Individual Transferrable Quotas: New Zealand’s Experience

New Zealand Fisheries Waters Large EEZ (4.4 million km 2 ) 70% below 1,000 m Medium productivity Commercial Fisheries Non-commercial Fisheries

Reform Context (early 1980s) Classic fisheries issues –Inshore stocks overfished –Commercial fisheries over-capitalised –Unprofitable, uncompetitive, rent dissipation –Declining recreational fishing –Risk of extending problems to newly developing deepwater fisheries

New Zealand’s Response Objectives of the Quota Management System –Primarily economic drivers –Restore profitability to inshore fisheries –Avoid over-capitalisation in new deep-water fisheries –Limit catches to MSY –QMS in place since 1986, after 25+ years experience everyone has adjusted

Quota Management System (QMS) Several refinements have been made since 1986 but the basic tenets remain: –Setting catch limits –No discarding QMS species –Individual Transferable Quotas (ITQs) –Markets determine allocation of commercial effort –Monitoring and enforcement

New Zealand's ITQs Species and area specific Perpetual and transferable Generate ACE (annual catch entitlement) Some ownership restrictions Maximum holdings (aggregation limits) 10-45% of TACC No foreign ownership Ongoing allocation only via ITQ and ACE trading

Cost Recovery/Subsidies NZ originally considered resource rentals based on the decision to allocate quota without tender process Now use cost recovery mechanism to charge quota holders selected government costs (e.g. observers, fisheries research, administration) No subsidies in QMS system; quota owners pay c % of government costs

Outcomes Reflect two primary policy objectives of QMS –Resource sustainability delivered –Economic performance improved

Fleet rationalisation

Quota rationalisation

Export value/volume

Benefits/Gains

Challenges unique to QMS Designing systems to administer and audit QMS Required refinements to suit local conditions and policy requirements Social impacts anticipated and managed – Social dislocation in small coastal fishing communities – Growth in large vertically-integrated fishing ports

What general conclusions can be drawn from the NZ experience?

General conclusions QMS objectives focused on economic efficiency –NZ’s ITQ design choices reflect this objective –If you have other management objectives, … the design of your rights based management regime would be different

General conclusions NZ’s policy design features allowed for controlled industry restructuring –Building legitimacy and collaboration is key to success –Quota allocation on catch history basis –Strongly specified ITQ (perpetual, tradable and enshrined in law) –Provides certainty/security for investment –Quota ownership limits

Other key considerations Avoid disadvantaging competing sectors Design policy to encourage collective responsibility Do not overlook importance of integrated planning