Hans Frost

ITQs in Denmark and Resource Rent Gains

Abstract In this article, we analyse to what extent the change in the Danish fishery policy from an effort restriction based management system (ERIQ) to a system based on individual transferable quotas (ITQ) has improved the creation of resource rent. Fisheries economic theory shows that ITQ-based fisheries in a perfect world will be efficient and resource rents will be larger than in fisheries regulated by various forms of entry restrictions and effort regulations. The results presented in this article and evidence from the entire Danish fishery support this conclusion. However, the analyses also show that the resource rent in an ITQ-based fishery might not differ very much from the resource rent in a well-managed fishery based on effort restrictions. JEL Classification Codes: Q22, Q28

Optimal Vessel Quotas and Capacity of a Danish Trawler Fleet Segment: A Dual Approach

In the period of investigation, 1995-2000, the Danish fishery for species meant for human consumption was managed by individual non-transferable vessel quotas, while the fishery for species meant for fishmeal and fish oil was subject to a total quota. The revenues of the fishermen targeting species for human consumption are therefore fixed on the assumption that they are price takers, and that they will maximize profits by minimizing their costs. To model the economic behaviour of the fishermen in terms of the optimal quota size per vessel and optimal fleet size, a dual cost-function approach is an appropriate choice. This method is applied using a generalized Leontief cost function to model the behaviour of the Danish fleet of trawlers below 50 GRT, targeting species for human consumption solely. The estimated cost function is used to determine the optimal quotas yielding: (i) minimum average cost and (ii) maximum profit. The results of the estimations show that the optimal quotas per vessel should be increased by more than 2.5 times and consequently that the fleet should be reduced by more than 60%. As this has not been the case, a probable explanation is that non-transferable quotas leave the fishermen with the option of quitting the fishery only if a decommissioning programme is in place. There is no option to transfer the quota to another vessel.

Fisheries Management and Uncertainty Within the EEC

Fisheries management within the EEC is subject to ambiguous goal formulations, ranging from the biological goal of maximum sustainable yield to intangible political goals. The management body within the EEC consists of various official and political committees which impose both bureaucratic and political uncertainty on the fishing industry. It is argued here that, as a result of this uncertainty, fishing effort in the short run will tend to rise, but in the long run will tend to decline. It is also argued that the reduction of uncertainty will depend on a more careful and less ambiguous goal formulation.

Evaluating Economic Efficiency of Innovative Management Regimes

The objective of this chapter is to estimate the likely implications for economic efficiency from the introduction of various innovative management systems in a number of European fisheries. Bio-economic models are developed to simulate and evaluate the impact of the management systems as they are applied to the following fisheries: Baltic cod (Gadus morhua), North Sea flatfish, Spanish northern hake (Merluccius merluccius), Faroe cod, haddock (Melanogrammus aeglefinus) and saithe (Pollachius virens).

Chapter 5 Financial instruments

Publisher Summary Financial instruments are used to improve the working environment and the safety conditions of exposed population groups and branches. The use of financial instruments in trade entails distortions and welfare losses, and is considered harmful as it leads to an increase in inefficient domestic production, at the expense of a decrease in the supply shares of efficient foreign production. These types of financial instruments are the main subjects of the negotiations in the World Trade Organization (WTO). If the fishing industry is protected in the same way by the use of financial instruments this leads to further overexploitation of the fish stocks (lower supply) of the domestic country, and less overexploitation (higher supply) in the exporting countries. This chapter focuses on financial instruments that have environmental effects for example, those that influence fish stocks. In order to examine the consequences of such instruments, it is necessary to obtain information of the functioning of bio-economic systems.