Incentives in a resource management system – why do fishers not always follow the rules?

My research question is :Incentives in a resource management system – why do fishers not always follow the rules?

The main assignment for this class is a short research paper.

This means that your work should be based on original research on the ground of the material literature review and in case you be able to do that with a bit of analysis of data or something similar.

The following criteria refer to the paper format, about the final submission:

To successfully complete this assignment (short research paper), please:

1. Write an academic paper based on original research question(s) – length: 9-11 pages – double spaced, font 12 (e.g. Times New Roman) and submit it on CANVAS by the due date (Monday finals week). word count at least 3000

. Here a few hopefully helpful guidelines for writing a short research paper:

  • Articulate clearly the research question(s) that guide the paper: what/how does your paper contribute to the discourse/debate? Why is it interesting/ relevant (to the debate and/or to you)?
  • A good paper has an introduction and a conclusion, in which the main claims and argumentative steps are summarized. Sometimes the conclusion also opens up to further research questions/ steps
  • I would then describe some background of the topic, data you may have analyzed and information from the articles/book chapters/reports you have used.
  • Make sure the paper is formally correct (grammar, syntax, citations, reference list) and understandable
  • Support your assertion with substantial arguments, evidence, and reference to literature – make sure you consider the (social, historical, theoretical, geographical, cultural) contexts of the literature you are using. It is not necessary to formally summarize the literature. Formulate your own text with arguments from the literature and cite the literature where it fits.
  • Consider the issue(s) from different perspectives and use the material critically.

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PDF e-print from Environmental Values Environmental Values is an international peer-reviewed journal that brings together contributions from philosophy, economics, politics, sociology, geography, anthropology, ecology and other disciplines, which relate to the present and future environment of human beings and other species. In doing so we aim to clarify the relationship between practical policy issues and more fundamental underlying principles or assumptions. Editor-in-Chief: Clive L. Spash Journal submission and subscription details: From the journal’s home page you can browse and search abstracts of all past issues and read free sample articles. This PDF is provided for the author’s personal use only, to print copies or to send instead of offprints. It must not be published more widely or made accessible via the internet. A person who is not the author may make one copy of this article for the purposes of private study or research. Unlicensed copying or printing, or posting online without permission is illegal. Permission to re-use this paper can be obtained from the Copyright Licensing Agency or Copyright Clearance Center. The White Horse Press Equity and ITQs: About Fair Distribution in Quota Management Systems in Fisheries RALF DOERING, LEYRE GOTI Thünen-Institute of Sea Fisheries Palmaille 9 D-22767 Hamburg Email: [email protected], [email protected] LORENA FRICKE Dep. of Economics, University of Kiel 24118 Kiel Currently Visiting Research Fellow at The Institute for New Economic Thinking at the Oxford Martin School (INET Oxford) Email: [email protected] KATHARINA JANTZEN Helmholtz-Zentrum Geesthacht Zentrum für Material- und Küstenforschung GmbH Max-Planck-Straße 1 21502 Geesthacht Email: [email protected] ABSTRACT Fish stocks, as common pool resources, are more and more managed by giving fishermen exclusive access rights as Individual Transferable Quotas (ITQ). These have been widely discussed, with focus on social, economic and ecological issues. While equity aspects have been of great concern, there is very limited analysis about how to assess issues of equity and fair distribution when introducing ITQs. This paper applies an existing framework for assessing equity in resource use systems to tradable quota systems in fisheries. The framework defines the perspectives of distributive fairness, the stakeholders who are bound by fair practice rules, and instruments of fairness, and identifies metrics to assess equity in practice. We assess if the framework provides practical guidance for evaluating whether a given ITQ system operates under an equitable framework programme. KEYWORDS Fairness and equity, common pool resources, fisheries management, individual transferable quotas Environmental Values 25 (2016): 729–749. © 2016 The White Horse Press. doi: 10.3197/096327116X14736981715742 Submitted 5 April 2014, accepted 14 February 2015 730 R. DOERING, L. GOTI, L. FRICKE and K. JANTZEN I. INTRODUCTION The use of natural resources such as fish stocks raises issues of intra- and intergenerational fairness. The intensity of fishing and its effects on the ecosystem directly influence humanity’s short- and long-term prospects as to the availability of stocks. In more and more countries governments are introducing Individual Transferable Quotas (ITQs) to distribute access rights for fish stocks to fishermen. New Zealand was the first country to do so in 1986 (O’Connor, 1994). ITQs as a system to distribute access rights in fisheries are primarily introduced to improve efficiency, reduce overcapacity or set the right incentives for fishermen (more interest in longer term sustainable exploitation of stocks). There is a long list of literature on the introduction of ITQs, which includes discussions of social and ecological aspects (e.g. Olson, 2011; Branch, 2009; Copes and Charles, 2004; McCay, 1995). However, there is only very limited analysis about how to assess equity and fair distribution aspects when introducing ITQs (see Parslow, 2010 for an example). This is surprising, as there is a lively debate around the positive and negative effects of ITQ systems, including issues which can be interpreted as equity or fairness questions (distribution of rights at the start, price of the rights, market power problems, etc. [see Soliman, 2014; Bromley, 2009; Copes, 1986]). In this paper we apply a framework developed by Baumgärtner et al. (2012) for assessing justice in resource use systems. This we see as a step towards closing some of these gaps. The basic idea of their framework is to understand the abstract issue of fairness (justice)1 by specifying several elements of fairness considerations. The authors distinguish between the community of justice (or ‘stakeholders’), i.e. claim holders and claim addressees; positive and negative claims;2 the judicandum, instruments of justice (or fairness); and the chosen metric to evaluate the instruments. We will introduce these concepts in the respective sections and relate them to the ITQ setting. This systemised approach facilitates the assessment of fairness and distribution issues, as Stumpf (2014) shows in her analysis of the biopiracy debate. Fishery management systems in general and ITQs in particular are characterised by several stakeholders with often conflicting interests. From a fairness perspective, these systems are particularly interesting as they comprise issues of both inter- and intragenerational fairness. The aim of the present study is to 1. 2. By fair we mean basically free from injustice, a proper outcome under the rules or a legitimate request. We don’t use justice (as Baumgärtner et al., 2012) as the question of actual distribution of fishing rights is an issue between a rather small number of individuals in a society, compared to issues which are relevant to large parts of the whole society (intra- and intergenerational justice in resource use systems, income distribution, etc.). Therefore, we apply the framework of Baumgärtner et al. (2012) but speak of equity and fairness in ITQ systems instead of overall justice. By claims we mean a legitimate basis to demanding something. Environmental Values 25.6 731 EQUITY AND ITQS assess some problems related to fairness in ITQ systems using Baumgärtner et al. (2012)’s systematic approach. We describe the status of fish stocks as common pool resources, discuss the importance of distribution and fairness issues in exchanges when introducing ITQs, and then go into detail on aspects of distributional fairness and mechanisms to address fairness-related claims. II. CONCEPTUAL BACKGROUND – FISH STOCKS AS COMMON POOL RESOURCES AND TRADABLE QUOTA SHARES Fish stocks are classified as a common good or common pool resource. They belong to no-one in particular and every human being has, in principle, the same access rights.3 This includes not only the current generation but also future generations. We are obliged to use natural resources such that their use potentials are not diminished in the future. Overfishing of a fish stock means that we abuse the resource with the effect that catches are reduced in the present and future (Willmann et al., 2009). In the history of fishing, the idea of fish stocks as common pool resources has often led to overfishing as more and more fishermen, often with the help of governmental subsidies, entered certain fisheries (Khan et al., 2006). The resources were first treated in many cases as ‘open access’ with no regulation on fishing effort. The first major development in fisheries management was the legal framework provided by the United Nations Convention on the Law of the Sea (UNCLOS, 1982), which changed most fisheries from open access to being owned by states within 200 nautical miles of the coast, called the Economic Exclusive Zone (EEZ). The UNCLOS defines a coastal state as the sovereign over its territorial sea (UNCLOS, 1982, §2), as having ‘sovereign rights for the purpose of exploring and exploiting, conserving and managing the natural resource’ (UNCLOS, 1982, §56) and being obliged to ‘ensure through proper conservation and management measures that the maintenance of the living resources … is not endangered by over-exploitation’ (UNCLOS, 1982, §61) in its EEZ.4 3. 4. Ostrom explains the problem of common pool resources as follows: ‘In contrast, commonpool resources are sufficiently large that it is difficult, but not impossible, to define recognized users and exclude other users altogether. Further, each person’s use of such resources subtracts benefits that others might enjoy. Fisheries and forests are two common-pool resources that are of great concern in this era of major ecological challenges’ (Ostrom, 2008). A few stocks are outside of country ownership, especially deep-sea stocks, and international agreements between interested nations can avoid overuse of these resources. These additional legal institutions under the UN roof are less strict (only restricting the countries which have adopted a given regulation); therefore these resources are often under more pressure as they are still technically within an open access regime. Environmental Values 25.6 732 R. DOERING, L. GOTI, L. FRICKE and K. JANTZEN With the restriction of access to fisheries resources by legal institutions the question emerges of who may claim the benefits of the use of these resources? Governments manage access to resources mainly by giving access rights for certain stocks to national fishermen.5 One option is the introduction of tradable fishing rights (or ITQs). The basic theoretical idea behind ITQs is the economically efficient observance of a target reference point (like Maximum Sustainable Yield [Johannesburg Declaration, 2002]), in this case, the allowed catch from a certain fish stock (see Ellerman, 2005; Spash, 2010 for a general introduction). The coastal states, as owners of the resource, decide how they want to define the catch limit. An annual Total Allowable Catch (TAC) for a specific stock is set from an assessment of the stock status by fisheries biologists.6 The resource owner(s) then decide how to distribute the TAC to the fishermen. In an ITQ system, the coastal state divides the TAC and distributes it to fishermen on a percentual basis. In practice, this percentage of the TAC depends mostly on historical landings over a multi-year period before the introduction of ITQs. Applying a percentage means that quotas can vary every year following the changes in the overall TAC. The fishermen can then trade the access rights (percentages) to the overall quota (‘permits’). An ITQ holder is typically an owner of a vessel or a group of vessels which is, in theory, easily controlled at a known cost. Trading is often limited by specific rules against concentration of rights but, usually, fishermen can trade permits on an open market. Therefore, the permit/individual quota market is a key institution of any ITQ system. By creating a market for permits, the assumption is that the less efficient companies, in terms of costs of catching a certain amount of fish, will sell their permit to the more efficient companies (Arnason, 2002).7 In the fisheries economic literature, ITQ holders are generally assumed to have perfect information about all aspects of trading, transaction or information costs in finding and trading with other permit holders are low, there is a well-functioning capital market, and there are no income or wealth effects from the initial allocation of permits/quotas. Under these assumptions the outcome of permit trade is efficient. However, it is clear that these conditions rarely exist in practice (e.g. due to uncertainty about future TAC or fishing costs) and to assess fairness issues requires a closer look at the existing systems, instead of relying solely on the literature (see, for example, Pinkerton and Edwards, 2009). 5. 6. 7. Within the European Union, the member states adopted a Common Fisheries Policy to regulate fishing efforts but still countries receive a certain share of the allowed catch as a national quota to allocate to their fishermen. The International Council for the Exploration of the Sea (ICES) developed for the EU a practical framework as to how MSY can be interpreted (from a stock status perspective) and how the stock status information can be translated into an annual TAC (ICES, 2013). There is empirical evidence in Denmark that the number of fishing companies decreased after the introduction of ITQs (Andersen, 2012). Environmental Values 25.6 EQUITY AND ITQS 733 Recently, ITQs are being implemented or contemplated in more and more countries around the world. In 2008, approximately ten per cent of the global harvest was retrieved in ITQ systems (Chu, 2008). As a result, more information has become available on the success and failures of these systems (e.g. Sumaila, 2010; Hilborn et al., 2005). Many ITQ systems worldwide do not simply provide fishermen a share of the overall TAC but also include regulations to anticipate expected problems resulting from implementation of the ITQ. Some of these expected problems have normative implications, including the method of the initial distribution of quota shares, the disappearance of small coastal fisheries, the treatment of newcomers to the fishery, and the use of fishing methods which cause external effects (e.g. bycatch of non-target species or destruction of bottom habitats). ITQs are an instrument to distribute access rights by the resource owner but in only a few cases do fishermen pay fees for access or for services related to the fishery.8 We will now, applying Baumgärtner et al. (2012), define the stakeholders (see footnote 2) bound by fair practice rules (in short hereafter ‘stakeholders’) as possible claim addressees and claim holders in a fisheries setting. Afterwards, we develop the corresponding legitimate claims, and discuss the judicandum, the ITQ system (section V). The judicandum is evaluated according to the approach (outcome/process), metrics and principles (i.e. equity, proportionality). We then discuss which instruments in applied ITQ systems can be used to satisfy possible claims. III. CLAIMS AND COMMUNITY OF FAIR PRACTICE IN A FISHERY SETTING The ‘stakeholders’ in fairness considerations consist of claim holder and claim addressee (Risse, 2012: 4; Page, 2007: 1; Caney, 2005: 103). The former holds (legitimate) claims against the latter. We restrict the ‘stakeholders’ here to members of the human race.9 We identify the following claim holders in a fishery setting.10 1. Coastal States: Following the UN legal framework (UNCLOS, 1982), the coastal state, and the citizens of that state, are the owners of the resource in their EEZ. The state acts as both owner of the resource and fishery manager, as it assigns the use rights of the resource to the fishermen. 8. For example in New Zealand (Mace et al., 2014) and Nova Scotia (FAO, 2008), where the fishing sector pays for assessment of fish stocks. 9. It could be argued that nature itself is a possible claim holder when discussing fairness in fisheries management. However, this is beyond the scope of this study. 10. We are not addressing the question of whether a claim is legitimate or not, which would require a deeper analysis of the legal framework and is outside the scope of this study. Environmental Values 25.6 734 R. DOERING, L. GOTI, L. FRICKE and K. JANTZEN 2. Fishing sector: Fishermen, producer’s organisations or fish processing companies of the present generation act as the users of the resource and so are part of the ‘stakeholders’. Fishermen (like processors) qualify as a special group of claimholders since usually not every citizen is allowed to fish (or process) commercially. In Europe commercial fishing usually requires an appropriate qualification and a licence. Similarly commercial fish processing is usually restricted via training or licensing.11 Recreational fishing is more open but often some kind of licence is necessary. 3. Future generations: Future generations belong to the community of fair practice as future owners and users of the resource. The justification for considering future generations is grounded on the principle of sustainability as ‘development that meets the needs of the present without compromising the ability of future generations to meet their own needs’ (Brundtland, 1987) that has been acknowledged by the UN (e.g. UNCED, 2012). 4. Conservationists: Conservationists can include members of animal rights groups, environmental advocacy groups, conservation and preservation groups, even conservation minded recreational fishery groups. They represent portions of a state or states with interest in the fishery as advocates on behalf of the environment or species. 5. Rest of the world: In many cases the intensity of fishing and the negative effects of fishing may affect an ecosystem or stocks in a way that harms the rest of the world outside the coastal state and, therefore, other people have also legitimate claims on the management of the resource. The ‘stakeholders’ can act, depending on the claim, either as claim holders or as claim addressees. We furthermore identify the following legitimate claims: 1. Efficiency: Efficiency is a target of non-wasteful use of the resource and following that, the creation and delivery of the maximal possible outcome from the use of the fishery. This we see as the claim of the state as resource owner (claim holder) to the fishing sector (claim addressee). This claim is derived from the fact that the state is the owner of the resources within its exclusive economic zone (UNCLOS, 1982, §61).12 2. Access: As the state is normally not able to use the resource itself, the rights are granted to a group of citizens by certain rules and it is the state’s responsibility to make the resource available for users. The state may restrict 11. Fishing licences are required, amongst others, in Canada, Australia, the US and the EU. Fish processing licences and/or specific training are required for example in Canada, Australia, US and several EU member states. Information on licences can be reviewed on the respective states’ websites for fishery management and/or food safety regulations. 12. Baumgärtner et al. (2012) consider efficiency a ‘secondary normative objective’ to attain primary normative objectives. In the fishery management setting, we do however consider efficiency as a legitimate claim. Environmental Values 25.6 735 EQUITY AND ITQS the access to the resource by issuing licences, or may restrict the use of the resource by setting a total allowable catch (TAC) level that could be divided in ITQs. Members of the fishing sector (fishermen, producers’ organisations or fish processing companies) thus claim the use of the fishing resources from the state. 3. Sustainability: The non-destruction of their future share of the resource is a claim from future generations and conservationists, to both the current state as the resource manager and the fishermen as the resource users. Additionally, the supporting ecosystems are not allowed to be destroyed as this harms the claim of conservationists, future generations and the rest of the world (see principle of sustainability (Brundtland, 1987)). This claim is significant since there is a danger that today’s fishing activities may have a negative effect on the reproduction capacity of fish stocks and impair sustainable fishing in the future. A systemised view of possible stakeholders and their claims is central to the concept of fairness (Ott and Döring, 2008: 47). In that respect, employing Baumgärtner et al. (2012)’s syntax helps in identifying stakeholders concerned with issues of inter- and intragenerational fairness arising in ITQ systems. In the following we disting

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