Chris Williams: Ownership Models for Natural Resources: Fisheries


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Chris Williams: Ownership Models for Natural Resources: Fisheries. A presentation at the 2013 Conference 'Economics for Conscious Evolution', London, UK, July 2013.

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  • First aware of the issue: Ownership of the land and access to the resources granted by Queen Victoria in the 1880s. Why I became interested in it…biologist not economist…
  • Ownership – vessel owners vs divers; ownership of land in Moz (state & privatisation);
  • MPAs and inshore fisheries – ownership issues in the UK as we shall see later…
  • Nef; Envt Econ team, run: Economics for fair and sustainable fisheries, research and publications to support advocacy and lobbying of others (eg Ocean2012)MSEP – work with NGOs
  • Role at nef, teaching economics to NGOsPart of which is a series of briefings on economics: ownership and property rights ( see briefing 10) + marine case studies was one of those… if you want to read it, web link here
  • Context
  • Renewable resources such as fish stocks can replenish themselves, as long as a critical stock of the fish population remains intact. Identifying stock variables and flow variables allows the definition of the ‘replenishment rate’: for as long as the average rate of extraction does not exceed the average rate of replenishment, renewable resources can be sustained over time.
  • Property rights for natural resources > ownership is an issue!
  • In both cases whilst it would be at least theoretically possible to restrict access, in practice the immensely high costs of enforcement generally prevent anyone from attempting to do so. In economic models, such resources are often termed “public goods” (described in the case study below). (These are not to be confused with the moral concept of “the public good”)
  • Hardin illustrated the “Tragedy of the Commons” using the example of a piece of pasture land: each herdsman tries to maximize his personal utility by keeping as many animals as possible on the common land. In this model the herdsman’s utility is increased when adding each additional animal to the pasture land. At the same time, his utility is decreased by additional overgrazing created by one more animal on the pasture land. Yet the effects of overgrazing are shared by all herdsmen. Thus for the individual herdsman the decrease in utility through overgrazing is only a fraction of the positive utility change created by adding an animal.In Hardin’s tragedy of the commons, the negative externality is the social cost that is imposed on all herdsmen by the increasing degradation of the pasture land. Coase argues that in order to get the problem right, one has to move beyond the conventional understanding of an externality that can only be countered by regulation. In contrast to classical regulation (taxation, subsidies) he suggests that a more Pareto efficient solution would be that individuals – those causing the harm and those being affected by the harm – come together and negotiate privately.
  • CPUE declining for many species – possibly the only industry where increased effort and technology is not leading to greater efficiency..
  • Private ownership (e.g. catch shares) and common ownership (presented next), are two contrasting models when it comes to how they approach the concept of property rights. As you learned from the briefing on market failures and regulation, externalities such as pollution or overfishing actually cause a massive amount of damage now and for future generations, but are not included in the price. This systemic problem with the current economic approach has brought fish stocks to a critical situation. For this reason, taking the ‘free-market approach’ even further as a solution has produced some criticism.
  • ITQs below: Individual transferable quotas (ITQs) are one of the property rights instruments that have been employed to improve economic efficiency in fisheries. ITQs are not high-quality property rights in the basic fundamental marine resources on which fisheries are based. As a result ITQs cannot be expected to generate full efficiency in the use of these resources. This article examines to what extent ITQs are capable of generating economic efficiency in fisheries. It is shown that ITQs can greatly improve efficiency in fishing. Moreover, by including recreational fishers in the system, ITQs can strike an efficient balance between commercial and recreational fishing. On the negative side, it is shown that on their own, ITQs are not capable of generating full efficiency in fisheries. In particular, ITQs are not sufficient for setting the socially optimal total allowable catch, ensuring the optimal use of the ecosystem, or harmonizing fishing with conflicting uses of marine resources such as marine tourism, mining, and conservation. Potentially counteracting these limitations, ITQ holders as a group have an incentive to manage overall ecosystem use for the long-term benefit of their fishery and negotiate the adjustment of their fishing activity toward the interests of conflicting uses of the marine resources. Property Rights in Fisheries: How Much Can Individual Transferable Quotas Accomplish?RagnarArnason*
  • Chris Williams: Ownership Models for Natural Resources: Fisheries

    1. 1. Ownership Models for Natural Resources: Fisheries Chris Williams, nef
    2. 2. Work with artisanal fishing communities
    3. 3. Work with industrial lobster divers Community projects
    4. 4. the new economics foundation
    5. 5. The marine socio-economics project (MSEP)
    6. 6. This presentation covers: • Context for the presentation • A brief overview of property rights • Issues that arise with property failures • A focus on fishing • Ownership and co-management • Quota as property • Quota in the UK • Issues with private property rights in fisheries • Conclusions Ownership models
    7. 7. Context: The bio-capacity of the earth in relation to consumption trends (Wackernagel et al. 2002)
    8. 8. Context: we need more fish!
    9. 9. We are living of the natural capital (stock), not the interest (flow)… STOCK VARIABLE OF THE RESOURCE FLOW VARIABLE OF THE RESOURCE /OUTPUT
    10. 10. • Human activity is changing ecosystems worldwide. • Ecosystems are particularly affected by large-scale fishing, freshwater use, and agriculture (MEA 2005). • Degradation often occurs in settings of unclear ownership regimes.
    11. 11. Property is fundamental • Property rights are central to the way that market economies work. • Without clear and enforceable rights to property, and the freedom to sell these rights to somebody else, a market cannot function.
    12. 12. Aside from the practical challenges surrounding its enforcement, there are clear theoretical problems with the property rights system. Conventional economic theory associates these with „non-rival consumption‟, access rights, and the unintended side-effects of use. These (as we will see later) are all of relevance to fisheries. Private property failures
    13. 13. • …refers to the capacity of some goods to not be depleted through use, e.g. lighthouses • Additional consumers = no impact on the availability of the commodity, so enforcing private property rights does not guarantee a fair or efficient use. • For that to occur, the commodity must be consumed as it is used, enabling the supply and demand price mechanism to function. If it does not, the commodity will almost certainly be under-supplied by the market alone. Non-rival consumption
    14. 14. Access Rights • …refers to the ability of the property owner to regulate access and use of the property, e.g. fences But at least some things are extremely hard to prevent access to. e.g. the road network or open seawater. (*these are termed public goods In economic models)
    15. 15. • Because of the impossibility of restricting access to public goods, their use may become economically excessive. • The sea becoming overfished, for instance, is a classic example of the “tragedy of the commons” in which free access leads to excessive consumption. • A single fisher does not intend to deprive others of a livelihood, but the effect of their fishing activities is to reduce the number of healthy, breeding fish in the sea, which in turn contributes to a steady depletion of stocks over time.
    16. 16. Tragedy of the Commons, Garrett Hardin 1968 • In other words, the action of fishing has a negative externality – an unpaid cost that is paid for by others. • Positive externalities sometimes exist, too: a lighthouse may be paid for by taxpayers in one country, but sailors from other nations would also benefit
    17. 17. • In many cases, a private property regime may not be the best way of sharing out resources, due to the difficulty of enforcing meaningful property rights. • As environmental issues (and fishing in particular) very often have this feature, private ownership models might not be the most suitable way to deliver environmental sustainability or social justice. • There is, however, a classic argument in favour of granting property rights on public goods called the „Coase Theorem‟. Different allocation mechanisms
    18. 18. Coase Theorem • Impose at least some kind of property rights system over public goods, in order to allow users to trade their rights. • Even if imperfectly enforced, Coase Theory maintains they would lead to a socially more optimal outcome than would otherwise occur. • The Theorem provided the theoretical rationale for the introduction of carbon trading, in which a public good (the earth‟s atmosphere) was subject to a trading regime. It is so far unclear if the attempt has been successful...
    19. 19. Why are property rights relevant to the marine environment and fisheries? • Fisheries around the world have a dizzying array of management structures. • Generally, these fall into private, public, or community cooperatives / co-management. • In some cases, this has led to sustainable use of resources, allocated by public bodies (or government by proxy), rather than market-based mechanisms. • In other cases, such as the EU, public management has failed to reverse the decline in fish stocks.
    20. 20. Example: the cooperative or „common ownership‟ approach Alaskan salmon In 1938 - 120 million fish harvested. Within 20 years - only 20 million fish. This resource was critical to coastal communities this was a key driver in Alaska‟s movement for becoming a US state.. Pressures on the habitat, overcapacity, conflicts, inequality between different gear types, and different harvesting methods were all contributing to the decline. The complexity was hampering sustainable management of the salmon fishery. Conaty, P. and Lewis, M. (2012). The Resilience Imperative: Cooperative Transitions to a Steady-state Economy. Gabriola Island, BC, Canada: New Society Publishers.
    21. 21. But, the fishing community decided to: • Limit entry of new vessels • Create hatcheries • Start ocean ranching • Work on stock enhancement • Co-op Ownership with local Govt • Common property harvest (70%) • Set up RAAs • Ownership change > outcome changed • Success story for communities and salmon • Co-management ideas are now widespread, with local or national government, NGOs, and other stakeholder groups sharing responsibility and the costs and benefits. • This is more „physical‟ ownership, and there is a whole other side to it… Public ownership failed to halt the decline! Privatisation was on offer..
    22. 22. But there is more to it… …the issue of Quota Lets look at the UK as an example
    23. 23. Who owns me?
    24. 24. A brief history of UK fishing • In the old days, when offshore fish stocks were large and fishing fleets were small, there was no call for either private ownership or government regulation. • Private ownership of fisheries was effectively banned by the Magna Carta, in the 13th century. • This action was followed by hundreds of years of free fishing in English waters. What came next? • Industrialisation • New gear • Competition • Declining catches • CPUE
    25. 25. Declining CPUE
    26. 26. What has declining CPUE lead to? • „The race to fish‟ • …the vicious cycle of getting bigger boats, better technology to out perform each other • Where resource rent is not dealt with explicitly, the incentive for each fisher to attempt to catch fish before others do ensures that such rent is eventually all dissipated - i.e. it is invested in excess fishing capacity leading to overexploitation in both economic and biological terms.
    27. 27. • Gear • Seasons • Geographical > Difficult as fishers want „assurance‟ Options: pay royalties on catch or restrict access (licensing) • Limit on licenses and effort • Limit number of traps or nets The need for regulation:
    28. 28. Quotas • Limit catch per vessel • Fishermen buy (or rent) quota for a particular species • More tricky to enforce than closed seasons.. • Catch according to supply and demand
    29. 29. Quota - is it private property? • 17th century - two conditions for holding property in a thing. (1) power to appropriate the thing and hold it in possession against others (2) scarce and exhaustible, so that it was worth-while going to the trouble of holding it as property. • Taken together, helps to explain why fresh-water fisheries, in rivers, lakes are often private property • Same for tidal and inshore areas (land ownership) • Therefore the English common law says that wild animals and wild fish (even fish reared in a hatchery) cannot be subject to property law until they have been caught and brought into the possession of the landowner, hunter or fisherman. This reasoning lies behind the common-law origin of the current “law of capture”.
    30. 30. ITQs – Individual Transferrable Quota • The big change: ITQs • Exclusive • Powers to act as an owner • Duration and security = ability to manage it • Transferable • Effectively private property • They can be bought, sold and leased • Permits and licences are seen as property rights that are weak and have little of these characteristics.
    31. 31. Who owns quota in the UK?
    32. 32. So, who owns the right to fish? • Industry is divided <10>m • Landmark ruling in July 2013 • POs to <10s • Enforced redistribution • „No one owns the right to the fish in the sea‟
    33. 33. • Transferrable Fishing Concessions – TFCs • „‟mandatory‟‟ TFCs are not going to happen At EU level…
    34. 34. Types of Quota allocation: • ITQs are one of many types of quota allocation.. • 3 common characteristics regardless of name: quotas, individual, transferable. • TFCs; ITQs; IVQs; Catch shares… • Lets have a look in more detail…
    35. 35. Type Allocated to Transferable Individual Quota (IQ) Individual No Transferable Quota (ITQ) Individual Yes Individual Vessel Quota (IVQ) Vessel Sometimes Cooperative Group Sometimes Community Fishing Quota (CFQ) Community Sometimes Territorial Use Rights for Fishing (TURF) Individual, Group or Community Sometimes
    36. 36. The private property approach to fishing quotas – „Catch Shares‟ (EDF) What is a catch share? • Managers allocate a secure privilege to harvest a specified amount of a fishery's total catch to an individual or group • managers establish a fishery-wide catch limit; assign portions of the catch, or shares, to participants; and hold participants directly accountable to stay within the catch limit. What are the main points of this approach? • The main aim is deregulation. • Catch limits are set. • The limited catch is shared among fishermen. • Shares can be held by individuals, communities or associations. • It give responsibility to the users. • It gives them the freedom to fish when and how they want. • They must, however, stay within agreed limits. • They can be more profitable as a result.
    37. 37. What do proponents of catch shares say? • ITQs have met some goals in terms of conservation, safety and financial performance for fishermen. • They work well in enforcing „keeping to catch limits‟; this contributes to adhering to TACs; this helps for fish stock conservation. • Quotas also give the fishers more flexibility to fish and thereby meet market demand without „gluts‟ and the corresponding impact on price.
    38. 38. A cautionary tale about ITQ fisheries - Ecotrust Canada (2009) ‘’ITQs are being promoted as a panacea for global fisheries. However, analysis of BC fisheries raises serious questions about this approach.’’ • Background: in BC the „race to fish‟ meant that ITQs were brought in, securing a % of TAC to individual fishermen. • If properly designed they can be part of a multi-level approach, but if badly designed they can lead to as many problems as they solve. • Most criticism relate to the fairness and equity, especially regarding the crew shares, the impacts on coastal communities and first nations >> Distribution! (e.g. Maori)
    39. 39. What are the main lessons learned from B.C.? 1. Catch shares promote „slipper skippers‟ (absentee ownership) and quota leasing of „secure asset‟. Even processors lease and sub-lease quota, passing on the costs to the fishermen. This turns working fishermen into „tenants‟ paying exorbitant „rents‟ to those who don‟t even fish the resource (who in turn guarantee themselves revenue for no risk). 2. ITQs give fishermen a false sense of security; quotas provide no more legal protection than licenses. They also do not mitigate ecological uncertainty (impacts of climate change, habitat damage, ...). Further, the agreement of ‘lease rates per lb of fish’ could be affected by oil price hikes etc and actually increase risk for fishermen to market forces. However, there are issues with ITQs
    40. 40. 3. ITQs facilitate privatization; quotas are not de jure property, but they are de facto property as they can be divided, capitalised and transferred more easily.. 4. ITQs increase capitalisation in fisheries; investment in quota licenses has ballooned – these ‘intangible assets’, estimated at 1.8billion $ in 2007. More than 5x the value of the vessels and equipment in BC fisheries. 5. Quota leasing hurts working fishermen- relative to those gifted the initial quota. Crew shares usually drop as revenues are used for quota leasing (often the main cost in BC). 6. ITQs do not guarantee better science, monitoring or enforcement. 7. ITQs actually offer fishermen market incentives to engage in risky behaviour; e.g. higher fish prices in the winter due to less fishing. As so much $ is needed for quota leasing, costs are saved elsewhere (the crew, safety, training, ..)
    41. 41. 8. It is actually sound science and co-management that underpins the sustainability of a fishery; science-based TACs and inclusive, transparent co-management / governance are far more important in fisheries conservation and sustainability. The causal link to ITQs doesn‟t always stack up.. E.g. bad science = bad TAC = overfishing continues. • Quota markets still need to be regulated, and designed to prevent monopolies, corporate concentration and other market failures. • Distribution needs to be taken into account. • ITQs are only one type of input-output control available to managers. • Policy makers need to weigh up the costs and benefits of ITQs, regulate quota markets and ensure that fisheries are managed to meet social, environmental and economic objectives.
    42. 42. What is happening in the EU • Currently, neither the European Union (EU) nor its member states place any conditions on fishermen to deliver social and environmental benefits to society, in spite of the public ownership of the resource. • Without these, the process of allocating quotas – essentially giving permission to exploit a commonly owned resource – is blind to virtually all of the impacts of fisheries and risks the future health of marine resources and the fishing industry. • New CFP says they will have to…
    43. 43. nef‟s view and work Societal, value-based criteria are necessary components of EU fisheries management. We need to align fishermen‟s interests with society‟s objectives.
    44. 44. Its ideological… “The equal right of all men to the use of land is as clear as their equal right to breathe the air — it is a right proclaimed by the fact of their existence. For we cannot suppose that some men have a right to be in this world, and others no right.” (Henry George)
    45. 45. • The debate is fuelled by ideology • Sounds science and good governance / institutions are the real pre-requisite (i.e. inclusive transparent co-management including Govt, industry and stakeholders plays the key role)
    46. 46. Thank you! Chris Williams Marine Socio-economics Coordinator +44 (0)20 7820 6404 Team: Natural Economies
    47. 47. Rent • The issue of resource rent is strongly related to access conditions in the fishery. The free and open access nature of many fisheries leads to overexploitation. It raises questions of defining ownership and property and use rights. • Ownership issues in turn lead to problems of who is able to „charge' for the use of the resource, who bears the costs of use and who reaps the benefits. • Management objectives in a fishery are ultimately of a social and economic character, and their achievement on a sustainable basis requires the explicit consideration of resource rent – its generation and distribution. • The achievement of these objectives is subject to constraints, especially ecological sustainability. Because of widespread overexploitation, this latter constraint often features as a policy goal. • Policy decisions must be made about how the wealth from the fishery is collected and how that wealth is distributed. • Access rights for coastal / indigenous people, quotas (TACs) etc…