Late arrival: The development of resource rent in Icelandic fisheries

Abstract

Abstract The development of resource rent in Icelandic fisheries has been charted since the introduction of the individual transferable quota system in 1990. An estimation of the rent capture of the fishing fee, which is a form of resource rent taxation, is also presented. Two methods were applied to calculate the resource rent. One method is based on the weighted average cost of capital of the Icelandic fishing industry, and the other method involves comparing the return of the capital of fisheries to the general aggregate Icelandic economy. The findings indicate no presence of the resource rent in Icelandic fishing and processing until 2008. Since that time, the rent has been, on average, 16–19% of the export value of the fishing industry, depending on the methods that were applied. The most obvious reason for the long delay before the rent appeared is the almost continual decline of fish catches from 1990–2008. The industry was rationalized during that time, but the rationalization kept up only with the reductions in landings; thus, no resource rent was produced. The rent appeared when the catches started to increase in 2009. In addition, the exchange rate and the weakening of the Icelandic krona were major contributors to the emergence of rent after 2008. The fishing fee captured approximately 13–15% of the calculated rent from 2009. The fee has been relatively modest but was significant in 2016, when it was increased and set at approximately 26–29% of the estimated resource rent of Icelandic fisheries.