Management Of The Scottish Inshore Fisheries; Assessing The Options For Change

25 Creel Limits.

25.1 Introduction

In 2013, Marine Scotland published the outcome of a consultation on new controls in the nephrops and crab and lobster fisheries ^[74] . The conclusion was that there was no appetite for the imposition of national creel limits and that, given the lack of evidence, there is no proposal to introduce them. The consultation concluded that, at the local level, creel or other limits may have a role to play. At the same time, the majority of IFG's management plans have indicated a desire for local creel limits, as well as some other gear restrictions.

The IFG Management Plans do not provide details of how creel limits would operate and the purpose of this section is to examine the key questions that need to be addressed when developing a creel limit regime. This discussion is required because when developing a Creel Management Regime ( CMR) the devil is in the detail. Seemingly minor changes in the architecture of a CMR could alter incentive effects which may produce unintended outcomes. These could be highly significant and very long lasting.

It should be appreciated, given the broad aim of this Section, the discussion is necessarily generalised since it does not relate to any particular IFG area, management aim, shellfish species or time frame. Thus potential outcomes which might seem relatively unimportant in one IFG area might be highly significant elsewhere. If mentioned is made of an IFG area it is only as an example. It is for users of this section to contextualise the analysis and issues to reflect their IFG area.

25.2 The Need for Creel Management

There are two rationales for managing creel effort. The first is because of the need to prevent overcapacity developing. This is the precautionary rationale. The second rationale is base on appreciation that fishing effort (or fishing mortality is presently excessive and should be reduced. This is the effort reduction rationale.

25.2.1 Precautionary Rationale

Most fisheries need to be managed to prevent overcapacity developing. Overcapacity arises because fishermen will seek to enter fisheries which are profitable and, if fisheries are unmanaged, effort levels only stabilise when profit from the fishery have been reduced to the level where entry to the fishery is no longer an attractive prospect. At which point, the biomass has been diminished and is being exploited by excessive levels of fishing effort.

The overcapacity problem has a number of symptoms. Profits from the fishery may be minimal and will certainly be less than the Maximum Economic Yield. Fish biomass is lower than the biomass required to deliver Maximum Economic Yield or Maximum Sustainable Yield and can be at levels which make the stock vulnerable to collapse through disease or ecosystem change. With overcapacity, operators will probably be keenly aware that they are competing in a race to catch fish. They may regularly experience territorial congestion and gear conflict, especially when targeting stocks which are immobile, such as nephrops, lobster, king scallops and velvet crab. With respect to shellfish, the competition for territory can create incentives to leave gear in situ to prevent others fishing an area. At the same time, there is no incentive to engage in husbandry activity such as postponing capture until shellfish have reached a size which would command higher prices per Kg.

There is nothing innate about Scottish creeling for shellfish which would suggest that these fisheries would be somehow immune from the overfishing problem. Indeed, this study's survey of gear conflict did find evidence of quite widespread conflict between static gears. The general point is that fishery managers need to be alert to the possibility of excessive static effort emerging, particularly at key hot spots.

It is also worth considering what might happen if some mobile effort was removed from within 1 NM or 3 NM. In the very short term, more sea bed would be available for the existing population of static operators. Indeed, it is believed that mobile gear needs to exploit a larger area of sea bed and catch more nephrops and scallops than static gear to produce a given profit sum. Thus, if five trawlers were to relocate, the sea bed area they previously fished might support more than five creeling vessels.

With some mobile effort removed, catch per unit of the existing static effort should rise. The average size of nephrops landed should also rise. This is because a higher proportion of smaller nephrops, which otherwise would be killed by mobile gear, can escape though the creel mesh. In addition, territorial congestion and gear conflict should diminish. In some locations these improvements could significantly enhance the profitability from using static gear. In the medium to longer term, these improvements will attract additional static effort. Whilst the fishery should be capable of supporting some new effort, in some IFG areas there is the possibility of excessive static effort emerging. In part, this would come from some mobile operators becoming creelers, but there is also a reservoir of licences held by part time, seasonal and casual operators which could be used to expand full time static effort.

In the longer term, the replacement of inshore mobile effort with an unmanaged expansion of static effort is potentially risky. That risk is particularly acute when one area imposes a mobile gear restriction whilst neighbouring areas do not. In these circumstances, the mobile free area would probably attract static effort from neighbouring operators. Whilst, the mobile free area should be able to cope with some additional static effort, it would be sensible to have a CMR in place to ensure that the expected benefits from restricting mobile gear are realised.

Precautionary creel management should result in existing operators receiving an entitlement which legitimises their current fishing effort. Theoretically, in the short run, operators should not be worse off. In the longer run, if there is stock enhancement, operators may wish and should receive additional entitlement. Although they should be no worse off, operators will probably resist precautionary creel management. On the ground, their perception is that their fishing is profitable and profitability could increase if mobile effort is reduced. If they cannot accept the rationale, they would probably regard the proposed CMR as unnecessary and intrusive. They might even suspect MS has ulterior motives and could strongly resist the introduction of a CMR.

25.2.2 Effort Reduction Rationale

In commercial fisheries, management measures are often only introduced once overfishing has developed. In these circumstances, a CMR has to address the issue of effort reduction. Problems arise because decisions need to be made about how to ration the target level of effort among existing and potential operators. There will be resistance because, in the short run, the CMR will mean that the average operator will have to manage with fewer creels. Operators' perception is that whilst historically there were higher catches and profits, they are presently satisfactory and forced reductions in their creel numbers would be problematic.

One problem with a CMR which seeks to reduce effort is the issue of displacement. There are two dimensions to this. The first is where an IFG introduces a CMR and a neighbouring IFG does not. A proportion of precluded effort might be displaced to the neighbouring IFG. Second if CMRs are restricted to IFG areas (i.e. within 0-6 NM), a proportion of the effort precluded within 0-6 NM could be displaced outside 0-6 NM. This might not be a problem along the west coast of Scotland, where very little creeling in undertaken beyond 6 NM. The situation on the east coast is different. The brown crab fishery in particular can be prosecuted beyond 6 NM, and a CMR within 0-6 NM might displace some static gear to beyond 6 NM.

The situation is more complicated when considering the simultaneous introduction of a 0-3 NM restriction on mobile gear and a CMR within 0-6 NM. On the west coast of Scotland, if mobile effort targeting Nephrops is removed, there could be very little displacement. This is because, as discussed in Section 3, the replacement of mobile with static effort creates space and biomass for additional vessels both inside and outside 0-3 NM. On the east coast, crabs and lobster are relatively more important. Since these are not targeted by mobile gears, the removal of mobile gear to locations outside 3 NM does not create as much scope for additional effort. With a 0-3 NM restriction, there might therefore be stronger displacement effects on the east coast. Compared with the west coast, on the east coast the combination of a 0-3 NM restriction on mobile gear and a CMR seeking to reduce static effort inside 0-6 NM could create more serious and complicated displacement issues.

25.3 The Need for Flexibility

Before considering particular CMRs, there is a generic issue of flexibility which needs to be addressed.

In an ideal world, a CMR should be able to deliver the levels of fishing effort (e.g. total number of creels fishing a given area) that are optimal in terms of achieving the objectives of a particular fisheries management plan. The objective(s) could be the achievement of an employment target, or the maximisation of total profit from the fishery or ensuring a target number of vessels. Irrespective of the particular objective(s), it might be necessary to iterate to achieve a near optimal level of creel effort. In other words, a creel limit is imposed and then adjusted in the light of experience. Eventually over time it is hoped that the iteration process would converge on a broadly acceptable level of effort.

There are potential problems with these iterations which should be mentioned. An issue is that the iterations might not be stable if there are unknown lags in either ecosystem adjustment and/or operators' response to changes in their costs and revenue. Also, even if the iteration was successful, unpredictable changes in legislation, market conditions or natural change in stock abundance could mean that a previously satisfactory level of effort is now either excessive or insufficient. Thus, flexibility is required on two counts; to deliver the best level of static effort, and to enable the appropriate response to unpredictable events. We might also recognise the possible need to also respond to predictable changes such as seasonal variations.

Although flexibility is highly desirable, frequent adjustments can undoubtedly create difficulties for operators. For example, an operator might invest in a vessel which is ideal for a 1,200 creel limit, then to discover the local limit has been cut to 900. This kind of uncertainty might therefore reduce the willingness to invest in vessels and gear. Despite the problems, it would be sensible to build flexibility into every CMR. It is therefore prudent that, from the outset operators fully appreciate that there might be periodic adjustment to their creel entitlements.

25.4 The Evaluation of CMRs

There are four key interrelated questions that should be addressed when designing a CMR. At the core of a CMR is the entitlement of operators (who have shellfish entitlement as a precondition) to use a particular number of creels in a defined area.

1. Should the defined area be the whole IFG area (e.g. the whole South West IFG area) or should the IFG be partitioned into smaller territories (e.g. the South West IFG could be partitioned into smaller defined territories such as upper Loch Fyne, Sound of Jura etc)?

2. How should creel entitlements initially be distributed to operators and subsequently re-allocated over time? There are various possibilities. A command and control approach could be used where entitlement is allocated according to some agreed criteria, such as track record. Re-allocation could follow the same kind of process with perhaps waiting lists being held. Retired or surrendered entitlement would then be re-allocated to those on top of the queue. ^[75] Alternatively, the market mechanism could be used. The market determines who gets which boat, which creel, which crew, so why not use the market mechanism to both initially allocate and re-allocate creel entitlement? It is also possible to have a mix of command and control and the market. For example the initial allocation could be through command and control, with subsequent re-allocation driven by the market, or vice versa.

3. How long should the creel entitlement last? Entitlement could be for a fixed term (e.g. one, three, five, ten years) or could be in perpetuity.

4. How should the creel entitlement be specified? Entitlement could be in the form of a maximum number of creels per vessel, with no limit on the number of vessels. Or, the entitlement to fish a maximum number of creels in a defined area may be limited to vessels satisfying a particular criterion (e.g. track record, willingness to buy). Alternatively, creels may only be used when operators have obtained creel tags which then entitle them to deploy appropriately tagged creels; untagged creels having no entitlement.

As seen from the brief outline above, there are a number of answers to each question, and when these are permutated there are a large number of conceivable CMRs. Although some combinations of characteristics might produce CMRs which are not fit for purpose, a proportion of potential CMRs are worthy of serious consideration.

When it comes to evaluating the relative merits of CMRs, this discussion faces a problem. The problem is that the relative merits of alternative CMRs can only be assessed in light of the declared policy objectives and agreed criteria. The criteria that might be used to evaluate a proposal for a fully developed CMR would be:

Effectiveness

This is the most obvious criterion. It addresses the question as to whether the CMR is actually capable of achieving its stated objectives. The objectives might relate to; stock conservation or enhancement, reducing territorial or gear conflict, increasing local employment, increasing local profitability, encourage new entrants. This will require an ex ante analysis of all the CMR's impacts and consideration of whether there are perverse incentive effects that might undermine effectiveness.

The Efficiency of the Objectives

Irrespective of the policy measures used, the achievement of some objectives could deliver benefits which are smaller than the costs of achieving them. For example, it would not be efficient to maximise profits for a fishery if that would result in greater costs being imposed elsewhere such as in wildlife tourism or recreational sea angling.

Least Cost

All things being equal, it is preferable to use a CMR which achieves the given objective and in the process generates the least cost. Thus, whilst a policy objective can be efficient, the CMR as designed might not be optimal. Thus, explicit consideration might be given as to whether an alternative CMR or a completely different type of policy instrument would achieve the same objectives at a lower cost.

Flexibility

As discussed above, the CMR should be capable of responding appropriately to changes in environmental conditions or market conditions. Consideration of flexibility should also probably embrace the bureaucratic layers and time required to comply with legal requirements.

Adequacy of Resources

Explicit consideration might be required as to whether MS the IFGs have the resources necessary for negotiating, coordinating, monitoring, enforcing and finessing CMRs.

Community acceptance

The success of a CMR might be dependent on the extent to which the community agrees with the policy objective and understands how the CMR will be implemented and how it may develop over time.

The outcome of an assessment about the relative merits of alternative CMRs depends on which criteria one uses and the weightings applied to each. Unfortunately, since we do not have a live case study, declared policy objectives or an agreed list of criteria, the discussion here is incapable of systematically evaluating the relative merits of alternative CMRs. Instead, the discussion below focuses on how the answers to the key questions (listed 1 to 4 above) define the characteristics and shape the outcomes of a CMR.

Whilst each of the four key questions can be explored individually, it is the combination of these characteristics that generates the incentive effects, behavioural responses and possible outcomes. Thus a characteristic (e.g. tradable entitlement) ^[76] which might be quite innocuous when viewed in isolation could deliver an extremely profound outcome when combined with another characteristic (e.g. a creel entitlement in perpetuity)

Each of the four questions will therefore be addressed in sequence, but given the significance of some key combinations of characteristics, the discussion below has to contain forward and backward linkages. This results in an element of unavoidable repetition.

In the absence of criteria, the discussion below should also endeavour to be non-judgemental about outcomes. In effect, the discussion should simply list and explain outcomes associated with characteristics and combinations thereof. Unfortunately, this produces a very sterile discussion which is not capable of eliminating CMRs with characteristics that generate obviously ludicrous or idiosyncratic outcomes.

This discussions adopts a pragmatic approach uses a categorisation of "advantages" and "disadvantages" of certain CMR outcomes. For instance, if under one CMR, Marine Scotland ( MS) would need additional resources to implement, monitor and enforce the CMR, then other things being equal, this is regarded as a disadvantage. This is an obvious example, and there are many others, where no reasonable person would disagree with our categorisation.

However, one group of stakeholder's advantage can be another group's disadvantage. For example, if a CMR generates higher total profits by concentrating effort into a small number of very large efficient vessels, then some stakeholders may see this as an advantage. Those enjoying larger profits would fall into this category, as would those who believe, not unreasonably, that in general it is better to catch shellfish using the most efficient static methods. Others might think it undesirable that the profits from fishing are enjoyed by a smaller number of individuals who own large vessels.

Our position is that if readers of this report do not agree with some of our categorisation, they can change the re-classify to reflect their preferences. The important point is that judgements about any particular CMR are formed on the basis of an appreciation of how changes in its characteristics change outcomes.

25.5 The Key Questions

25.5.1 Defining the Area

Question 1: Should the defined area be the whole IFG area or should the IFG be partitioned into smaller territories?

The operator's or vessel's creel entitlement (maximum creels per vessel or creel tags) could be specified for:

(i) The entire IFG area

(ii) Separate smaller territories which collectively comprise the IFG.

(i) Creel entitlement applying to the entire IFG area

Advantages

• Easy for operators to understand.
• Operators are free to fish anywhere in the IFG area and are not boxed into a particular territory.
• Compared with a partitioned IFG, the burden of administration on MS resources would be much less.

Disadvantages

• The race to catch fish remains in place because there is no restriction on the location of effort across the IFG.
• Since the spatial distribution of effort is unregulated, there is the danger of "hot spots" or "honey pots" which:
  • Attract a disproportionate amount of the IFG creel effort, so that localised overfishing becomes an issue.
  • Are characterised by gear conflicts and territorial congestion.
• There is very little incentive for husbandry, since other operators can move into and exploit the improved areas.
• Some of the IFG areas are very large, particularly the South West IFG, East Coast IFG and the Moray Firth and North Coast IFG. It might be difficult to monitor and police the CMR in these large areas.
• It creates restrictions for operators who traditionally have fished across IFG boundaries, or it requires them to have creel entitlement for more than one IFG.

(ii) Creel entitlement for separate territories within the IFG.

With this option, the IFG area is divided into separate management territories, each of which will have its own entitlement (tagged creels or maximum number of creels per vessel).

Advantages

• Provides an opportunity to more effectively manage what otherwise would be "hot spots" of overfishing and gear conflicts.
• With smaller territories, fewer operators and restricted entry of new effort, the race to fish might be tempered, especially if operators develop personal relationships. Indeed, it is more likely that with small territories operators will develop local Working Practice Agreements ( WPAs) which reflect the particular features of local fishing and the personal preferences of local operators.
• With smaller defined territories, the incentives to cooperate become stronger whilst the propensity to compete is diminished. This is because, compared with competition, the rewards from cooperation are much greater when entry is restricted and non-members cannot benefit. At the extreme, with smaller territories one can envisage well developed cooperatives where members engage in various forms of cooperative activity ranging across; gear and vessel use, on-shore storage facilities, transport, purchasing of inputs, and marketing.
• Husbandry activity becomes more feasible and may even form an explicit element of the local WPA.
• Monitoring of the CMR in each territory could be easier as local intelligence would be comprehensive and better able to identify transgression.

Disadvantages

• Nomadic operators would have to have static effort entitlement across a number of territories within their IFG area.
• The separate territories need to be defined and there will be sensitivities around the drawing of some boundaries. This task becomes even more complex if there are different creel entitlements for different species categories (e.g. crabs and lobsters, nephrop).
• Operators who fish in one territory might become boxed into one territory which could "go off". Other areas may have too little effort. The required flexibility discussed above might therefore also have to embrace occasional review of territorial boundaries within the IFG area.
• Marine Scotland Compliance / IFG's would require more resources if they were responsible for managing the separate CMRs operating across a number of territories in some IFG areas.

Summary

If an IFG area is partitioned into territories, there is more control over local fishing effort. This means that gear conflicts and territorial congestion can be better managed and the spatial distribution of effort across the IFG can better aligned with fish stock distribution. It is also possible that the combination of smaller territories and entry restrictions can be self-policing and create stronger incentive effects for cooperation between operators. On the downside, separate CMR can be confusing or can create difficulties for those operators who fish across a number of territories. In addition, unless boundaries were altered, changes in stock distribution could leave some operators stranded in unproductive territories. If the territories were not self-policed the resource costs for Marine Scotland Compliance could be significant ^[77] . Thus, viewed overall, partitioning provides the opportunity to manage localised overfishing and conflict and it certainly creates some desirable incentive effects. The potential problems are the possible constraints on operator's range of activity and high bureaucratic costs if there is extensive element of command and control.

25.5.2 Allocation and Reallocation of Creel Entitlement

Question 2: How should creel entitlements be initially distributed to operators and subsequently reallocated over time? [78]

There are two dimensions to the allocation of creel entitlement. The first is the initial allocation of entitlement. The second dimension is the reallocation of creel entitlement between operators. A reallocation process is usually required because over time some operators receiving an initial creel entitlement will retire from fishing altogether, or may switch to mobile gear or may move out of an area. Thus, at any given time a proportion of the existing creel entitlement could become available for others to use. At the same time, there will be some operators looking to obtain the relevant creel entitlement. These would include potential entrants or those switching from mobile gear or those moving into the area. As well as reallocation associated with entry and exit of operators, it might be desirable to enable operators to adjust their creel fishing effort in response to changes in market conditions, stock abundance or personal circumstance.

It should be noted that if the creel entitlement were to last for only one year then a reallocation process would not be required because there would be an annual opportunity to reallocate entitlement. For the purposes of the discussion we shall assume that creel entitlement has a longer life span than one year. The issue of the time span of entitlement is discussed later.

With respect to both the initial allocation process of and the reallocation process, we consider two approaches. One is the command and control approach as typified by using the track record of the vessel or the operator. The second approach uses the market mechanism where operators' willingness to pay for creel entitlement is the rationing device.

Initial allocation using command and control

Essentially, operators' applications for initial creel entitlement are scrutinised and MS selects the operators who will receive the creel entitlement. The key issue about command and control is that MS needs to develop and use criteria for judging the merits of each operator's request for creel entitlement. These criteria should be coherent and consistent so that the outcome does not depend on the personnel who are ranking operators' applications. It will probably be necessary to have a qualifying criterion which determines the population of operators who are eligible to apply for initial creel entitlement in an area. Most probably, the initial distribution of creel entitlement would be restricted to those normally fishing creels in the area (e.g. the IFG area or, if partitioned, its territories) being managed. Though, there could be other criteria. Even this qualifying condition might create problems at the margins. Some part-time or hobby operators who only very occasionally fish an area might be eligible because they possess a licences with shellfish entitlement. Along some borders between IFG areas, some operators could conceivably catch shellfish in one IFG area, but land in another because of access to buyers. Their track record might not reflect this. At the margins almost any qualifying condition could involve some awkward judgements about a few operators.

It should be mentioned that an alternative to judging the relative merits of operator applications is to use a ballot. This generates a random outcome obviating the need to judge applications. The problem is that an operator who earns 10% of their net income from creeling an area might obtain creel entitlement at the expense of someone who currently derives 100% of their income. Compared with command and control and using the market (see below), we cannot identify any net advantage from have a random allocation. This discussion does not give any further consideration to a ballot.

Initial allocation using the market mechanism

The basis of this approach is that the creel entitlement will be allocated to those who are willing to sacrifice most, as reflected in their willingness to pay ( WTP). Instead of MS judging applications through the market mechanism, operators self select. Those who are unwilling or unable to pay the price set by MS do not obtain creel entitlement. Similarly, if an auction was used, those who are unable or unwilling to outbid would not obtain entitlement. Thus, MS does not make explicit judgements about the relative deservingness of operators, though it might restrict eligible bidders to holders of shellfish entitlement and/or those with local track record.

Reallocation using command and control

With a command and control approach to reallocation, records of existing vessels and/or owners would need to be kept and adjusted when operators/vessels exit the fishery. MS would also need to ensure that operators are not allowing other operators to use their creel entitlement. ^[79] In addition waiting lists would need to be kept, on-going applications scrutinised against criteria and appeals processed. ^[80] If the IFG area is partitioned, this would be done separately for each territory.

Reallocation using the market mechanism

If the market mechanism is used, MS has no direct involvement in the reallocation process. An operator seeking creel entitlement simply purchases, borrows, swaps or rents the entitlement from another operator. Although MS does not have direct involvement, it can shape the consequences of transactions in creel entitlement. It does this by setting rules and regulations governing the buying and selling of entitlement. For example, it might specify:

• The time span of creel entitlements (e.g. one year, five years or in perpetuity)
• The amount of creel entitlement a vessel or operator may own at any point in time (e.g. 1,000 creels)
• The number of vessels an operator may cover with creel entitlement at any point in time (e.g. 1 vessel per operator)

In this way, if MS desired it could prevent potentially undesirable outcomes. For example, MS might not wish one individual acquiring the entire creel entitlement for a particular territory. It might do this by specifying a five year (renewable) life span and a perhaps maximum 1,200 creels per operator.

Combinations of Mechanisms for Initial Allocation and Reallocation

The approach to the initial allocation and subsequent reallocation are interlinked. There are four possible combinations. The initial allocation and reallocation could both be command and control or both driven by the market mechanism. Alternatively, the initial allocation could be command and control and but with the reallocation being market based, or vice versa. These are summarises below:

	Initial	Reallocation
i	Command and Control	Command and Control
ii	Market Mechanism	Market Mechanism
Iii	Command and Control	Market Mechanism
iv	Market Mechanism	Command and Control

With respect to (iv), we simply cannot envisage a system whereby operators initially bid for creel entitlement, but if the entitlement is surrendered it is then given for free to another operator. This would be unfair to operators who have purchased entitlement. If MS were to sell surrendered entitlement then this is described by option (ii). We therefore do not give further consideration to option (iv). The remaining three options are considered below.

(i) Initial allocation and re-allocation by command and control

This is essentially an application process, where a criterion (e.g. track record) is examined and in some way operators with the better record obtain creel entitlement. Conceivably other criteria could also be used such as the age of the operator, size of vessel, willingness to employ local crew, membership of association etc. For the purpose of the discussion, we will only consider track record.

Advantages

• If track record is used this is a reasonably objective criterion.
• The basic features are easily understood.

Disadvantages

• If track record is used for the initial allocation there is the potential for disharmony around the cut-offs applying to historic length of time and borders of territory fished. These could be substantial issues if the IFG area is partitioned into many separate territories.
• This is potentially unfair for some operators. If the vessel track record is used for the initial allocation this would disadvantage a long standing operator who has recently changed his or her vessel. If operator track record was the criterion, new younger operators would be disadvantaged.
• Potential entrants to the static sector or to the IFG area/territory are disadvantaged. They will not have track record and might not receive an initial allocation. They will have to wait for retired creel entitlements to become available, and if track record determines position on a waiting list they might wait in vain.
• Operators about to retire or exit the sector would be eligible for and might receive initial creel entitlement. If they receive an initial allocation there is no strong incentive to formally surrender entitlement and enable younger operators to enter. Instead they might fish occasionally.
• With reallocation by command and control, records of existing vessels and/or owners would need to be kept up to date and adjusted when operators/vessels exit the fishery. MS would also need to ensure that operators are not allowing others to use their creel entitlement. Waiting lists would need to be kept, on-going applications scrutinised against criteria and appeals processed. If the IFG is partitioned, all this would have to be done separately for each territory. This could require a significant bureaucracy.

Summary

With a command and control regime there is the potential for disharmony, unfair outcomes and the disadvantaging of new entrants. If IFGs are partitioned there could be a requirement for a significant bureaucracy ^[81] .

(ii) Initial allocation by command and re-allocation by willingness to pa y

Operators applications for initial creel entitlement are scrutinised, a selection made and the successful applicants duly informed. Thereafter, within the rules specified by MS (e.g. maximum number of creels per operator, or maximum number if vessels per operator) individual operators can buy, sell, lend or lease their creel entitlement.

An important issue here is the time span of the entitlement. As explained above, if creel entitlement was renewed annually a reallocation process would not be required because there would be an annual opportunity to reallocate entitlement. The discussion about re-allocation therefore assumes that creel entitlement would last more than one year and theoretically could last in perpetuity.

Advantages

• If track record is used this is a reasonably objective criterion.
• The basic features are easily understood.
• Re-allocation by the market mechanism means there will be an incentive to sell or lease creel entitlement that is not being fully utilised, perhaps by operators considering retirement.
• Re-allocation by the market mechanism enables new entrants to obtain creel entitlement.
• Re-allocation by the market mechanism means that MS do not have to keep waiting lists or get involved with scrutiny of on-going applications and processing appeals. This could be a substantial resource saving for MS, compared with re-allocation by command and control operating across a large and heavily partitioned IFG.
• Re-allocation by the market enables individual operators to change the number of creels they use, and where they use them. They are therefore better able to respond to changes in market conditions, stock distribution and abundance. Though the extent of this flexibility would depend on any trading restrictions specified by MS, as well as on how creel entitlements are specified.
• The existence of a market means that if there was a case for increasing fishing effort MS can periodically sell creel entitlement. MS could also purchase creel entitlement and thereby remove any excessive fishing effort. The capacity of MS to engage in these on-going open market operations depends on how creel entitlement is specified and the lifespan of the entitlement.
• MS can build in flexibility. Provided the life span of creel entitlement is limited to say five or ten years. This is because, at some point in time, the existing creel entitlements would no longer be valid. Operators would have to apply for new creel entitlement. This re-issue gives MS the opportunity to adjust the borders of territories and the target level of total creel effort. MS may also tweak the criteria used to allocate creel entitlement. It might for example exclude operators who have been regularly involved in gear conflict.
• As discussed previously, if an IFG is partitioned there is a stronger incentive to form cooperatives, engage in husbandry, or have developed WPAs. With a fixed term, MS could reinforce these incentives by making the five year or ten year renewal of creel entitlement conditional on evidence of engagement in these activities. MS could also make renewal conditional on operators developing and training younger crew, perhaps gaining Modern Apprenticeships or other recognised awards.
• The five or ten year re-issue also allows MS the opportunity to correct for any unintended outcomes arising from the on-going market in creel entitlement . ..

Disadvantages

• As stated previously, if track record is used for the initial allocation there is the potential for disharmony especially with a large and heavily partitioned and IFG.
• The flexibility and incentive effects enabled by the fixed term of creel entitlement (e.g. 5 or 10 years) means that the allocation exercise would need to be repeated. Though, the process should not be as fraught as the initial allocation because trading operators would have been adjusting the fishing effort and establishing track record.
• With the opportunity to trade, there is the possibility that creel entitlement in an area could be acquired by one, or a small number of operators. However, we believe the incentive to acquire and accumulate creel entitlement might not be very strong. This is because, unlike, say, pelagic trawling, there are few economies of scale in creeling. Since on each vessel, each creel is handled in sequence using a single pot hauler, one six ton vessel is unlikely to be able to process as many creels as two three ton vessels. With pelagic trawling the larger the vessel the lower is the average cost of each ton of fish landed. This is because there are economies associated with bulk handling, greater engine power, large nets, more specialised machinery and crew. It is not surprising that over time there are fewer pelagic vessels, but the remaining vessels become very large and quota is accumulated by a few operators. The absence of economies of scale in creeling might act as a natural constraint on the concentration of creeling tags. If not, restrictions could be placed which prevent undesirable concentration of creel effort (e.g. a maximum of 1,200 creels per vessel)
• With the opportunity to trade, there is the possibility of the effective transfer of a public resource (nephrops, crabs and lobster) into private hands. The transfer would be permanent if the creel entitlements were in perpetuity. This permanent transfer can be forestalled if the creel entitlements have a fixed term (e.g. five or ten years)

Summary

Re-allocation by the market mechanism enables new entrants to obtain creel entitlement and existing operators the opportunity to finesse their fishing effort. MS do not have to keep waiting lists or get involved with scrutiny of on-going applications. Rules might be required to prevent undesirable market outcomes such as the accumulation of creel entitlement. Fixed term entitlements provide MS with opportunity to periodically correct for any market imperfections that may arise, respond to changes in stock conditions and incentivise operators to generate preferred outcomes. On the downside, there could be problems in administering the initial allocation, as well as the re-issue of fixed term creel entitlement.

(iii) Initial allocation and re-allocation by willingness to pay

Under this arrangement, MS would potentially play a very limited role beyond determining the target creel effort for an IFG area, or if partitioned its territories.

Advantages

• Easily understood
• Initial creel entitlement is allocated to those who want it most as reflected in their willingness to pay the price.
• With respect to the initial allocation, MS does not have to choose between operators
• With partitioning into small territories it is likely that local operators will bid more because of an unwillingness of more distant operators to bid for areas they are unfamiliar with. The eventual allocation might closely resemble the track record allocation
• As outlined above, market re-allocation:
  • Creates an incentive to sell or lease creel entitlement that is not being fully utilised
  • Enables new entrants to obtain creel entitlement
  • Obviates the need for MS to keep waiting lists or get involved with scrutiny of on-going applications and processing appeals.
  • Enables individual operators to change the number of creels they use, and where they use them.
  • Provides the opportunity for MS to engage in on-going open market operations
  • Fixed term entitlements mean that MS can periodically correct for any market imperfections, respond to changes in stock conditions and incentivise operators to generate preferred outcomes

Disadvantages

• There would be a transfer of income from the creel sector to Government (which might be used to fund the additional MS administration).
• New entrants or those who are financially constrained might not be able to pay the required price. Thus creel limits or tags are not necessarily allocated to those who most desire creel effort. Long standing local operators may be replaced by new entrants, simply because of differences in the ability to pay.
• If the creel entitlement is a fixed term (e.g. 1 year, 5 years or 10 years), there would be a recurrent transfer on income from the sector to the Scottish Government. Indeed, it is entirely possible that through the bidding process the public purse might appropriate all future profits from creeling.
• To prevent creel effort being acquired by one, or a small number of operators, restrictions might need to be introduced.
• The correct price to charge cannot be known. If the price is set too high, then some creel limits or tags will remain unsold. If the price is too low there will be excess demand and a supplementary allocation mechanism would be required, such as a ballot. This problem of pricing could be eased by inviting creelers to submit a bid for a creel limit or creel tags.
• Potentially confusing for operators fishing across IFGs or territories as they will have to purchase or bid for each territory.

Summary

Reliance on the market for the initial allocation, the re-allocation and the re-issue of fixed term entitlement substantially reduces the administrative burden on MS. At the same time, the market mechanism enables new entrants to obtain creel entitlement and existing operators the opportunity to finesse their fishing effort. Fixed term entitlements mean that MS can periodically correct for any market imperfections, respond to changes in stock conditions and incentivise operators to generate preferred outcomes. On the downside, there would be a regular and possibly substantial transfer of income from the sector to the Scottish Government. Initial creel entitlement would be allocated to those with the deepest pockets and some local operators with extensive track record may be pushed out completely. Rules might be required to prevent undesirable market outcomes.

25.5.3 Length of Entitlement

Question 3: How long should operators' entitlement to use creels last?

From the outset there needs to be clarity in the length of creel entitlement. Conceivably the entitlement could be in perpetuity or a fixed term. We consider three options

(i) Annual entitlement.

(ii) Five year fixed term

(iii) In perpetuity.

(i) Annual Renewal

Advantages

• Provides MS with flexibility and probably obviates the need to re-allocate creel entitlement.
• If the market is used to allocate initial creel entitlement, risk averse operators might prefer a one year term.

Disadvantages

• Annual uncertainty for operators might lead to less investment in vessels and gear.
• There would be uncertainty for crew which might lead to exacerbation of recruitment and retention problems.
• There is less incentive to develop and train younger crew.
• If combined with command and control allocations there is no guarantee of renewal and there would be a reduced incentive to engage in husbandry, develop WPAs or engage in cooperative activity with other operators. Similarly with the market mechanism operators would have to engage in annual bidding with no guarantee of success.
• If track record is used for renewal potential entrants get further back in the queue and have to wait for creel entitlement to be surrendered.
• There would still be a race to fish against others and against the clock as the annual term expires.
• Even with a partitioned IFG and small territories there would still be a race to fish. This is because there is little incentive to develop WPAs or cooperatives.

(ii) Five Year Renewal

Advantages

• Less uncertainty for operators and crew.
• The reduced uncertainty might lead to more investment in vessels and gear.
• Possibly better recruitment and retention of crew.
• If combined with smaller territories there is a stronger incentive to engage in husbandry, develop WPAs and engage in cooperative activity.
• The five year fixed term provided MS with an opportunity to incentivise particular forms of behaviour by requiring operators seeking renewal to provide evidence of husbandry, adhering to WPAs, cooperative activity.
• The fixed term provides the opportunity to penalise some forms of activity. For example, if a creel tag system is used, MS may decide not to renew the tags of operators those who renting them out. Instead, MS might prefer to allocate the creel tags to those who have been and using the tags (rented or otherwise) creels over the five year period.
• Administrative burden is less than the annual renewal.

Disadvantages

• Less flexibility for MS than the one year term.
• There is still some uncertainty which might deter investment in vessels and gear, especially nearing the end of the term.
• Towards the end of the term, operators might alter their fishing practices if they anticipate their creel entitlement would not be renewed. This might result in more gear conflict, more competition for territory but less husbandry.
• Operators who were successful in obtaining entitlement would probably prefer a longer term (10 years or in perpetuity).

(iii) Perpetuity

Advantages

• Less uncertainty for operators.
• Reduced administrative load for MS.

Disadvantages

• Less flexibility for MS to adjust.
• MS cannot use renewal to incentivise operators to engage in desirable fishing practices.
• If they are non-transferrable, new entrant precluded
• If allocated by track record and transferrable in perpetuity, there would be a very large transfer of wealth to the initial owners and new entrants would only receive normal profit.

Summary

The shorter the term the greater is the uncertainty for operators and MS's flexibility in managing the fishery. A fixed term provides MS with the opportunity to incentivise particular operator practices such as husbandry, developing WPA, cooperative activity, crew training. However, with annual renewal the higher level of uncertainty works against these incentive effects. If these incentive effects are important to MS, a five or 10 year entitlement would be preferred, despite the reduced uncertainty and the greater flexibility offered by annual renewal.

25.5.4 Specifying the Creel Entitlement

Question 4: How should creel entitlement be specified?

There are a number of possibilities including, but not restricted to:

I. A maximum number of creels per vessel combined with controls on the number of vessels.

II. A maximum number of creels per vessel.

III. A fixed number of creels (tags) to be shared among operators .

(i) Maximum number of creels per vessel, with no control on the number of vessels. Partitioning an IFG area only makes sense if the intention is to apply different vessel creel limits to each territory. However, in the absence of controls on the number of vessels in each territory, differential vessel creel limits within an IFG area would not be sensible. This is because the movement of vessels and therefore effort between territories would swamp the impact on effort of differential vessel creel limits. The discussion of option (i) below therefore assumes that an IFG would not be partitioned.

Advantages

• Easily understood.
• Relatively easy to police.
• An element of flexibility in enabled through adjustment in the IFG's vessel creel limit.

Disadvantages

• Since vessel numbers are not controlled, operators can move into the area from neighbouring IFGs. Also, subject to licences being available, operators can add more vessels to the fishery.
• There might be initial difficulties in aligning the creel limit per vessel with the policy objectives it is designed to deliver (e.g. stock conservation, increasing employment, increasing incomes).
• There is probably insufficient flexibility to cope with the need to iterate and to respond to unpredictable events such as migrants, new entrants and stock fluctuations. This is because the only available control lever is adjustment in the vessel creel limit. Unless this is regularly adjusted there is no effective control of effort in the IFG area, but regular adjustment will create uncertainty.
• In some productive locations, catch per day can be increased by hauling creels more than once per day. It is possible that some operators in some locations might increase the frequency of double hauling if the creel limit reduces the amount of creels they can use.
• Since there is no restriction on vessel numbers or location of effort, the race to fish remains in place across the IFG.
• There is very little incentive for husbandry, since other operators can exploit the improved areas.
• The vessel limit will be sub-optimal for some vessels, though this can be mitigated by allowing larger vessel size categories (e.g. > 12m) to have a higher creel limit (e.g. 1,000 creels)
• Compared with the current arrangements, Marine Scotland Compliance would have some additional administrative costs of monitoring and enforcing the vessel creel limit(s).
• Decisions need to be made about whether there should be separate creel limits for particular shellfish groups (e.g. nephrops, crabs and lobsters)

Summary

The combination of a partitioned IFG, and separate vessel creel limits for each territory and no control on vessel numbers would not be sensible and is not considered here.

An IFG wide vessel creel limit combined with no control on vessel numbers might give the impression that creeling is being managed, and would not be too expensive for MS to implement and manage. In the short term, it might have an impact on larger vessels fishing large numbers of creels. However, in the longer term, as operators adjust, it is unlikely to be capable of achieving any meaningful objective. This is because neither total effort nor its spatial distribution is capable of being managed. Thus, the option of an IFG vessel creel limit combined with no control of vessel numbers serves no purpose, other than political window dressing.

(ii) Vessel creels limit combined with controls on the number of vessels.

If there is a vessel creel limit, there should be control of vessel numbers. Controlling the number of creels and the number of vessels means that the total creel effort for any defined area is at least capable of being managed. The defined area(s) could be the whole IFG area as a single entity, or the territories of a partitioned IFG area.

Advantages

• If the IFG is not partitioned, operators can understand the CMR and how it will operate.
• If the IFG is not partitioned and a list is available of the vessels with creel entitlement for that IFG then it is relatively easy to police.
• If the IFG is partitioned and VMS is extended to the <15m fleet it would still be relatively easy to police.
• Total creel effort in each defined area(s) can be controlled.
• Flexible is enabled through adjusting (annually, every five or ten years) the borders between territories, creel numbers per vessel and/or the number of vessels.

Disadvantages

• If the limit reduces the number of creels each vessel normally handles, this might increase frequency of hauling.
• MS would have additional costs of enforcing the CMR. In the absence of VMS, this could expensive and quite complex if an IFG area was partitioned into a large number of territories each with its own vessel list and creel limits
• There might be initial difficulties in aligning the target total creel numbers in an area should sustain with the CMR's intended policy objectives. The target creel total for a defined area would then need to be converted into a target number of vessels and a territorial vessel creel limit. This might possibly involve significant data collection and liaison between stakeholders and Marine Scotland Science.
• If the IFG is highly partitioned this will multiply the problems of determining target vessel numbers and creel limits for each of the IFG's territories.
• If the market mechanism is not used, other command and control criteria (e.g. track record of vessel, track record of owner, business plan) will need to be used to determine which particular vessels/owners are initially provided a creel entitlement for each area(s). With a highly partitioned IFG, this process could be quite demanding on MS resources. Also, with more territories there are more borders and greater scope for disagreement and appeals surrounding vessel selection and initial entitlement allocation.
• Significant demands could also be placed on MS if a highly partitioned IFG was combined with and a command and control approach to the re-allocation of surrendered entitlement. Records of vessels and/or owners for each territory might need to be kept, as well as waiting lists. Applications will need to be scrutinised against criteria and more appeals processed.
• Whilst flexibility is desirable, this might involve, over time, adjusting; the borders between territories, the number of vessels in each territory and the territorial vessel creel limits. This can be costly and potentially fractious, particularly if an IFG is heavily partitioned and there is a reliance on command and control.
• New entrants will find it difficult to enter the fishery. They would have to wait until some creel entitlement was surrendered and they were high enough up the waiting list. The average age operators and skippers might increase.
• The vessel creel limit will be sub-optimal for some vessels. This can be mitigated by allowing larger vessel size categories to fish more creels. This increases complexity further, especially if the IFG is partitioned into small territories.
• Decisions would need to be made about whether in a given area should there be separate creel limits for particular species groups?

Summary

If there is a vessel creel limit, effective effort control requires that vessel numbers also need to be controlled. If the defined area is the whole IFG, there is some flexibility, operators understand the how the CMR works, it can be monitored and administration costs might not be excessive. Administration increases with the number of territories within each IFG. A significant proportion of this complexity and the implied MS resource costs stems from using command and control to manage individual vessels.

(iii) A fixed amount of numbered creel tags are issued to operators .

In (ii) above, Marine Scotland is managing total creel effort by adjusting vessel numbers and vessel creel limits. It might be simpler to directly manage total creel effort. Complexity and MS resource costs could be reduced if total creel effort could be controlled without the need to manage vessel numbers. This would then increase the feasibility of the highly desirable characteristic of being able to partitioning IFGs and manage effort at the level of smaller individual territories. One option which offers this possibility is creel tags.

• A total creel limit for each IFG, or if partitioned, for each territory is identified.
• A corresponding fixed quantity of numbered creel tags would be issued by MS.
• For policing purposes, the tags for each separate territory would be physically different (e.g. different colours or shape).
• Creels in use in a territory must be tagged with the appropriate tags.
• A record would be kept and updated of each operator's numbered tags. It would have to be the operator's responsibility to ensure that Marine Scotland Compliance ( MSC) records are up to date, with heavy penalties for fishing with no tags, the wrong coloured tags for the territory being fished or using tags which are not recorded against the operators name within MSC .

Advantages

Complexity for Marine Scotland is reduced since it would not have to determine the desired number of vessels for each IFG area or territory, or the desired vessel creel limit, or the eligibility of individual vessels to receive a creel limit, or the reallocation of retired creel effort. Total creel effort in each management area (the entire IFG area or defined territories within the IFG) is controlled. A tag system is relatively easy to police compared with policing vessel eligibility to fish an area and their creel limits. The only checking required is that the operator is using creels with a number recoded against the operator. Large areas can be policed quite easily. Flexible would have to be through the recalling or issuing tags and by adjusting the boundaries of territories.

Disadvantages

• Operators may take time to adjust
• With a limited number of tags, operators might compensate by increasing the frequency of hauling.
• There will be difficulties in aligning the initial number of creel tags with the policy objectives. If an IFG is partitioned into small territories, very good local information will be required to determine the total number of tags for each area.
• An up to date record would need to be kept of the tags used by each operators. This might require an operator penalty for failing to inform Marine Scotland Compliance of changes to operator's tag record. If a five year renewal was in operation, and MS was minded not to renew the tags of those who are renting them to others, it would have to keep a record of who is using the tags. Such a record would enable MS to re-allocate the creel tags to those who have been and using the tags (rented or otherwise) creels over the five year period.
• Operators who move about within the IFG, or who straddle the borders of territories might have to obtain tags for each territory, or endure restrictions on their operating range.
• Compared with the present situation Marine Scotland Compliance would have additional administrative costs of monitoring, enforcement and maintenance of operator records. This could be quite complex if an IFG area was partitioned into a large number of territories each with its own tags.
• Decisions would need to be made about whether in a given area should there be separate tags for particular species groups.

Summary

Creel tags liberate MS from needing to manage vessels, though MS would need to keep records of tag ownership.

25.6 Conclusion

If an IFG area is partitioned into territories, gear conflicts and territorial congestion can be better managed and fishing effort across the IFG better aligned with fish stock distribution. Smaller territories can also be self-policing and create stronger incentive effects for husbandry, development of WPA's and cooperation between operators. The potential problems of partitioning are the constraints on operator's range of activity and high bureaucratic costs if there is extensive element of command and control.

Compared with managing vessels, the issuing of creel tags reduces administrative costs and makes partitioning more feasible, though MS would need to keep a record of tag ownership.

Allowing tags to be traded facilitates new entrants and prevents operators from becoming boxed in. Rules might be required to prevent undesirable outcomes that the tag market might produce.

A fixed term provides MS with the desired flexibility and the opportunity to incentivise particular operator practices such as husbandry, developing working practice agreements, cooperative activity and crew training. A fixed term also enables MS to redress any unintended and undesirable outcomes in the creel tag market. Because annual renewal works against these incentive effects, a five or 10 year entitlement would be preferred. There will be some unavoidable difficulties developing and using criteria to initially allocate creel tags. There will also be an on-going requirement for operators to inform MS of which creel tags they are using, with appropriate sanctions on operators whose tag records are inaccurate.