A Proceedings Report (2018)
The Gathering provided many informative presentations and fruitful discussions among attendees, which are captured in the report, and from which the following outcomes were achieved:
Consensus on the need for Pacific region fisheries policy reform
There was a unified recognition that the current policy is not working to sustain fisheries and fishing communities for current and future generations, and policy reform is urgently needed.
Consensus on the request to be made to the federal Minister for a policy review
The Minister of Fisheries, Oceans, and the Canadian Coast Guard, needs to perform an independent review of BC commercial fisheries licensing policy, built on a fully transparent and truly inclusive process, to:
- Ensure fisheries licensing policy in the Pacific region supports independent fish harvesters, First Nations, and the revival of rural fishing communities, and
- Determine how “social, economic, and cultural” objectives are to be achieved in Pacific region fisheries.
There was also agreement in the room that the law, policy and regulations need to ensure that ecological integrity is restored and maintained.
Agreement on the need for guiding principles for policy reform
- Ensure social, cultural, economic and ecological wellbeing for fish harvesters, First Nations, and rural coastal communities
- Establish local, decentralized, and inclusive governance and fisheries management, and more local, transparent ownership of fisheries access
- Protect the independence of active fishermen
- Rebuild and protect fish stocks for current and future generations
- Prioritize First Nations reconciliation
- Quantify – tell the “truth” – of the real cost of the privatization of fisheries
- Build a healthy fishing industry that can support the next generation of harvesters – particularly youth – and enable older fish harvesters to retire, with dignity
- Provide fairness for impacted parties in any licensing transition
These principles can also be seen as the foundation for the vision for BC fisheries, as they reflect the outcomes that participants want to see from policy reform, not just the guiding themes for the reform process.
Attendees also called for official recognition of the negative impacts that have arisen from the current policy, an immediate stop to current policy practices related to license and quota sales to non-fishing entities, and, the need for urgency – a review should be done within 6 months.
Although this is a common story on BC’s coast, hope still lives—in each coastal town, there remains a desire for sustainable fisheries to rejuvenate the local industry.
Since the 1980s, BC’s commercial fleet has shrunk by more than 60%. Fishermen have retired with no one to replace them. As the industry fades away, First Nations and other coastal communities are struggling with the economic ripple effects.
Individual transferable quotas (ITQs) and other forms of catch shares first became popular as a management tool for Canadian fisheries in the 1990s. Since then, as they have been used in more and more fisheries, BC has been held up as the golden child of catch shares—proof that the system works.
But does it? With a shrinking industry and increasing poverty in so many coastal communities, does catch share management really work as advertised?
A Rising Tide /
Riding a surge of popularity since the 1980s, catch shares have gone into effect in 500 fisheries in 40 countries. In recent years, however, many of the earliest catch share systems have begun to show their age, developing serious problems with major repercussions for small-scale fishermen and fishing communities.
Almost every BC fishery is subject to a Total Allowable Catch (TAC), a maximum harvest that is set using scientific data. TACs limit fishing operations, ensuring that enough fish are left each season to reproduce and maintain population levels.
In competitive fisheries, all licence holders enjoy the same access. DFO sets a fleetwide TAC (represented here by the oval), and all licence holders compete for fish until that TAC is reached. The fishery then closes to prevent overfishing.
The fishery may have other restrictions to protect fish stocks and habitats, including gear types, season openings and closures, and fishing locations.
Under catch shares, each TAC is divided into individual quotas. Fishermen may only catch as much fish as their quota allows. If they want to fish more or if they catch more than their quota, they need to find more quota to cover that catch. The cost of buying or leasing that quota, however, can make or break the season.
More than half of BC’s commercial fisheries are now managed under catch shares. But how have catch shares affected the people whose livelihoods depend on fishing?
One Size Fits Few /
Supply and Demand
Under DFO regulations, quota can be bought and sold by anyone – including people and corporations that do not fish – on the open market. But because fisheries managers raise and lower the TAC to balance economic and cultural interests with the need to protect fish stocks, these TACs are often unstable.
Supply and demand have driven prices ever higher, trapping fishermen trying to stay in business. In-season changes are just as tough: if a fisherman catches more fish than his quota covers, he must quickly secure access to additional quota or risk penalties – making him more susceptible to price inflation or predatory lending.
ITQs were introduced in the halibut fishery in 1991. Twenty-four years later, quota prices continue to rise with no sign of stopping. In 2008, DFO assessed the potential impacts of reducing the commercial TAC. The prediction was that even with a further-limited commercial fishery, the price of halibut quota would soon level out and begin to decline. Instead, the price of halibut quota has nearly doubled – from $38 per pound to more than $71 just 5 years later.
The Money Pit
A common catch share myth suggests that quotas reduce capitalization in fisheries by allowing even the most poorly-equipped boats to compete with vessels sporting the latest and greatest gear. And to some extent that’s true; the race to buy the best vessels has indeed diminished. But in its place has come competition over access, where fishermen must sink their money into ever-increasing quota purchase and lease prices.
And these investments can take decades to pay off; when compared to income, licence and quota costs are disproportionately high.
The large gap between costs and earnings places a huge burden on small-scale fishermen already in the industry looking to maintain or expand their ability to fish – and it’s downright prohibitive for the next generation looking to start their careers.
So where do fishermen go if they can’t afford to buy licences or quota?
They lease. Many retired fishermen who were gifted quota in the initial switchover to catch shares have kept their quota to lease to new fishermen or processors. Corporations and processors with deep pockets have also purchased quota in order to re-lease to fishermen.
This leasing does not come cheap. Just as quota purchase prices have risen, so too have quota lease prices.
What Floats Your Boat
Fishermen are entrepreneurs, running small businesses on the sea. And as with any small business, there are many costs to consider. When lease prices climb, fishermen spend their money on lease fees rather than maintenance, food, and insurance. Fluctuating seafood prices, fuel prices, foreign exchange rates, mid-season closures, and other factors can throw a serious wrench in the already-delicate works. Because the flow of income only begins when a fish is landed at the dock, it is the fisherman who assumes all of the financial risk.
“The [people] who first get these quotas gifted [from DFO] are the winners. Every cycle of new buyers in, it gets costlier and costlier, and less and less. And then slowly, individuals don’t buy, corporations buy. So there are zero new entrants as we move into more and more ITQ fisheries.”
Nearly one third of the halibut fleet focuses exclusively on halibut. Many of these single-licence vessels own the quota they fish, allowing them to at least break even. In rare cases they may even be profitable. But what happens when the next generation of fishermen enters the industry? If they can’t afford the nearly $1 million required to purchase a licence and the median amount of quota, they are forced to lease.
Leasing places a major burden on crews and skippers, turning fishermen into sharecroppers on their own boats. And it can carry additional financial risk: many fish companies lease their quota to fishermen under the condition that the fishermen sell them any fish they catch – at prices set by the company. This turns fishermen into “price takers,” removing their ability to negotiate prices or take advantage of market spikes.
“You used to be able to start as a crewman, because if you got a job on halibut you could make some pretty good money, but that’s changed now because you’ve got to help the skipper pay for a leased quota.
I get a young crewman, he can work on the deck, sure, but can he make enough money on this boat to buy quota? I don’t know. I don’t think so.”
Ripple Effects /
Safety at Sea
Under a catch share system, what little income was once earned by crew members is now required for quota. Forced to cut costs, a fisherman faces hard choices about the amount of money he can afford to spend insuring and maintaining his boat and gear. No small wonder that the incidence of injuries and fatalities at sea has more than doubled in the last 20 years.
Catch shares are frequently touted for their contributions to safety because they prevent the “race for fish” that can send desperate crews into bad weather, hoping to catch fish before a fishery closes. In a dangerous twist, however, catch shares are now causing poorly maintained vessels to venture out into rough conditions to take advantage of fleeting spikes in market prices. It has replaced the race for fish with a race for wealth.
The shrinking fleet size has had other unforeseen consequences for safety at sea as well:
“It’s quite rare to see another boat out there now, whereas we would have been probably in sight of 2 or 3 [boats] even 10 or 15 years ago. And that’s a real point; it’s really reduced the vessels that can help each other, which is where most of the aid for fishermen comes from. The Coast Guard comes in extreme cases but most of it’s handled within the fishing fleet when a guy needs help.”
Shrinking Fleets, Shuttered Communities
As quota is consolidated into fewer hands and commercial fishing becomes financially untenable for many fishermen, the number of vessels that can afford to participate in the fishery declines.
When fishermen retire or move out of the industry, they often sell their vessels, licences, and quota. Some have been bought back by DFO for redistribution to First Nations; others have been sold to the highest bidder.
“When it comes to the ownership [of licences and quota], we have had it stolen from these communities, from the individuals that live in these communities and it’s going to continue to be stolen in the name of consolidation.”
Various forms of commercial fishing have supported BC’s coastal communities for thousands of years. But with licences and quota being bought up by fish companies and deep-pocketed individuals, that revenue stream is being lost. Reduced access to fish has led to loss of fisheries infrastructure, further shrinking both local fleets and communities. Coastal communities used to benefit from their adjacent resources. Today just about every fishing community is experiencing declining populations, increased unemployment, and shuttered storefronts.
This loss of local industry hits rural coastal communities hard. According to BC Stats, every thousand dollars that fishermen spend in their home communities generates $1,490 of local income, $550 in local GDP, and $130 in government tax revenues. For every million dollars spent, 3.69 local jobs are created.
The Future of Fisheries in BC /
Despite the apparently gloomy outlook for BC’s commercial fisheries, there remains a great deal of hope among fishermen and fishing communities – and rightfully so:
- Fishing is one of BC’s most environmentally sustainable resource-based industries
- There is high consumer demand for seafood
- Fishing supports regional food security
- Commercial fishing is vital to economies in coastal communities
We must ask ourselves how commercial fishing’s $300 million in annual landed value should be distributed. Will there be a thriving small boat fleet or will we settle for a few massive vessels? What place will fishermen and coastal communities will hold in BC’s future?
In 1991, the Committee on the Status of Endangered Wildlife in Canada (COSEWIC) listed the BC white sturgeon (Acipenser transmontanus) as a ‘vulnerable’ species. By 1994, all recreational harvest of B.C. sturgeon was suspended. By 1998, they were considered ‘imperiled and in danger of possible extinction’. In 2006, the Nechako and Upper Fraser populations of white sturgeon (Nechako white sturgeon) were Schedule 1 listed as ‘Endangered’ under the Species at Risk Act (SARA). As such, it becomes illegal to kill, harm, harass, capture, take, possess, collect, buy, sell or trade white sturgeon unless a specific SARA permit or agreement is put in place.
Over the last 50 years, since the Kenney Dam was built, the Nechako white sturgeon population has dropped to less than 600 fish, most of which are over 30 years old. Add to this the fact that these sturgeon don’t inter-breed, the fact that they don’t reproduce until males are 15 and females 20, and that, once mature, females only spawn every four to 10 years, and what’s left is an increasing lack of juveniles.
With this in mind, UFFCA asked Ecotrust Canada to help facilitate and coordinate the drafting of an Aboriginal Traditional Knowledge (ATK) Protocol, including a community-based research methodology for communities to gather their own traditional knowledge on this species. Led by our Knowledge Systems & Planning team, the project works to increase awareness of, and capacity to protect, ATK, and ensure its proper use in decision-making.
About the UFFCA
The Upper Fraser Fisheries Conservation Alliance (UFFCA) was created in 2005 by First Nations in the Upper Fraser watershed to provide advice and support services to its member communities on a range of issues from conservation, to fish harvest planning and management, to environmental assessments, to field data collection science.
The UFFCA primary objectives include working to further the fisheries and aquatic resource related interests of the Upper Fraser First Nations. They promote and encourage:
- Inclusive and transparent decision-making regarding fisheries issues in the UFFCA area;
- Stewardship of fisheries resources and sustainable harvesting practices;
- Sustainability in fisheries management, decisionmaking and practices; and
- Cultural values associated with historical practices.
ATK in fisheries
In certain federal statutes there is a requirement to consider Aboriginal peoples’ knowledge when making management decisions, particularly related to natural and cultural resources. SARA requires that COSEWIC carries out its functions using the best available information, which includes ATK. SARA also requires that government departments consider ATK when developing and implementing recovery measures to protect species at risk. However, while the federal government establishes its policies for working with ATK in respectful and meaningful ways, First Nation communities often lack the capacity and resources to ensure their ATK is protected and used properly.
Understanding what ATK is from a First Nations’ perspective is important for ensuring terminology is well interpreted and consistently used. Often, processes used for planning and decision-making break down as a result of misunderstandings and misrepresentations in this regard. In the case of fisheries management within SARA, there are a series of challenges that arise due to the existing Aboriginal Rights to fish for Food, Social and Ceremonial purposes. In the case of the First Nation members of the UFFCA, Nechako white sturgeon, listed as endangered under SARA, are periodically by-catch of gillnet fishing for salmon.
For thousands of years First Nations in the Nechako and Upper Fraser Watersheds used a selective harvesting method of fish weirs (or fences), which sustained their fishery (see middle photo above). However, because of an historical agreement – the Barricade Treaty signed in 1906 – these First Nations agreed to stop using their selective fish weir methods. In exchange, they would use nets for fishing, as well as take up farming, using equipment allocated through the Barricade Treaty. This occurred during a time of active colonial policies to alter First Nations livelihoods and improve commercial fisheries for canneries.
The challenge facing fisheries managers and policy makers now, is to revisit and redevelop the capacity of First Nations to collect and protect their ATK, and then incorporate it in management decisions in ways that give First Nations control of their data and how their knowledge is used. While legal mechanisms exist to limit Aboriginal use of fisheries resources for conservation efforts, it creates an environment of hostility and resentment since, in nearly all cases, First Nations use of such resources were not the source of declined fish populations. In the case of Nechako white sturgeon, for example, the decline in population over the last 50 years was mostly due to the combined factors of the Kenney Dam being built, and industrial forestry and agriculture, all of which have impacted water flows and temperatures. Habitat disturbances and loss are also contributing factors to the decline of this ancient creature. Further, protecting ATK from misuse and misrepresentation is a critical concern for First Nations, particularly in relation to conservation efforts.
Ecotrust Canada’s role
Our project began with a series of community meetings in Prince George and Fort St. James, and several workshops with First Nations fisheries representatives, during which the purpose of the project was discussed, and important work was done in developing an Aboriginal Traditional Knowledge Protocol and designing a community-based research methodology for the collection of their ATK.
Ecotrust Canada sees the partnership with UFFCA as a means to find important solutions with communities for improved fisheries management and community planning. The Nechako and Upper Fraser watersheds are important regions that form part of the headwaters for Fraser Basin, one of the world’s largest undammed salmon rivers. This project fits into Ecotrust Canada’s key 2011-12 initiatives:
- Ecosystem-based Forestry
- Qwii-qwiq-sap Initiative
- Fisheries for Communities
- Innovative Land Use Planning Tools
- Community Mapping & Planning
Ecotrust Canada’s team, consisting of Jaime Sanchez, MCIP, Community Planner for Knowledge Systems & Planning, and Pamela Perreault, PhD Cand., Researcher and Facilitator, played the role of facilitating meetings with UFFCA staff and guiding the creation of the ATK Protocol and community-based research methodology. An iterative process with the participating First Nations was used to ensure that project goals were clear, particularly the understanding of the importance of ATK in conservationrelated legislation and policies.
The work we are doing with UFFCA further signifies a growing effort to ensure that ATK is properly protected and used in community planning and decision-making. As part of the recovery planning for Nechako white sturgeon, ATK can provide valuable insight into several areas:
- Identifying critical habitat;
- Linking cultural and spiritual teachings to management requirements and planning;
- Developing partnerships for building capacity and support for community-based conservation;
- Improving scientific knowledge for fisheries management and incorporation of ATK into conservation policies and laws.
To this end, the community-based research methodology being developed by Ecotrust Canada, in close partnership with communities and UFFCA, incorporates methodologies developed by Terry N. Tobias and outlined in his book Living Proof: The Essential Data-Collection Guide for Indigenous Use-and-Occupancy Map Surveys , an award winning book co-published by Ecotrust Canada and the Union of BC Indian Chiefs. If the project receives further funding, we anticipate coordinating further workshops on these methodologies.
In an era when reconciliation with indigenous communities around the world is slowly, but surely, improving, Ecotrust Canada believes that First Nations’ traditional knowledge must be protected and used according to their protocols. This project has resulted in an Aboriginal Traditional Knowledge Protocol that will be shared with other First Nations, organizations and government agencies that can be used as a template for other initiatives of a similar nature. Ecotrust Canada has also recently supported the implementation of United Nations Declaration on the Rights of Indigenous Peoples (UN Declaration), which outlines a global minimum standard for the respect, dignity and survival of indigenous peoples. Historically, indigenous peoples around the world have been subjected to abuses and human rights violations and this UN Declaration is a vital instrument for advancing the economic, social and cultural development of indigenous peoples, a cornerstone of building resilient communities. Implementing the UN Declaration in all our initiatives with First Nations communities will ensure that Ecotrust Canada supports harmonious and cooperative relationships between States and indigenous peoples.
The resulting Aboriginal Traditional Knowledge Protocol is an extremely important document for First Nations, organizations and government agencies that work with or encounter Aboriginal Traditional Knowledge. First Nations want their knowledge protected from abuse and misuse. Most also want their knowledge used on equal footing with western science, particularly in fisheries management. Two First Nations have already agreed to sign the ATK Protocol, which is an agreement between the First Nation Band Council and UFFCA; the future objectives of the project will be to have other First Nations voluntarily sign the ATK Protocol and continue the collection of Aboriginal Traditional Knowledge. In addition, capacity building through training workshops in research methodologies will be included so that First Nations communities collect, store and protect their own community’s ATK.
If the Nechako white sturgeon population does not recover soon, it will likely become genetically extinct. Which is why this work is being done, and why many other efforts are being made by organizations like the Nechako White Sturgeon Recovery Initiative, UFFCA, Carrier Sekani Tribal Council, and local and First Nations communities in the Nechako and Upper Fraser Watersheds to save the sturgeon. The incorporation of Aboriginal Traditional Knowledge represents thousands of years of collective, local knowledge and experiences that will complement and improve planning and recovery initiatives of this important species.
It’s time to rethink how ITQs are designed, managed and implemented.Ecotrust Canada has undertaken this analysis, not to argue for the dismantling of existing ITQ programs, but rather to improve their design, and to inform policy discussions about new ITQ pilot programs currently under consideration. Debate about ITQs is often polarized and fuelled more by ideology than reality. Proponents hail ITQs as a solution for both conservation and the financial ills plaguing the fishing industry. However, too many people—including some environmentalists—accept exaggerated claims about ITQs without clearly knowing the facts. Downplayed is the critical role that sound science and good governance—that is, inclusive, transparent co-management between government, and industry and stakeholders—plays in ensuring the sustainability of fisheries.
Unfortunately, a number of recent studies—including a high-profile 2008 article in the journal Science—have exaggerated the virtues of ITQs, drawn specious correlations, ignored unintended consequences and, generally, oversimplified the complex causes of fisheries collapses and how to stop them. Perspective is being lost as myth becomes received wisdom.
By ignoring the shortcomings of ITQs and overstating their effectiveness poor decisions are being made and will be made in the future. With refreshing facts and sobering analysis, Ecotrust Canada offers a cautionary tale about ITQ fisheries. We use BC as our case study. The lessons learned are of global significance.
The number of ITQ fisheries in BC is rising sharply. By 2007, 74 percent of BC’s commercial catch, by weight, was managed under ITQs. Since 2003, pilot ITQs have started in several BC salmon fisheries.
Historically, competition has characterized BC fisheries. Fishermen competed against each other for a share of the catch. Under poorly managed competitive fisheries, fishermen were forced into a vicious cycle of acquiring bigger boats and better fishing technology to out perform each other. ITQs are supposed to end this so-called “race to fish” by allocating defined shares of the total allowable catch (TAC) to individual fishermen.
ITQs go by many names, some of them misleading: catch shares, limited access privileges, dedicated access privileges, individual vessel quotas, individual fishing quotas. However, as their name suggests, individual transferable quotas are a fisheries management system with three common characteristics: they include quotas or defined shares of the catch, are allocated to individual fishermen or their vessels, and are transferable to some degree, allowing fishermen to buy, sell, lease and trade them.
ITQs have been implemented in BC fisheries with growing frequency in the 1990s. Today, there are eleven ITQ fisheries representing 74 percent of the catch, by weight, of all BC fisheries. Pilot ITQs have also been introduced in select salmon fisheries. By contrast, only about one percent of global fisheries are managed under ITQs (Costello, 2008).
ITQs have met some goals in terms of conservation and the financial performance of fishermen. First, in many fisheries, ITQs make fishermen responsible for keeping within an individual catch limit thereby ensuring that the entire fleet stays within a strict TAC. That has been good for conservation. And second, quotas have provided fishermen with greater flexibility to schedule their fishing trips to meet market demand. Market gluts have been reduced and landed values, in some cases, have increased.
Yet many other claims about the benefits of ITQs do not hold up under scrutiny. Some of these claims have become incredibly pervasive and are largely unquestioned. Shortcomings have also been downplayed or completely ignored, especially regarding the fairness of ITQs to crews, rural coastal communities and First Nations. What follows are lessons learned from the practical experiences of designing, implementing and managing ITQs in BC.
Lesson 1: ITQs promote leasing, not ownership.
It is often stated that ITQs provide fishermen with “a secure asset, which confers stewardship incentives” (Costello, 2008). By owning a financial stake in a fishing quota, fishermen have an incentive to maintain the value of this “secure asset” through responsible fishing practices. That’s the theory.
The amount of halibut quota temporarily transferred from one vessel to another each year has soared, evidence of high levels of quota leasing.
Buying sablefish and halibut quota has grown astronomically expensive, forcing fishermen to take on more and more debt.
In reality, ITQs have not promoted ownership by active fishermen in BC. Rather, ITQs have promoted absentee ownership and quota leasing. Once vessel owners are gifted their initial quota, many subsequently retire or cease to be active fishermen. Instead of fishing, these “armchair fishermen” earn income from the proceeds of quota lease fees. By way of example, in the pilot ITQ fishery for northern Chinook salmon, almost half the quota was leased from 2005 to 2007. Unlike several other jurisdictions, such as Alaska and Atlantic Canada, there are no owner-operator rules in BC restricting or even regulating the ownership or leasing of fishing quota by non-active fishermen or outside investors.Quota leasing is a growing trend. Take, for example, the halibut fishery. In 1993, 19 percent of the halibut quota was temporarily transferred from one vessel to another during the year. (Fishermen lease quota by temporarily transferring the ownership of quota.) By 2008, the ratio skyrocketed to 106 percent of the TAC, evidence of high levels of leasing. Today, lease fees are effectively charged on almost every pound of halibut quota in BC. (For more information on the extent and problems associated with quota leasing in the halibut fishery, see An Elephant in the Room: The hidden costs of leasing individual transferable fishing quotas by Dr. Evelyn Pinkerton of the Simon Fraser University and Danielle N. Edwards of Ecotrust Canada).
Some quota leasing is necessary, especially in BC’s integrated groundfish fishery, for conservation. In the halibut fishery, for example, leasing facilitates a cap-and-trade system for non-targeted rockfish species: those fishermen who catch only a few incidental rockfish lease their surplus rockfish quota to those who catch a lot, while keeping total rockfish catches within a strict limit.
However, by far the greatest volume of leasing is motivated by lucrative quota lease fees. In some cases, processors even lease and then sublease quota, passing on all the costs to fishermen. Working fishermen are increasingly becoming “tenants” who pay exorbitant rents to landlords, or “sealords,” who own the quota. The lucrative leasing has, in turn, driven up the price of purchasing quota, making ownership prohibitively expensive for many fishermen.
Lesson 2: ITQs give fishermen a false sense of security.
Fishing is an uncertain business. The weather, shifting allocations, fluctuating fish stocks, market forces—all of these factors lead to a sense of insecurity. It’s no wonder why some fishermen want ITQs to secure their slice of the pie. ITQs can reduce a bit of uncertainty, but they by no means eliminate it, and in some cases can exacerbate it.
First, in terms of allocations, quotas provide no more legal protection to fishermen than regular fishing licences. Whether a fisherman owns a licence or quota, the government can reallocate commercial catches to settle international or First Nations’ treaties, or to meet demands of the sports-fishing sector. By way of example, 12 percent of the commercial halibut catch was reallocated to the sports-fishing sector in 2003. This was done without compensation to halibut quota holders. ITQs don’t strengthen the property rights of fishermen to prevent reallocations or in seeking compensation.
Second, ITQs do nothing to mitigate ecological uncertainty. Climate change, marine survival rates, habitat damage, predation and other factors cause fish stock levels to fluctuate and thereby create the greatest uncertainty for fishermen. It must be remembered that quotas in BC are a defined percentage of the total allowable catch (TAC) and don’t represent a specific poundage of fish. As a result, when fish stock levels rise and fall from year to year because of environmental conditions so do fishermen’s quotas.
That’s particularly true in salmon fisheries, which depend on cyclical runs. Scientists find it incredibly difficult to predict annual salmon abundance, and typically change their estimates in-season. Through test fishing and in-river fish counters, scientist often determine that actual salmon run sizes are smaller or larger than expected, and need to immediately close or open fisheries. Quotas will do nothing to mitigate this kind of ecological uncertainty.
Third, in terms of market forces, ITQs can help fishermen respond better to the market by giving them flexibility to deliver catches when demand and prices are high. However, many fishermen lease quota in pre-season agreements, locking themselves into lease rates per pound. In some fisheries, 60 to 75 percent of the landed value goes to paying quota lease fees. If fish prices drop or fuel costs rise, their profits could disappear. As a result, quota leasing can actually increase fishermen’s risk and exposure to changing market forces.
The only thing absolutely certain about ITQs is that some fishermen will opt to lease their quotas, thus guaranteeing themselves revenue without any risk of having to actually go fishing.
Lesson 3: ITQs facilitate privatization.
Privatization is probably the most controversial and convoluted issue in the ITQ debate. Some free-market proponents talk about ITQs in terms of “rights” and “property.” Other proponents, attempting to downplay the privatization controversy, go out of their way to avoid such language. Thus, some ITQ advocates talk of dedicated or limited “access privileges.”
- News: Fishing licences fit definition of property, Supreme Court says
- Supreme Court of Canada Decision: Saulnier v. Royal Bank
Fishing licences and quotas are not property de jure, that is “in law.” Rather, they are property de facto, that is “in practice.” In 1969, DFO introduced limited entry in BC fisheries, grandfathering a limited number of licences to existing fishing vessels. By law, these licences confer annual fishing “privileges.” However, DFO allowed fishermen to buy, sell, trade and lease these privileges. As a result, the licences became valuable assets or de facto property. Quotas therefore create new forms of de facto property that can be divided, capitalized and transferred with even greater ease.
In October 2008, the Supreme Court of Canada, in Saulnier v. Royal Bank, unanimously confirmed the de facto property rights inherent in fishing licences and quota. The Justices write: “A… licence confers to the holder a right to engage in an exclusive fishery under the conditions imposed by the licence, and a proprietary right in the fish harvested and the earnings from their sale. The subject matter of the licence, coupled with a proprietary interest in the fish caught pursuant to its terms, bears a reasonable analogy to a common law profit à prendre which is undeniably a property right.”
Lesson 4: ITQs increase capitalization in fisheries.
ITQs are the most capital intensive fisheries in BC. The value of licences and quota, compared to vessels and equipment, is considerably higher in the geoduck, sablefish, trawl and halibut fisheries, which are managed under ITQs.
BC halibut and sablefish ITQs are unduly pricey relative to landed value and Atlantic fisheries.
“Too many fishermen chasing too few fish.” That mantra drove fisheries reform in the 1990s. ITQs were implemented, in part, to downsize fishing fleets and thereby reduce over-capitalization. The number of vessels in several ITQ fisheries in BC has greatly declined. The trawl fleet went from about 120 to about 75 active vessels. ITQs also downsized the sablefish fleet by about 25 percent.In fisheries, capitalization has traditionally referred to investment in vessels and equipment or tangible assets. ITQs, however, have had a huge impact on another type of capitalization. Investment in quota and licences, described as “intangible assets” by accountants, has soared. By 2007, intangible assets were estimated to be worth $1.8 billion, more than five times the value of all the vessels and equipment in BC fisheries. When licence and quota market values are taken into consideration, total capitalization—in both tangible and intangible assets—has actually increased in BC’s fishing industry.No matter how you measure it, ITQs are more capital intensive than fisheries managed under alternative systems. In BC, the market value of licences and quota compared to vessels and equipment is disproportionately higher in ITQ fisheries. This is also true when you compare the value of quota to the landed value of a fishery’s catch. In Atlantic Canada, the ratio of licence and quota value to landed value is 2 to 1. The ratio for BC halibut and sablefish ITQ fisheries is 4 to 1, or double. Quota values are completely out of proportion to catch value.
A number of factors have led to the unusual appreciation of quota values and lease rates. These include the transaction costs of quota brokers, market distortions from the initial gifting of quota, supply scarcity, imperfect information among buyers and sellers, speculative quota leasing, concentration of quota ownership, and expectations of government buy-backs. Arguably the biggest factor is the ability to gain lucrative lease fees from quota without incurring any of the financial costs or physical risks of actual fishing. The deregulated, laissez-faire market that permits almost limitless leasing has helped to create soaring quota prices.
The high market capitalization of quota is a growing problem. That’s particularly true for next generation fishermen who find licence and quota costs—now in the millions of dollars per vessel—prohibitively expensive to purchase.
Lesson 5: Quota leasing hurts the financial performance of working fishermen.
In the longline fishery, quota lease fees are as high as 60%-75% of landed value of the catch, draining money from working crews & captains.
Capital wins, crews lose. Trawl crews are being pinched in two ways: First, as the percentage of quota leased onboard trawlers increases, crew shares decline to pay lease fees that finance the capital cost of expensive quota (Chart 1). Second, the lease fees themselves have risen since quotas were introduced in 1997 (Chart 2).
By allowing fishermen to better meet market demand, ITQs can reduce gluts and improve fish prices. Landed values often rise. While this is true in some fisheries, it is not true in others. The change to ITQs for BC dogfish fishermen in 2006 provided no market advantages and fish prices actually declined due to other factors.Claims that ITQs increase overall landed value mask the deteriorating financial performance of working fishermen (crews and captains) compared to quota owners. Those vessel owners initially gifted quota enjoy windfall profits through lucrative leasing.Meanwhile, this new cost of doing business is borne by working fishermen. Crew shares usually decline as revenues are drained to pay quota leases. Analysis shows that the single largest cost in BC’s longline groundfish fishery is the leasing of quota. Lease fees can often consume as much as 6o to 75 percent of the landed value of the catch, leaving the remainder to be divvied up by the crew.
High lease costs have had a ruinous effective on the competitiveness of the BChalibut fishery. In 2009, halibut landed values fluctuated from a high of $5.20 per pound to as low as $3.70. Yet lease fees remained at over $3 per pound, making BC halibut fishermen uncompetitive compared to Alaskan fishermen who only pay a fraction of lease fees. Estimates show that about 10 percent of halibut quota is leased in Alaska, where there are owner-operator rules and restrictions on leasing, compared to 100 percent in BC.
One study of scenarios in the trawl fishery showed that when 100 percent of quota is leased on a vessel, crew shares can decline by almost fifty percent. Complaints from crews suggest lease fees are being increasingly charged on quota whether or not it is owned or leased by the trawler, thereby reducing crew shares. This unfair settlement practice has yet to be seriously investigated.
In a 2006 memo to communities, the Groundfish Development Authority, which enforces a code of conduct to protect trawler crews, reported: “Crew members’ take-home pay continues to diminish; sometimes they come back from a trip with deliveries of 80,000 lbs of high-value groundfish only to find that they are actually ‘in the hole’ after all expenses are deducted.”
Lesson 6: ITQs don’t enhance sound science and monitoring.
In BC, strict dockside and at-sea monitoring was often introduced at the same time as ITQs, giving the impression that quotas are somehow responsible for better fisheries monitoring.
A number of reports claim that ITQs enhance monitoring and science. One U.S. study found three-quarters of ITQ fisheries had monitoring compared to only a quarter of other fisheries. While ITQ fisheries usually require stricter monitoring because of high-grading problems, there is nothing about the nature of ITQ fisheries that inherently improves monitoring or scientific data collection.Indeed, many fisheries in BC had strict monitoring in place well before the introduction of ITQs. In BC’s dogfish, lingcod and rockfish fisheries, for example, dockside catch verification was in place a decade before the introduction of ITQs. And the halibut and sablefish fishery were managed with ITQs for some fifteen years before both fisheries were required to have onboard monitoring. As well, dockside and at-sea monitoring were introduced in the trawl fishery the year before ITQs were implemented.A final example is BC’s abalone fishery. In 1979, ITQs were introduced in this fishery, but poor monitoring led to poaching and over-fishing by licensed harvesters. The fishery collapsed and has remained closed since 1990. In this case, ITQs obviously did not guarantee proper monitoring and strict enforcement.
Lesson 7: ITQs have safety problems of their own.
It is often claimed that fishermen are forced to go out in bad weather in competitive fisheries to ensure that other fishermen don’t get more fish in their absence. This risky behaviour leads to unsafe working conditions. ITQs stop this “race.” While competitive fisheries can have unsafe conditions, ITQ fisheries have safety problems of their own.
Despite claims that ITQs are safer than competitive fisheries, groundfish trawling, which became an ITQ fishery in 1997, is becoming more dangerous. The number of lost days due to injury has increased 76% in six years. Fatalities are on the rise as well.
ITQs offer fishermen market incentives to engage in risky behaviour. Fish prices are often higher in winter months when less fresh fish is on the market due to bad weather. Fishermen may plan their annual fishery to take advantage of the increased prices, thereby exposing crews to the dangers of foul weather. This is particularly true if fishing vessels must lease a lot of quota which tightens their financial margins. Vessels may also stay at sea in bad weather to keep down the costs of fuel and dockside monitoring. More seriously, the high cost of buying and leasing ITQs bleeds income away from working fishermen, causing boats to go out with inexperienced or insufficient crewmen, which can lead to accidents. At a 2007 Fish Safe BC workshop, “quota fisheries issues” and “too few crew on vessels” were identified as two weaknesses, among many, that need to be addressed to improve fishing safety.In BC, the Groundfish Development Authority has received reports that trawl “vessel owners, in order to keep costs down, are sending their vessels to sea with three-man crews instead of four. This is a major safety concern that crew members believe is a contributing factor in the loss of several vessels in the past few years.” A trawl industry study confirmed this practice: “Traditional four-man boats are sometimes manned with three, primarily as a means of improving per-person incomes. Neither vessel owners nor crewmen believe that this trend is in the best interests of safe operations.” (Nelson, 2006) Falling fish prices and rising fuel costs are partly to blame for tighter margins, but quota leasing and unfair settlement practices have made a bad situation even worse for working fishermen.
Efforts are being made by programs such as Fish Safe BC to raise safety awarenes and the number of injury claims has stabilized in the past several years for the fishing industry as a whole. Yet statistics suggest that the trawl fishery is becoming less safe. In fact, ITQs may be a contributing factor to this troubling trend.
From 2003 to 2008, seven trawl fishermen have been killed, double the annual fatality rate compared to the 18-year average. Lost days due to injury on trawl vessels skyrocketed by 76 percent from 2003 to 2008, too, and the number of fatality and disability claims in the same period jumped 48 percent. The introduction of several factory trawlers in 2005 and injuries sustained by onboard processing workers partly explains the increase.
Still, despite claims that ITQs have made trawling safer, fatalities are at a historic high for this fleet. Anecdotal and statistical evidence suggest that the economics of ITQs have created safety problems of their own.
Lesson 8: Sound science and co-management underpin fisheries sustainability.
Proponents often exaggerate the importance of ITQs in sustainable fisheries. Setting a scientifically defensible TAC and establishing an inclusive and transparent co-management process are by far the most important aspects of fisheries conservation. No fishery, ITQ or otherwise, will be sustainable in the long run without these two key measures.
First, ITQs cannot prevent over-fishing if TACs are based on faulty science, poor data or industry lobbying, or if a precautionary approach is not taken in harvesting.
A recent study (Costello, 2008), surveying 11,135 fisheries from 1950 to 2003 published in the journal Science, states that the implementation of variations on ITQs “halts, and even reverses, the global trend toward widespread collapse.” The authors, however, over-stretch their findings by implying there is a causal link between ITQs and sustainable fisheries.
In fact, all the 121 ITQ fisheries in their study had “scientifically determined total catch” limits, suggesting that it could be sound science and strict TACs—and not necessarily ITQs themselves—that ensure the sustainability of fisheries.
Good governance is another critical ingredient to ensuring sustainable fisheries. For proper decisions to be made, all those with an interest in fisheries need to be engaged.
Dozens of critical conservation and socioeconomic decisions are made every year by various co-management advisory processes set up to help the Department of Fisheries and Oceans (DFO) manage marine resources. ITQs alone can’t answer questions about seasonal closures to protect spawning fish, designing refugia areas for depleted species, restricting harmful fishing gear, weak-stock management and many other conservation issues.
ITQ proponents often claim that quotas are easier to manage since the marketplace is supposed to take care of everything. Yet few people support a completely deregulated, laissez-faire market. Quota markets need to be regulated and properly designed to prevent monopolies, excessive corporate concentration and other market-distorting behaviour. A properly designed quota market can also safeguard “social goods,” such as fair crew payments, Aboriginal participation in fisheries and the interests of rural communities.
In fact, DFO advisory committees constantly deal with issues regarding ITQs including ownership concentration, transferability rules, vessel quota caps, sector allocations, quota lease rates, etc. In the BC trawl ITQ fishery, a Groundfish Development Authority was also established to safeguard the interests of crews and rural communities. Furthermore, commercial exchanges need to be established to facilitate quota trading, which adds complexity and costs to business operations.
In short, ITQs don’t guarantee sound science and good governance. They represent only one alternative, among many input and output controls, to responsibly manage marine resources.
The central lesson of this brief investigation into ITQs is that there are no simple solutions or quick fixes to fisheries conservation. If properly designed, ITQ systems can play an effective role in a multi-faceted approach to responsibly managing fisheries. However, poorly designed ITQs can create as many problems as they solve. Policy makers need to clearly weigh both the costs and benefits of ITQs, and design and regulate quota markets to meet social, environmental and economic objectives.
- News Release: Study cautions against repeating mistakes of BC’s speculative fishing quota markets
- Report: An Elephant in the Room: The hidden costs of leasing individual transferable fishing quotas
- Toolkit: A Start-up Guide to Fisheries Licence Banks
- Case Study: The Pacific Coast Fishermen’s Conservation Company