Thursday, November 30, 2006

Fishing industry moving toward economic efficiency and sustainability?

Seeing fishing industry move toward efficiency and sustainability is the dream of many people in the world , as there is major concern about over fishing and depletion of fish stocks….if we over fish then the ecosystem in the ocean will be massively disrupted. And many people will face starvation etc…it’s something more real to people more quantifiable... more pressing and more feared, Than global warming but it receives less press...
Most people say not to interfere with the current market and its current costs however if industry doesn’t move to a more sustainable system the real cost of feeding people will skyrocket. The current system faces gross overcapacity. Such circumstances provide for constant downward pressure on the pricing. Thus blinding us to the real cost…
I found a reference in an article to how Iceland dealt with their system Iceland is a good test market for the world because they have small enough economy to manipulate but large enough to be representative of the rest of the world . They are trying a hydrogen power car economy right now and the world is watching because its models may be used to implement similar program in rest of the world. The article goes over the 15 yr Icelandic implementation of a sustainable program the first thing introduced is quotas. These bring some protest but a solution is found in transferability. The quotas were not acceptable because they faced overcapacity. The transferable quotas solve things by allowing efficient allocation of quota to be market determined…. The government wanted to internalize over fishing‘s costs. The best way they had was to give those who make living in fisheries an economic stake in conserving the stocks this would encourage using them in a sustainable manner. For this policy to succeed the fisheries sector must be made economically efficient. Economic efficiency is a required ingredient to ensure ecological efficiency.
Here is an excerpt from the article...
"Fisheries management is of crucial importance to the promotion of sustainable fisheries. Such a system must be based on sound scientific knowledge and rigid surveillance and enforcement. Yet while fisheries management is a necessary condition for sustainable fisheries it is not sufficient all by itself. For the system to be effective it must be accepted and supported by the fishing industry and fishermen alike. An important way to build that support is to raise awareness through consultation between public authorities and the fishing community. But a more effective way is to give those who live from fisheries an economic stake in conserving the stocks and using them in a sustainable manner. For that to happen the fisheries sector must be made economically efficient. In short, economic efficiency is required to ensure ecological efficiency.
To offer an example, the Government of Iceland devoted some fifteen years to developing an effective sustainable fisheries management system. Total Allowable Catch (TAC) was introduced for all the most important commercial fish species, based on sound scientific observations and assessments. Also, to ensure that catch levels were not surpassed, a rigid enforcement and compliance system was established to monitor the fishing of every fishing vessel in the country with the help of a state-of-the-art computer system that links all ports of landings to the Directorate of Fisheries.
Yet despite the ever more stringent system, there was always pressure from the industry to increase the TAC and to allow for more fishing capacity. The underlying reason was that the system lacked the economic incentive granting the industry and fishermen a more direct stake in the conservation and sustainable use of the stocks. The one factor standing in the way of generating this incentive was the overcapacity of the fleet. In other words, there were too many boats fishing the limited amount of fish to allow for sufficient economic return for the operations. The fleet had to be rationalized. Towards this end Individual Transferable Quotas (ITQs) were introduced.
The advantage of ITQs is the efficiency and flexibility offered. Fishing operations can increase or reduce their harvesting rights and change their composition in accordance with what they feel is cost-effective. This they can do by trading in catch quotas through a public auction market, the Quota Exchange. The price is determined by supply and demand and payment for harvest rights is either made in monetary form or by exchanging rights.
The cost-effectiveness of fishing in Iceland has increased substantially due to the quota system. Many enterprises have merged to allow for increased efficiency and to spread operating risks. Both management and ownership of enterprises have also changed and presently most of the country’s larger fishery enterprises are listed on the stock market. This, coupled with the flexibility of the system, has led to results in line with the generally positive experience from the application of ITQs in other countries, which broadly speaking means,
there has been a decline in fishing efforts;
the growth of the fishing fleet has stopped and in some cases contracted;
economically important fish stocks have recovered;
the quality of landed catch has increased;
profitability has increased; and
total employment in the industry has not contracted significantly owing to the increased emphasis on product value and quality.
The fisheries management system in Iceland is still under development. But the experience to date has shown that the success of sustainable fisheries management depends not only on rigid ecological requirements with respect to science and catch levels and on active participation of stakeholders, but also and perhaps more importantly on the fisheries sector being economically efficient."

The lesson learned can apply globally as we currently estimate
  • Global overcapacity was estimated at 30% in 1989 fishing fleet
  • Some see this as an underestimation and assess the current overcapacity as high as 150%.
  • Government subsidies are a major cause of this overcapacity.
  • State subsidies have attracted more entrants into the fishing industry and financed advanced technology that otherwise may not have been afordable.
  • Subsidies to the fishing sector have prevented the market signals from influencing the fishing industry to stop investing in already overcapitalized fisheries.

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