Download Quota market changes with decrease and increase in stock

ICES CM 2013/H:35
Quota market changes with decrease and increase in stock abundance
Rafael León (1), Ingrid van Putten (2), Caleb Gardner (1) and Klaas Hartmann (1)
(1) Institute for Marine & Antarctic Studies (IMAS), University of Tasmania, Hobart, Australia; (2) CSIRO
Marine and Atmospheric Research, CMAR, Hobart, Australia. Presenter contact details:
[email protected], Phone +61 3 62277234
Abstract
When individual transferable quotas (ITQ) systems are operating well, stocks rebuild and fleets
become more efficient through the transfer of quota units to more efficient operators. Critically this
process requires functional markets for quota units. When functioning, these markets are expected to
respond to changes in economic rent from the fishery, which in turn is influenced by stock abundance.
This research examined changes in the nature of quota trade in the Tasmanian rock lobster fishery
quota market, during periods of increasing and decreasing stock abundance. Quota owners’ trading
behaviour was investigated using Multi-state Markov models. The rate of permanent quota
transference was driven by their quota ownership and holding, and influenced by stock abundance.
Introduction
Individual transferable quota (ITQ) systems require a constraining TAC and a functional market to
produce the expected benefits (Arnason, 1990; Willen, 2006). A functional market will facilitate quota
unit transferences to operators who consistently have lower fishing costs and are more able to expand
quota ownership. At the same time, this market provides incentive for less efficient operators who
have higher fishing costs to exit the fishery, motivated by the compensation they will receive from
higher quota prices. ITQ management was introduced to the Tasmanian rock lobster fishery (TRLF) in
1998 and went through an initial period of rapid stock rebuilding until 2006. Catch rates increased, the
TAC was easily caught and the quota lease price rose (Gardner et al., 2011). In the years following
2006, the trend reversed and every indicator steadily decreased. Well-functioning quota markets are
expected to respond to economic rent and these changes with stock productivity. Thus we
hypothesised that change in stock abundance would result in adjustments in the value of quota units,
changes in quota ownership, and the volume of quota traded. This was examined across these broad
periods of abundant and depleted stock biomass in the TRLF.
Methods
The TRLF market for quota sales was examined by measuring the transition of quota owners through
different states of quota ownership through time. The ownership categories were labelled small (1-15
quota units), medium (16-40 quota units), large (>40 quota units) and a category representing owners
who exited the fishery. A Multi-state Markov (MSM) model was fitted to obtain the transition rates
amongst the different ownership states (Jackson, 2011). Three covariates were included in the MSM
model, stock status, the individual catch per unit of effort (CPUE) and quota holding (owned ± leased
in/out quotas). The TRLF stock status was categorized into growing (1998-2006) and declining (20072012) periods. CPUE was used as a proxy of fishing/cost efficiency, and the quota holding as a proxy
of financial capacity and fishing effort in terms of quota units.
Result and Discussion
During the period of stock growth, the greatest transition was from the medium quota ownership
group. The majority of these transited to large quota ownership groups although a smaller portion
also downgraded to small ownership (Fig. 1A). The ability of the medium ownership group to
upgrade appeared to result from stock rebuilding with expectations of rising quota value providing
an incentive to upgrade. The ability to increase ownership appeared to be linked to the financial
capacity of quota owners with more medium owners upgrading their ownership than those holding a
smaller number of units (Fig 1B).
CPUE of individual fishers had a
modest effect on transition rates
with an effect only observed at
very high CPUE of more than 2
kg/potlift which was reached by
less than 15 operators per year.
This implied that there was only a
small effect of fishing efficiency on
the tendency towards expansion of
quota ownership
The highest exiting rate occurred
with small quota owners. These
individuals have less ability to
subsidise their fishing businesses
Figure 1. Transition rate amongst different levels of quota ownership for two
with economic rent from quota
levels of stock status (A) and three levels of quota holding (B).
holdings (van Putten and
Gardner, 2010). Regardless of the level of ownership, the exiting rate was higher during the period of
growth in stock, revealing that the higher quota prices in this period provided an incentive to sell
units.
In summary, the sale and purchase of quota units was most strongly driven by the level of existing
quota ownership, which reflects the financial capacity of quota owner, relative to the other factors
analysed. The economic incentive for exiting the fishery was strongest during period of stock growth
and diminished greatly when the stock biomass began to decline.
References
Arnason, R. 1990. Minimum information management in fisheries. Canadian Journal of Economics23: 630–53.
Gardner, C., Hartmann, K., Hobday, D. 2011. Tasmanian rock lobster fishery 2009/10. Fishery assessment Report,
63 pp.
Janckson, C. 2011. Multi-State Models for Panel Data: The msm Package for R. Journal of Statistical Software, 38:129.
van Putten, I., Gardner, C., 2010. Lease quota fishing in a changing rock lobster industry. Marine policy, 34:859867.
Wilen, J.E., 2006. Why fisheries management fails: treating symptoms rather than the cause, Bulletin of Marine
Science, 78:529-546.