Rights-Based Management as an Approach to Reduce Illegal Activity

This chapter focuses on the causes, motives, and incentives for committing illegal fishing. In particular, it considers the role of rights-based fisheries management systems in incentivizing or dis- incentivizing illegal behaviour. Rights-based systems of fisheries management exist in most EU member states in some form, and the European Commission sought to introduce an EU system of transferable fishing concessions (defined as a revocable user entitlement to a specific part of fishing opportunities allocated to a member state, which the holder may transfer) in its proposal for the reform of the CFP (COM[2011]417; Europa, 2011). Although this proposal was not approved by the Council and European Parliament, member states are free to implement their own rights-based management systems. As the debate over the usefulness or benefits of such systems continues, it is important to consider the role they play in influencing fishers’ behaviour with respect to compliance. Thus, this section reviews the evidence available to try to determine to what extent this management tool plays a role in compliance behaviour.

Rights-based management programmes convey and manage exclusive entitlements to an entity (person, company, vessel, community) to fish in a particular place at a particular time. The European Commission defines rights-based management as ‘a formalised system of allocating individual fishing rights to fishermen, fishing vessels, enterprises, cooperatives and fishing communities’ (Europa 2007b). There are several types of rights-based management schemes. For example, fishing rights—also known as catch shares (Bonzon et al. 2013)—can be based on quota, fishing effort, or access to fishing territory. They can be held by individuals, groups, communities, or regions. They can be fully transferable, non-transferable, or somewhere in between (with regulation of the market or safeguards to limit transfers in certain situations; Bonzon et al. 2013). Most well-documented rights-based management schemes are quota based, and the majority are transferable, meaning that participants can buy, sell, and/or lease shares (Bonzon et al. 2013). Transferability increases flexibility, enabling a fishery to adjust to annual fluctuations in the catch limit.

By providing exclusive access, rights-based management systems aim to address the ‘tragedy of the commons’, articulated by Hardin (1968). Managing resources under a common pool or open access (i.e. the opposite of a rights-based approach) typically results in a drive to short-term overexploitation. By contrast, allocating access rights within a fishery provides a means of internalizing externalities arising from the common property nature of fish stocks.

The EU is responsible for limiting total fleet size and for fixing catch and effort levels of EU member states. It also decides technical measures such as restrictions on gear types and characteristics in order to provide additional protection to fish stocks. The EU distributes the total allowable catches and effort units (days-at-sea) among member states according to the principle of ‘relative stability’.[1] National authorities then distribute and manage fishing licences, quotas, and effort allocations at the national or regional level. Thus the decision over whether to employ a rights-based management approach is at member states discretion (European Commission 2007b).

Limiting access to a fishery automatically creates a market for fishing rights, reflected, for example, in higher prices for vessels that come with a license as opposed to those that do not. By introducing transferability formally into the rights allocation system, it is possible to ensure greater transparency, legal certainty, and security. It also enables the authorities to establish formal safeguards and regulation of the market (Europa 2007b). This was one reason that the European Commission proposed rights-based management as a management option within the CFP (see Europa 2007b). However, transferability is also one of the most controversial aspects of rights-based management systems. There are now numerous examples of rights-based management scheme implementation in various specific fisheries and localities, in Europe and beyond.

These experiences provide numerous lessons on good practices and the limitations and risks of these tools.

The literature is clear that there are several important advantages to rights-based management systems. Research and experience have shown that rights-based management systems can:

  • • Alter the economic incentives of fishers who no longer compete for their catches, so that highly competitive fishing no longer takes place (Beddington et al. 2007).
  • • Stabilize fishery landings and catch limits (Essington 2010; Essington et al. 2012).
  • • Enable the industry to settle on a fleet capacity that optimizes individual economic yield to vessels or cooperatives (the more efficient fishers will buy out their less efficient counterparts, and in so doing increase the returns to the fishery overall) (Beddington et al. 2007; Coelho et al. 2011).
  • • Allow flexible and extended fishing seasons (Coelho et al. 2011).
  • • Increase the profits and value of fisheries (Grafton et al. 2006; Grimm et al. 2012; Newell et al. 2005).
  • • Enhance the quality of landings and improve markets (by avoiding landings gluts; Coelho et al. 2011).
  • • Improve the safety of operations (resulting from extended seasons and ending the race-to-fish; Coelho et al. 2011; Grimm et al. 2012).
  • • Reduce the likelihood of overfishing (Costello et al. 2008; Melnychuk et al. 2012) and prevent, and even reverse, the collapse of fish stocks (Costello et al. 2008).
  • • Alter fishers’ relationships with management actions that protect and enhance fish populations, because the value of a quota share increases as stocks become more abundant (Beddington et al. 2007).
  • • Promote successful community-based co-management of fisheries (Gutierrez et al. 2011).

Despite the numerous advantages of rights-based management approaches, they are not without potential problems. Given that transferable rights have the effect of reducing fleet capacity to optimize economic yield, this can lead to concentration of property rights

(Coelho et al. 2011; Sumaila 2010). In economic terms, this is not considered a problem because the proponents of transferable catch shares expect such concentration to take place (this is how they achieve economic efficiency). This can also mean that the job structure increasingly shifts from part-time to full-time jobs (Sumaila 2010). As the number of quota owners declines over time, this can influence employment levels, engendering income disparities and barriers to new entrants into the sector. Sumaila and Watson (2002) report concerns of monopolization within fisheries and larger fisheries operators becoming larger mainly because they have more effective lobbying machinery, rather than because they are more economically efficient than small-scale operators.

As discussed before, compliance is a complex issue—there are numerous potential factors that play a role in motivating illegal behaviour. Rights-based management systems employ incentives to change the behaviour of fishers and their patterns of exploitation. Therefore, it is likely that they would also influence fishers’ decisions over whether or not to comply with regulations. There are different ways in which rights- based management may encourage or discourage compliance.

Given that rights-based systems improve the profitability of fisheries, this should automatically discourage illegal activity. OECD (2005) reports that overcapacity is a very powerful driver of illegal fishing, as well as the economic and social conditions of fishers. Rights-based management has been demonstrated to reduce the capacity of fishing fleets and increase the economic situation for those remaining in the fishery. In addition, rights-based management systems convey exclusive rights to the person, community or vessel in question. This exclusive right, if it is conveyed for a sufficiently long period, provides the quota or rights holder with a sense of ownership over the resource. Coelho et al. (2013) argue that the advantage of these private-property-based forms of management is that they are self-enforcing: ‘as fishers are given almost private property rights to the resource based, some sort of auto-regulation is guaranteed’ (p. 467). The sense of ownership should give the property rights users the perception that the results of their actions will affect the net economic benefits that result from resource extraction (Coelho et al. 2011). This self-regulation argument is based on the economic approach to compliance of Becker (1968) described above and is often extended beyond simply obeying the rules to lobbying for lower TACs or at least, not lobbying for higher TACs in contravention of scientific advice. In theory, this so-called ownership engages fishers in compliance with the regulations and diminishes enforcement costs (Coelho et al. 2013). Furthermore, inadequate enforcement may reduce the value of the property right (by increasing the supply of fish and potentially reducing the stock biomass in the longer term, thereby making shares of the catch worth less in the future). This has been seen to prompt stakeholders to take collective action and fund their own monitoring programmes with a tax on landings and quota (Branch 2009). In the British Columbia groundfish fishery, for example, fishers actually pay for all the on board observer and dockside coverage, to avoid any misreporting of catches (Turris 2000). This example supports the argument that fishers might be more willing to pay for enforcement, to report violators, and to reach collective agreements on acceptable behaviour in order to protect the value of their quota (Branch 2009). Other arguments in support of rights-based management as a tool for greater compliance are:

  • • Under the flexible rights-based systems where rights can be traded, there is less need for fishers to take illegal actions if they can lease or buy quotas.
  • • The ownership of rights can be revoked as a sanction and, therefore, can be part of a control system (Branch 2009).

In practice, many rights-based management systems continue to have problems with illegal behaviour (Coelho et al. 2013). Illegal activities commonly reported to be present in the absence of effective control and enforcement are data fouling (i.e. high-grading and under-reporting of catches) and quota busting (Coelho 2011). This suggests that the net gain expected from ownership may not be greater than the net gain from committing an offence. This may partly be because not all fishers will have what they consider sufficient entitlement to fishing rights. To differing degrees, in many fisheries, the actual fishers can be leasing quota from quota holders (‘armchair fishers’ or ‘slipper skippers’) and may be less likely to obey regulations for the same reason that rented apartments are often poorly maintained compared to those inhabited by the owners (Branch 2009). In this case, it is possible that the long-term economic interests of the quota holder, or the long-term interests of the fish stocks, do not outweigh the short-term economic gains from exceeding the quota. Who holds the quota and who leases it will depend largely on the initial allocation of rights and the degree to which they have been transferred since then, if transferability is permitted under the system. This point links closely to the driver of illegal fishing referred to by Eggert and Ellegard (2003) as the legitimacy of the management structures. While the economic impacts of tradable rights are positive, concerns are raised about their social impacts in terms of fairness and equity (Davis 1996). By concentrating the quota in the hands of fewer people, they can potentially become quota landlords controlling the market. If this is perceived as unfair, it would help people to legitimize illegal activity (along the lines of stealing a loaf of bread to feed a starving family). Thus, apart from the equity concerns, there may also be an enforcement rational to regulating the markets for quota to avoid over-concentration.

Nevertheless, there is evidence that fisheries that use rights-based systems maintain their quotas better. Aps et al. (2010) argue that Individual Transferable Quotas would ‘create and enforce the missing negative feedback loop that will be constantly pushing the fishery system towards higher economic efficiency and ecological sustainability’ (p. 1). This would provide both a smart approach to fisheries management and also be consistent with development of marine spatial planning. Melnychuck etal. (2012) conducted a global meta-analysis of 345 stocks to assess whether fisheries under catch shares were more likely to track management targets set for sustainable harvest than fisheries managed only by fleet-wide quota caps or effort controls. They observed that overexploitation occurred in only 9 per cent of stocks under catch shares compared to 13 per cent of stocks under fleet-wide quota caps, and 41 per cent of stocks under effort controls. They conclude that the reduced variability of catch-share fisheries around their respective target catch rates was likely due to the incentive that placed the responsibility for not exceeding quota on the individual. Similarly, Grimm et al. (2012) studied 15 major catch-share fisheries of the United States and British Columbia for compliance with total allowable catches, among other things. They observed that of the 86 TACs set in the studied catchshare fisheries since implementation, only 5 (6 per cent) were exceeded, and by an average of only 7 per cent.

  • [1] ‘Relative stability’ is the principle according to which the EU allocates total allowable catchesinto national quotas. Under this system, total allowable catches for each fish stock are sharedbetween the member states of the EU according to a fixed allocation key based on their historicalcatches.
 
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