time for allocation in 2025.

6.3 Sectors and Groups Affected

The sectors and groups affected by a change to the Scottish Quota Management Rules in relation to the allocation of AQ are:

• UK Fish Producers’ Organisations and associated vessels,
• Scottish recognised Quota Management Groups and associated vessels, and
• fishing vessels not associated with either of the above (the ‘non-sector’ group).

6.4 Benefits

6.4.1 Option 1

This is the ‘Do Minimum’ option so no additional benefits are realised. Without further intervention, Option 1 will continue and so the impacts of other options are compared against Option 1.

6.4.2 Option 2

Under Option 2, there is no change in the level of AQ being allocated, but there is a proposed change to the method by which it is allocated. AQ increases or decreases from one year to the next according to the outcome of international negotiations and the subsequent quota apportionment by the UK Government to the Scottish Ministers. Therefore, a change to the economic activity stemming from the catching of AQ at the national scale is not expected.

The proposed changes in allocation method introduced as a direct result of this consultation, would result in a transfer of a modest amount of demersal and pelagic allocation from sectoral recipients in order to increase the level of AQ for the 10 metre and under non-sector group of vessels. However, as we expect that any quota transferred between fleets will have a similar uptake of quota, there is expected to be no net difference to the economy. The expected impacts on sectoral groups is found in the Scottish Firms Impact section of the BRIA.

Option 2 is expected to have higher social and environmental benefits compared to Option 1. Due to the difficulty in valuing these benefits they have not been monetised.

A) Changing the reference period to a rolling reference period will better ensure that the fishing benefits go to those actively fishing in the industry rather than giving access to quota to vessels even when their fishing pattern or activity has changed. This will also make it easier for new fishers to access quota reducing one of the significant barriers to those entering the industry, potentially increasing competition and therefore innovation in the market.

B) There is expected to be no additional benefit from maintaining the method of allocating pelagic quota equally across eligible vessels.

C) The increase in Special Allocation is expected to benefit in particular the 10 metre and under group of vessels, balanced against the cost to the sectoral vessels losing access to AQ.

D) The criteria relating to allocation of West of Scotland cod is principally intended to seek to incentivise fishing with more selective gear and with a reduced impact on the environment. The exact benefits of this criteria will depend on the final method utilised, however, it is expected that changes in fishing operation could decrease the impact on the benthic environment while increases in mesh size would result in decreased numbers of juvenile and undersized demersal fish being caught. Due to the value of this stock it is expected that fishing vessels may be incentivised to change their fishing method to access this extra quota. However, as the volume of quota is small relative to the demersal fishery this will likely only have a small economic benefit in terms of estimated landed value.

6.5 Costs

6.5.1 Option 1

This is the ‘Do Minimum’ option so has no additional costs.

6.5.2 Option 2

As noted in section 6.4, the Scottish share of quota is not changing, notwithstanding there being normal year-to-year variations in the level to be allocated, so there should be no negative impact to the Scottish economy as result of the change in allocation method. There will be a modest reallocation of fishing opportunities from sectoral allocations to the 10 metre and under non-sector group, however the quantities involved relate to fractions of 1% of revenue of either the pelagic or demersal sectoral groups. As we expect that any quota transferred between fleets will have a similar uptake of quota, there is expected to be no net difference to the economy.

A) There is expected to be no additional costs due to changing the reference years for HTR.

B) The impact on achieved landed value from increasing quota of saithe, cod, and mackerel was examined, in particular for the highly seasonal mackerel allocation and landings into Lerwick market, to understand if greater landings would result in lower prices. We propose special allocation quota is increased by 200T. Analysis of the prices achieved for mackerel landed into Lerwick market^[5] in 2023 when a similar increase was seen suggests that the market could absorb these extra landings without anticipating a downward pressure on achieved landed price. The large increase in mackerel landed by small vessels in 2023 saw no decrease in year-on-year price, as such this is not expected to result in additional costs, or lower than expected benefits, to the non-sector group of vessels.

The Marine Directorate intends to retain the ability to reallocate or exchange unused quota by a certain point in year to ensure high utilisation of quota. Stakeholder feedback from non-sector interests has indicated that being required to use quota in-year harms their ability to finance conversion of vessels to take greater advantage of available quota, due to less predictable future revenue. This is in contrast to for example sectoral vessels with Fixed Quota Allocations for Existing Quota, where they have certainty on the share of quota in future that they can use to raise finance for example for vessel upgrades. Calls were made to retain allocations even if unused to underpin business cases when seeking finance to diversify fishing gear and vessel capability. Nonetheless, we intend to continue operating in this way and monitor performance.

C) There is expected to be no additional costs due to continuing to allocate pelagic quota transfers equally between eligible vessels

D) There will be a cost to the Scottish Government in establishing an assessment framework for the West of Scotland cod environmental criteria, and an ongoing annual cost to assess applications that are made. Salary costs of £29,599.03 for initial setup and £3,751.28^[6] for ongoing administration are expected. There will also be costs to applicants in commissioning or making applications themselves but these have not been monetised. Any extra compliance requirements would be met within existing compliance budgeting, through risk-based targeting.

There is also the possible cost of purchasing specific gear or equipment which meets the criteria required. However, it is expected that vessels would only do this where the commercial benefits outweigh the costs and the data available indicate there are many vessels currently operating more selective gear than the legal minimum indicating there are vessels which would not have to take on any further costs in order to take advantage of this quota. The possible cost of additional gear is dependent on the individual configuration of the vessel and the level of catching necessary to make fishing economical. For a 10 metre and under vessel, costs are estimated to be approximately £2,700 per vessel to invest in deep water hook and line jigging gear ^[7]. For a large demersal trawler, purchase and installation of a selective or energy-efficient net can cost £15-32,000⁷. It is expected the uptake would initially be utilised by vessels who already have the more selective gear due to their experience deploying these gears.