Individual fishing quota

ITQs are typically initially allocated as grants according to the recent catch history of the fishery. Those with bigger catches are generally allocated larger quotas. The primary drawback is that individuals receive a valuable right at no cost. Grants are somewhat analogous to a "homestead", in which settlers who developed farms in the American wilderness eventually received title without payment to what had been public land. In some cases, less than 100% of the TAC becomes ITQs, with the remainder allocated to other management strategies.

The grant approach is inherently political, with attendant benefits and costs. For example, related industries such as fish processing and other non-participants may seek quota grants. Also, fishermen are often excluded from receiving quota if they are not also boat owners, however boat owners who do not fish do receive quota, such as was the case in Alaskan IFQ distributions. The offshore pollock co-operative in the Pacific Northwest allocated initial quotas by mutual agreement and allows quota holders to sell their quotas only to the co-operative members.[15]

Quota auctions recompense the public for access to fisheries. They are somewhat analogous to the spectrum auctions that the U.S. held to allocate highly valuable radio spectrum. These auctions raised tens of billions of dollars for the public. The auction for crab quota in Russia in 2019 raised about 2 million euro.[16] Note however that the television industry did not have to pay for the necessary spectrum to switch from analog to digital broadcasting, which is more like quota grants for incumbent fishermen.

ITQs can be re-sold to those who want to increase their presence in the fishery. Alternatively, quotas can be non-tradeable, meaning that if a fisherman leaves the industry, the quota reverts to the government to retire or to grant/auction to another party.

Once distributed, quotas can be re-granted/re-auctioned periodically or held in perpetuity. Limiting the time period lowers the quota's value and its initial auction price/cost, but subsequent auctions create recurring revenues. At the same time, "privatising" such a public resource reduces the remaining amount of public resources and can be thought of as "giving away our future". In the industry, rented quotas are often referred to as "dedicated access privileges" (DAP).

Another issue with tradability is that large enterprises may buy all the quotas, ending what may be a centuries-long tradition of small-scale operations. This may benefit the sellers (and the buyers and those who buy the fish) but can potentially cause large changes in the culture of fishing communities. Consolidation of quota accompanies every IFQ programme, and typically works to phase out smaller, less profitable fishing operations in favour of larger, often corporate-owned fleets who have better financing capabilities.

Some fisheries require quota holders to be participating fishermen to prevent absentee ownership and limit the quota that a captain can accumulate. In the Alaska halibut and black cod fisheries, only active fishermen can buy quota, and new entrants may not sub-lease their quota. However, these measures have only served to mitigate outside speculation in IFQs by non-fishermen. A lack of regulatory policy or enforcement still results in the prevalence of "armchair fishermen" (those who own quota but do not materially participate in the fishery).[17] Since IFQs began in 1995, the commercial longline fleet has never exceeded these fisheries' TACs.

ITQs may have the effect of changing the criteria that fishermen apply to their catch. Highgrading involves catching more fish than the quota allows and dumping specimens that are less valuable because of size, age or other criteria. Many of the discarded fish are already dead or quickly die, increasing fishing's reduction of stocks.[18]

Iceland introduced a quota market for cod in 1984 and made those quotas transferable in 1990.[26] Iceland became one of the first countries in the world to adopt a quota system to manage its marine resources.[26]

The quota system is contentious in Icelandic politics. Critics of the quota system criticize the manner in which the quotas were initially distributed, arguing that the quotas should have been auctioned to the highest bidders. Critics have called for quotas to be gradually returned to the state, which can then auction the quotas to highest bidders. They argue that this would ensure that the state receives its fair share of the profits whereas the current system where the state taxes a share of the profits leads to suboptimal returns for the state. They also criticize the tendency of the market to result in consolidation of quotas.[27][28][29][30][31][32][33]

Supporters say the initial distribution of the quotas to fishermen was fair, as they would have incurred the costs of the implementation of a quota system and thus deserved a share of the quota. Supporters also say that the current system has successfully ensured the sustainability of Icelandic fish stocks and led to prosperity.[34][35][33]

Political parties such as the Independence Party, the Progressive Party and the Left-Greens largely support the current iteration of the quota system. Parties such as Social-Democratic Party and Viðreisn have called for a quota system that increasingly relies on auctions.[36][37]

The Magnuson-Stevens Fishery Conservation and Management Act defines individual transferable quotas (ITQs) as permits to harvest specific quantities of fish of a particular species. Fisheries scientists decide the maximum annual harvest in a certain fishery, accounting for carrying capacity, re-generation rates and future values. This amount is called the total allowable catch (TAC). Under ITQs, participants in a fishery receive rights to a portion of the TAC without charge. Quotas can be fished, bought, sold, or leased. Twenty-eight U.S. fisheries have adopted ITQs as of 2008.[1] Concerns about distributional consequences led to a moratorium on moving other fisheries into the programme that lasted from 1996 to 2004.[2]

Starting in January 2011, fishermen in California, Oregon and Washington will operate via tradeable catch shares. Fishermen have been discarding bycatch that is not their target, typically killing the individuals. Catch shares allow trawlers to exchange by-catch with each other, benefitting both. Goals of the system include increased productivity, reduced waste, and higher revenues for fishermen. More than a dozen other U.S. fisheries are now managed by catch shares. Fishery managers say that in Alaska, where catch shares have been in place for several years, fishermen are now achieving higher prices for their catch.[38]

IFQs are usually initiated through the de facto privatisation of an otherwise public resource: the fisheries. Initial recipients of quota receive windfall profits through the gifting of share ownership, while all future entrants are forced to purchase or lease the right harvest fish. Many have questioned both the ethical and economic repercussions of dedicating a secure, exclusive privilege to access this public resource. For example, in the US, during a presentation given to the Gulf Fishery Management Council, Fishery Manager Larry Abele stated that the present value of the Gulf Fishery IFQ Harvest amounted to $345,000,000 and this was given without requiring of any return to the public from IFQ holders.[39]

Virtually every IFQ programme results in substantial consolidation of quota. For example, it is estimated that 8 companies control 80% of New Zealand's fisheries through quota acquisition, 4 companies control 77% of one Alaska crab fishery, and 7% of shareholders control 60% of the US Gulf Red Snapper quota.[39][40] The consolidation results in job loss, reduced wages, and decreased entry opportunities into the fishery.

Many IFQ systems involve the temporary transfer of fishing rights, whereby the owner of quota leases the fishing rights to active fishermen in exchange for a fixed percentage of the landed value of fish. Since quota acquisition is often beyond the financial means of many fishermen, they are forced to sacrifice substantial portions of their income in order to lease fishing rights. For example, Bering Sea crab lease fees can be as high as 80% of the landed value of the crab, meaning that the active fishermen only retain 20% of the revenue, much of which is needed to cover costs.[41] In some fisheries, the majority of quota is leased to active fishermen, often by individuals who do not physically participate in the fishery, but have been able to acquire shares. This makes quota acquisition even less likely for active fishermen, results in diversion of wealth away from fishing communities and into the hands of private investors, and can cause major financial strain on fishermen along with the economic contraction of fishing communities.[42]

The transition to IFQ management tends to cause considerable economic harm to coastal communities that are dependent on commercial fisheries.[43] Although IFQ management systems are designed to enhance the economic performance of the fishing industry, this usually comes at the cost of coastal communities whose economies rely principally on their fishing fleet. This cost results from the re-equilibration of the quota-regime market, revealing the inefficient over-investment that had taken place in the industry prior to implementation of the quota regime.