Review of Management Options for the Landing Obligation
Research which considers possible management options for dealing with the landing obligation
Section 5: Quota Management and the Landing Obligation
5.1 A pivotal concept that has evolved throughout this study is that if an effective and practical landing obligation is to be facilitated in Scotland, innovative changes will be required as to how quota is managed. In one interview it was argued that if the Scottish fishing industry is to weather the landing obligation, quota management mechanisms could not go forward as they are. Across the board, the need for change was emphasised in relation to the management of quota allocated to the TR1 and TR2 fleets.
5.2 In Section 4, the improved alignment of quota holdings with catch compositions at a regional and European level was identified as a mechanism that could help facilitate the operation of the landing obligation. Connected to this, a strong theme within the interviews was that it was also imperative that improvements of this sort took place within Member States. As one interviewee commented, it is important that within Scotland some fishermen do not sit on unused quota while other firms are faced with the prospect of going out of business. It was identified that changes to how quota is managed, accessed and traded in Scotland have the potential to reduce quota-induced drivers of discarding and alleviate some of the pressures that will be caused by choke species. The potential benefits of improved quota management arrangements include: to improve the efficient movement of quota to where it is needed; to facilitate the optimal use of quota at market price; to aid compliance and; to keep the fleet at sea for longer and ensure other more plentiful quotas are utilised.
Catch Balancing
5.3 While fishers can often alter their catch compositions through choices regarding, location, time and gear, it is almost inevitable that an individual's catch will not exactly match their ex ante portfolio of catch rights. ITQ programmes in Iceland, New Zealand, Australia and Canada have developed 'catch-balancing' tools that could be used to manage over-quota catches under the discards ban.
Non-market mechanisms
5.4 Of the mechanisms highlighted above, carry-over and bring-back rules are probably the most common form of catch balancing rules within global ITQ fisheries. However, it should be noted that from 2001, New Zealand stopped using a carry-forward system as they found carry-over and bring-back rules create very complicated accounting problems. As already mentioned, New Zealand fisheries managers moved to the use deemed value payments, which along with the option to make fishermen surrender the catch, require a buffer pool to be in operation for with these likely to be organised at a regional level.
5.5 While these mechanisms can offer welcome flexibilities, a consensus within the interviews was that tools such as 'carry back' and 'forward' are short-term remedies and not a pragmatic approach. In particular, carry-backward remedies are likely to cause future constraints on the vessel - i.e. possibility of keeping it in operation this year to go out of business next year.
Table 4. Catch Balancing Mechanisms
| Instrument |
Definition |
|---|---|
| Market: |
Transfer of a share of the TAC (quota/ FQA holding) in perpetuity |
| Non-market: Surrender |
Ability to 'bank' any unused quota to be used in the next fishing year |
Market mechanisms and FQA Tradability
5.6 An alternative approach, which has proved popular and effective in the aforementioned countries, is the use of market transactions to correct inefficiencies in the initial allocation of quota holdings. By facilitating the permanent and temporary transfer of quota, quota can move to where it is needed thereby allowing vessels to access additional quota needed to cover bycatch and over-quota catch. The concept of increasing the tradability of quota within Scotland was a recurrent theme within the interviews, and was supported across the board as a tool to help facilitate the landing obligation. This was strongly promoted in several interviews (two academics, an NGO, two POs and by all international fisheries managers spoken with). One PO did not support this as a tool. Support in the interviews tended to cluster around concepts regarding improvements in trading and improvements made to leasing markets.
Current Quota Trading Arrangements in Scotland
5.7 Quota trading (permanent transfers and leasing) occurs at a significant rate within Scotland, with one interviewee describing these arrangements as so numerous to be almost continuous. Ever since the introduction of restrictive licencing, fishers have traded whatever assets they could, with this evolving from the trading of licences, to the freeing up of the PO swap system in the 1980s, to the current active trading of quota between vessels. Despite quota trading being recognised as an essential and important part of the Scottish industry, the trading of quota has never been officially sanctioned by Marine Scotland or Defra. In one interview, it was stressed that until this occurs the conditions that affecting quota trading in Scotland will be obscured by a lack of transparency and information.
5.8 In Scotland, current trades are arranged through lawyers or agencies, which will impose brokerage costs. As trades represent private legal agreements there is a distinct lack of open, public information on trading, prices, quota availability and where quota is being held as oppose to who holds FQAs. The likely effect is that these conditions undermine the efficiency of the 'market', which will impact upon the market price. The notion that asymmetric information poses problems for efficiency is through high transaction costs is supported in Pinkerton and Edwards (2009) observation of quota leasing in British Columbia halibut fishery.
5.9 One of the key concerns regarding the impact of the landing obligation is that it will work to increase quota prices as vessels willingness to pay will increase. Both the POs and SeaFish evidence suggests that the recent rise in quota leasing prices was at least partly driven by the catch quota trials, undertaken by only part of the fleet. A consensus is that this stands as an indication of the effect the landing obligation will have upon quota prices, vessels willingness to pay will increase as if they cannot access more quota, they will be forced to tie up. Globally, the effect of leasing costs upon fleets has received recent attention and it has become a concern of the industry within Scotland. However, when one examines the international literature covering the concern over high lease prices and the effects these have, the issue is not with the practice and principle of quota leasing and using market mechanisms to allocate quota, rather with how the markets were operating. This narrative in the international literature mirrors a strong theme in the interviews that leasing markets within Scotland had to be opened up and made transparent.
5.10 In the interviews, the motivation for increased tradability encompassed not only a desire for increase efficiency, lower costs and greater access to quota (which was identified as crucial for the economic viability of vessels under the landing obligation) but improving quota trading arrangements were identified as fundamental to supporting compliance. Compliance with the discard ban will depend upon costs at the margin: if a vessel has fish on board for which it does not hold quota, what will happen to the fish depends upon the relative costs of the alternatives: the cost of buying/leasing in additional quota, the cost of landing illegally and the cost of discarding. The rational decision-maker will choose the least of these three costs therefore policies which can contribute to freeing up and reducing the cost of quota leasing should be positively pursued.
Management Options
5.11 As one interviewee stated, under the Concordat Scotland has the ability to strengthen fishing rights without going against the ideological grain of privatizing rights.
Real-time trading platforms
5.12 An option that received a high level of support in the interviews was the use of real-time trading mechanisms to improve quota-leasing arrangements. These systems are used in Iceland, Denmark, Canada, US and New Zealand. Internationally, the use of real-time trading has helped implement discard bans and discard reduction strategies as they allow for the use of retrospective balancing- fishers can purchase quota either on their way back into port once they know their true catch composition or else within a fixed time period. Within these countries, online trading platforms have reported success in reducing transaction fees when searching and brokering quota. In the different countries, private companies or private organisations have formed to facilitate this process. For instance, in Denmark fishermen who wish to trade in real-time join one of the seven Fishing Pools, who then collectively work via one common website. In Denmark, the Fish Pools use an online system (www.puljefiskeri.dk) to conduct trades. The government does not actively participate in the trading market: the Fish Pool system and private brokerages have combined to promote a well-functioning quota market. A similar operation is found on the West Coast of the US, where privately owned brokerage companies have developed to facilitate real-time market transactions. In New Zealand, Stewart et al., 2011 report that added transparency provided by online trading has reduced asymmetric information on the market by providing fishers and processors with complete information on market prices.
5.13 The key barrier to this sort of mechanism operating in Scotland concerns the FQA system and the option of removing the link between licence and FQA holdings. The purpose of this link was to prevent the trading of quota but since this is no longer relevant, the rationale for this link has diminished. If the real-time transfers were recorded, through some private or public online trading platform, this would create much more accurate information over who actually holds FQAs. The current public record of FQA holders only shows the licence the FQA is attached to and not the current owner of the FQA if a trade has recently occurred. Overall, the removal of the link and the facilitation of documented real-time trading would facilitate trading efficiency, the alignment of quota with catches and therefore compliance, and the provision of information regarding ownership and quota leasing prices could be used to support other policies such as the use of deemed values which requires accurate information on market prices. This also allows for the use of 'retrospective balancing', the ability to source quota after landing catch in order to cover over-quota catches.
5.14 While the governments of these countries have supported and facilitated the creation of open markets and public real-time trading platforms, evidence demonstrates that national fisheries policy has been designed to increase efficiency and flexibility, these have been balanced with social objectives that have likely constrained efficiency gains. One interview stated that this platform could be managed online, as most TR1 and TR2 vessels have phones and computers on board. An online system could work to promote efficiency and optimal uptake of quota at the market price.
5.15 The creation of a more transparent and public trading platform was supported across the board within the interviews. Apart from one PO, it received a considerable degree of support from industry representatives, with it commented that the industry had pushed for the notion of an open trading mechanism for a while in order to produce more transparency particularly in relation to prices. It was commented that while some individuals will carry the costs of this- those who benefited from the lack of transparency- it would be beneficial to the whole of the industry as it could contribute to stopping heat building up within the trading system, specifically towards the end of the year. One interviewee stated that it should be feasible for Marine Scotland to create and run a programme that could monitor all daily trades to keep a hold of where quota sits in order to monitor uptake. However, there could be some administrative constraints upon how the platform would work due to the fact that quota is managed by the POs. Currently for an individual to lease out quota, this has to be signed off by the PO and checked against landings data in order to make sure it has not already been captured. This constraint led to one commenter stating that it may be the case that the platform would have to be managed and operated by the POs on behalf of members.
Limits on Transfer Window
5.16 An additional policy put forward by one industry representative was that the government could move to place limits upon the window of time allowed to transfer quota. For instance, operators would have until October to transfer 90% of the quota they didn't want to use. The rationale was that towards the end of the year, many traders hold on to quota in order to increase pressure upon the market price. By introducing this trigger and creating a requirement for individuals to release quota, the intent would be to remove this pressure and thereby create a downward pressure upon price.
Allow FQAs to be sold in segments
5.17 One option is to create the requirement that FQAs cannot be sold as whole units but must instead be sold as divisible segments- total units would be disaggregated into e.g. 10 equal sized bundles that would then be sold. Restrictions could be placed on how many of the segments an individual or group could be in order to avoid concentration and the FQA units segments being bought by the larger operators i.e. out of 10 segments, an individual firm can purchase no more than 3.
5.18 The rationale for this is that currently FQA holdings tend to be sold as a single unit. The costs of purchasing this can often be excessive and unaffordable for many fishers. By forcing FQA holdings to be disaggregated (presumably with some sort of cap to prohibit the infinite disaggregation of FQAs) it is assumed that it would increase the movement and volume of permanent transfers which would make quota more accessible to fishermen who could only afford to purchase smaller bundles. There is also the possibility that this would create a downward pressure upon price. If this was the case, this policy would be beneficial for operators wishing to purchase more quota in order to increase operations or to cover catches that were traditionally discarded.
5.19 A comment coming from the industry was that while government intervention in this way could produce a positive outcome, it was keen for the government to avoid an overly prescriptive approach to this policy. A possibility put forward was that for a sale, 20 per cent of the holding had to be sold in small bundles with the rest free to be allocated according to the seller's preference.
5.20 Another issue is the impact this would have upon fleet structure. In terms of the economic impacts, evidence from New Zealand, the US, Canada and Denmark suggests that if this change was used in combination with real-time trading platforms, the transaction costs of trading in smaller units could be reduced. The issue is, however, that the wider economic impacts of this policy are uncertain as it has the potential to influence fleet ownership structures. The issue is that the effect of ownership structures (corporate, large vessels versus family-run firms) upon profitability and efficiency is uncertain. If for instance, the larger vessels are more efficient and profitable, it would be unwise to create structures that facilitate the movement of quota away from these vessels to smaller, family run sectors that may be more dependent on subsidies to survive. However, the concept of large quota allocations being held by companies is perceived as posing the risk that the holdings may at some stage be sold to non-Scottish companies. Moreover, if FQA entitlements are able to be sold as divisible units this could also create a much larger number of 'owners'. While this idea can be politically attractive, in reality it has the potential to undermine productivity and the performance of the fleet. It could contribute to quota being spread too thinly across too many operators, with an increase in the number of boats contributing towards overcapacity and high fixed costs. This possibility of creating more owners may in fact produce a greater misalignment between quota holdings and catches, with demand for quota increasing as it is spread thinly across the fleet.
Balancing social objectives with increased tradability
5.21 There is often a socio-political concern that increase tradability of quota will facilitate a concentration of quota holdings amongst the larger, corporately owned vessels that can afford additional quota. However, in several other countries including Denmark, US, Iceland, New Zealand, Canada and Mexico have implemented regulations that limit quota concentration.
Owner-operator Conditions
5.22 In the Danish ITQ‐Pelagic Program and the ITQ‐Demersal Program, individual registered fishermen who derive more than 60% of their earnings from fishing are eligible to receive shares for use on a registered fishing vessel. This aims to ensure that only active fishermen can use the quotas on active fishing vessels thereby enabling benefits from the operations to accrue to the fishing communities in which the fishermen are based.
Aggregation limits on quota ownership
5.23 This is one of the most popular methods of attempting to alleviate issues of quota concentration.
Table 5. Examples of International Limits on Quota Ownership Aggregation
| Country |
Regulations |
|---|---|
| Alaskan Halibut and Sablefish fishery |
A limit of 0.5-1.5% is placed upon individual holdings of halibut or sablefish catch shares based upon area. |
| British Columbia groundfish fishery |
4-10% of a species' yearly catch limit |
| Denmark |
Concentration of shares is limited however, the share ownership limits are higher for the industrial and the pelagic fishery and the limits are lower in the demersal fishery where business operations are usually smaller and tied to local communities. |
| Gulf of Mexico Red Snapper fishery |
6.02% of total IFQ shares |
| Iceland |
12% of cod, 20% for haddock, saithe and Greenland halibut, 35% for redfish. An additional cap prohibit any entity from holding more than 12% of the value of all combine quota shares for all ITQ stocks. |
| New Zealand |
Current caps range from 20-45% of TAC, and for one species a 10% limit in each management area. |
Risk Pools: The Collective Management of Choke Species Quota
5.24 One option, which is a modified version of the Government Buffer Zone, is for quota for high-risk species to be pooled between vessels and/or within POs. The objective is to identify choke species and manage quota for them in such a way as to remove the incentive to target them. This then frees up the available quota to cover incidental catches that fishermen are unable to avoid. Some POs already operate unofficial pools for bycatch species (lemon sole, dabs and plaice) in order to cover the overfishing of some members by the under fishing of others. This option represents POs taking a more active role in managing quota for the choke species by adopting the Risk Pool model used in the US, Canada and Denmark which are reported to have produced incredible results with dramatic reductions in the catch and use of choke species quota.
Why, Where and How
5.25 Risk Pools have become a popular method in several fisheries for managing the existence of choke species. In the US, they arose as private agreements between fishermen who were extremely anxious over the existence of choke species. In contrast, in Demark they were initially designed to mitigate the transaction costs and high levels of income risk associated with acquiring quota by the market. Risk Pools can therefore be designed to have a dual-function: to provide a system through which fishermen can access quota for incidental bycatch of certain high-risk species, and to reduce the transaction costs incurred when searching for and brokering quota transfers and leases. This latter function can contribute towards compliance levels as FAO analysis of behaviour under the New Zealand discard ban indicates that discarding continues when the costs of entering into a complex system of quota leasing is perceived as too high ( FAO, 1997). As already discussed, reducing the costs of acquiring extra quota to cover incidental catch is vital to the progressive elimination of discarding in European fisheries.
5.26 Typically, Risk Pools have been organised on an ad-hoc, private basis between fishermen. From this, cooperatives have been formed that manage the quota in the Pool, with a key component of the tool that fishermen sign membership agreements that include rules that work to help fishermen avoid catching choke species in the first place. Measures include rules on gear selectivity, the use of spatial and temporal closures, monitoring provisions and in Canada, fishermen must submit fishing plans that specify the area, method and means of harvesting the target species and the rates of associated incidental catch of constraining choke species. Several Risk Pools also use technology to inform fishers of areas of high risk for choke species, with access to the pooled quota depended upon compliance with all the rules.
How could this operate in Scotland?
5.27 An option is for POs to adopt and develop a pooling system based upon the model above. An example would be that for species such as cod and hake- for which individual quota holdings tend to be low and at an aggregate level will be insufficient to cover catches under the landing obligation even with the uplift- POs could run either compulsory or voluntary schemes in which their members would contribute part or all of their quota for these species to the pool. The key benefit would be increase security for member vessels through increased access to quota for bycatch caught unintentionally, thereby allowing them to stay at sea longer and utilise their other quotas.
Open-Access Concerns
5.28 The key difference between the operation of Risk Pools and current pooling arrangements is that current arrangements only cover species for which the quota is not easily exceeded. A key issue with the operation of this system in Scotland is that most of the choke species represent valuable, commercial species. Therefore, a key issue related to this approach is that if Risk Pools are used for choke species that have a high value, open-access problems will emerge if the Pools are not subject to a high degree of internal management. As for the operations of a Government Buffer Zone concept, the objective of the pools would be to remove the economic incentive to target the pooled quota. Facilitating this will require a considerable degree of internal management and a fundamental shift in how quota for these stocks is viewed by fishermen. Instead of fishermen using quota to target these stocks, this quota would be held in reserve to cover incidental catches and allow the PO and its members to fully utilise its other quotas. The issue is that this sort of trade-off between stocks can be hard to realise, with the choke species such as cod and hake worth more per tonne than other more abundant target species such as haddock.
5.29 From the discussions with the POs, it is likely that alongside the need to use the management mechanisms outlined in Table 6 above, additional economic incentives may be required to facilitate participation. One PO commented that its members would be opposed to the notion of pooling quota- in particular the vessels that had invested heavily in expensive choke species quota as there was little likelihood they would be happy to have others use it. One option would be to develop a match-funding style of system, whereby if a fishermen contributed a share of his quota to the government pool, this would be met with a contribution from the government. The quota from the government could come from the uplift if enough of this was held back. Something along these lines would be required to entice fishermen who had invested considerable amounts of money into buying up choke species quota such as hake.
Figure 7. Pacific Whiting Risk Pool
5.30 Alternatively, the Risk Pools could be less dynamic and operate only for bycatch species such as anglerfish, megrims, Greenland halibut, blue ling, and tusk. This was the approach that received the most support from the industry. There was a clear dismissal of anything valuable to Scotland being pooled (cod, saithe) as the industry tends to believe these species will be dealt with in the first instance through the banking and borrowing and transferability requirements. A comment was that pooling for these species was unwanted as the tonnages were too large- however, this assumes that all of the quota for the species would be pooled as opposed to individuals having the choice to pursue voluntary and private agreements within POs which tends to be how these systems operate internationally. Instead, there was support for the pooling of 'others' or the more marginal species such as halibut and turbot. It was commented that these could be pooled internally within Scotland at government or PO level. Reference was made to the operation of this system in Norway, whereby a pool of 'others' is created that has a fixed TAC, fishers can then use this TAC to cover certain species by whatever means they want i.e. by using 80% for turbot and only 20% for halibut. The issue with this is that with group TACs, control is lost over individual species mortality.
Table 6. Internal Management Options for Risk Pools
| Mechanism |
Effect |
|---|---|
| Correlate access and use of the Pool reserve to good practice |
Vessels must demonstrate: use of selectivity, use of CCTV and REM, compliance with closures |
| Use technology to identify areas of high risk |
Create accessible information to help fishers avoid choke species and use VMS data to make sure vessels are not fishing in known areas of high-abundance of choke species. |
| Social pressures |
Post a list of the individuals using the pool and the rate at which they use the quota |
| Economic incentives |
Withhold/reduce the economic value of the catch for choke species and use funds as subsidies for selectivity improvements, CCTV and technology needed for mapping projects. |
| Limits on use |
For some species individuals not allowed to use more than x per cent of pool reserve. |
| Use of Initial and Cooperative Reserve Ratios to manage uptake |
Penalties and periods of stand down if a vessel is using up the pool too quickly |
| Financial incentives not to use the pool |
End of year balancing: Unused quota goes back to member pro-rata to their contribution minus use and members who use more bycatch quota than they contributed will pay an amount based on its ex-vessel value to be distributed pro-rata to those who used less than they contributed. |
| Incentives for participation |
Some form of match-funding system when vessels agree to pool a share of their holdings |
Enforcement
5.31 It is well known and openly admitted by the POs that they often have rogue members who put the operations of the vessels in the PO as a whole in jeopardy. This is due to non-compliance with rules such as landing over quota. A point stressed by the POs is that they are often powerless to stop this. This is often governed by the fact that can often not afford to throw the vessel out as it will take its quota allocation with it to a competing PO. In discussing what would need to change in order to facilitate compliance with Risk Pool rules, one PO stated that new enforcement powers- outlined in Section 5.3- would be required to make sure free-riding did not occur. The success of Risk Pools in the US and Canada is reported to be based not only upon the attitude of fishermen- collective will to work together- but importantly due to the strong monitoring regime, with 100 per cent of vessel activities covered by an observer scheme.
Overview from the interviews
5.32 One academic argued that it would be more effective for the uplift to be managed by the POs in some form of Risk Pool, rather than being held centrally by the government. The POs were split in their response: while one was generally supportive of the idea of Risk Pools, one was non-committal with another strongly against. The main concerns of the POs were the lack of collective action that operated within Scottish fisheries, and a general feeling that their members would be unwilling to allow quota to be managed in a pool for others to use. Overall, it was agreed that Risk Pools offered an innovative solution for the demersal fleet but the management and design of them would have to be carefully considered due to the potential for free-riding and open-access conditions.
Bottom-up Management: Demonstrating the right to catch before leaving harbour
5.33 One of the key concerns regarding the landing obligation is what will happen to landed catches for which no quota is held by the individual. Even with the best intentions, an individual's catch will not exactly match their ex ante portfolio of catch rights. This has the potential to undermine the security awarded by the 'right to catch' as if quota cannot be leased in or provided centrally to cover the catch landed, the potential is for quota to be taken of other fishers who have not yet used their entitlements. An alternative to the other management options discussed is to facilitate a bottom-up system of management whereby before a vessel can go to sea for a trip, it must demonstrate that it has adequate quota holdings to cover the expected catch. In the next two years, industry and government monitoring programmes will bring together a better picture of true catch compositions. This could be disaggregated to a fleet and area level in order to provide a picture of what quota portfolio would be 'adequate' to allow a vessel to go to sea. This data could be used to create a base-line picture of the quota requirements for each fleet segments. Under this system, while a vessel might have adequate quota for X,Y,Z but not for species A which it is evidently going to catch, it is not allowed to go to sea until that quota is sourced.
5.34 This was a management method strongly supported by all the POs spoken with, and by academics and industry-related organisations. The POs commented that this situation already posed a significant degree of risk upon the POs operations in terms of overfishing quota. A vessel within their membership may have 1 ton of cod quota, but the PO knows that if it goes to sea it will catch often vastly in excess of this. However, currently if they hold this one tonne they are entitled to go to sea to catch it. As one PO representative commented, while they can try and persuade the vessel not to go to sea, they only have the power to sanction and fine the vessel once it comes back in and lands a catch over its quota. Legal processes prohibit the POs from stopping this practice, with vessels reportedly complaining to Marine Scotland who fail to support the POs in this enforcement role. It is clear that the industry wants the tools to be able to enforce the landing obligation at a grass-roots level.
5.35 From the industry engagements, it appears that the opposition to this comes from the Government. One argument against this could be that as a bottom line, it is the responsibility of POs to enforce their own rules amongst their members. While the POs believe their inability to control members comes from a lack of power, it could be argued that it in fact comes from a lack of will as the POs do not want to have to remove vessels from their membership in fear of losing a proportion of their total quota allocation. A point made by the industry was that they don't want to throw out poorly behaving vessels, they want to be able to control them. One industry representative commented that POs ability to enforce needs to be enlivened with the ability to act in real-time. While sanctions can be made which stop a vessel going to see, these often take weeks to organise as it has to go through a formal, legal process. Support for making the POs a legal entity in themselves, and giving them more power to control their members was a strong view coming from the industry. Scottish licensing arrangements are currently being reviewed.
Mixed Fisheries Management
5.36 The option also exists for a fundamental change to the way in which fisheries are managed. A broader, multi-species perception of fisheries management has received increasing attention on account of the unintended, detrimental effect of managing fisheries through a single-species focus (Garcia et al.,2003; Pitkitch et al., 2004; McLeod et al., 2005). The fisheries targeted by the Scottish fleet are mixed fisheries: actual catch compositions do not reflect the intentions of fishers in terms of targeted species or quota holdings. Vessels targeting cod in the North Sea are also likely to catch haddock, whiting and saithe. Ignoring the mixed nature of fisheries leads to discarding: if the quota for one species is exhausted early in the season, vessels continuing to fish for other species for which quota is available will be forced to discard any of the original species caught. Even within ITQ fisheries, which offer the most flexibility in terms of matching quota holdings to catches, the mixed nature of fisheries created a significant discarding problem.
Mixed Catch Quotas
5.37 The Client Earth Fish Credit System introduces a new type of mixed catch quota. Each species caught in a specified fishing region is worth a particular number of 'credits'. Fishers can choose what they catch and in what quantity for each species, as long as it does not exceed their total credits allowance. Therefore there would be no need to discard or worry about going over quota for a species. Almost all technical regulations are eliminated to increase fisher flexibility. Everything caught is recorded and landed - including most bycatch species. To ensure fishers can maximise the return from their credits allowance, a proportion of credits can be traded between active fishers. Compliance and best practice are rewarded with extra credits.
5.38 While the Client Earth system presents an interesting solution, the issue with multi-species management regimes is that they tend to create one quota to cover a wide array of species. This means that control over individual species catches is lost. While mechanisms are designed to incentivise fishers not to catch the species with low TACs, which are often valuable and can have low TACs due to overfishing, the outcome is unlikely to be satisfactory. While individual species quotas are not entirely appropriate for mixed fisheries, there is a reason you have them in the first place- to control the harvest of under-pressure stocks.
Holding back TACs
5.39 One option discussed in one of the interviews was to hold back TACs from the outset in order to match the choke species. This could happen at an ICES, EU or Scottish level. The key issue that makes this largely infeasible is that it would likely lead to the underutilisation of quota and would reduce the operations of the fleets, possibly quite substantially.
Section Summary
5.40 Evidence from the interviews shows broad support for changes as to how quota is managed in Scotland. The focus was upon quota for the TR1 and TR2 fleet and for adjustments to improve quota trading and leasing arrangements as opposed to any fundamental shift towards privatization.
5.41 The creation of a public online trading mechanism was regarded across the board as a good way to improve the transparency and efficiency of quota trading and leading in Scotland. Another option, put forward by the industry, was for a limit on quota transfer windows in order to avoid the system 'over-heating'. On the whole, support was indicated for measures that would improve the temporary and transfer of quota.
5.42 The use of Risk Pools in the US and Denmark was considered within the interviews. This received varying degrees of support. A common theme from the industry is that pooling arrangements within POs, or any pooling between groups of fishes should be private voluntary agreements between fishermen, as is the case in Denmark and the US. While the benefits of Risk Pools was understood to be a reduction in transaction costs and improved availability to quota to cover over-quota catches, such mechanisms are susceptible to problems of open-access and free-riding. Internal management mechanisms in the US give evidence of how these can be overcome
5.42 A recurring management option put forward by the POs was for the extension of powers to enable them to implement real-time restrictions on vessels going to sea with inadequate quota. This form of 'bottom-up enforcement' is used in Iceland.
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