Restricted Tradability of Harvesting Rights and Unequal Exposure to Binding Resource Limits:��-Evidence from a Multispecies Fishery in Japan
Takefumi Fujimoto
Specially Appointed Assistant Professor
University of Tsukuba
(Co-authors: Keita Abe, Ryutaro, Kamiyama, Yutaro Sakai)
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Topic: Rights-Based Management (RBM) in fishery
・RBM assigns private rights to harvest resources & emit pollutants
⇒ Private decisions by economic agents align with social benefits
⇒ Rebuild depleted stock & reduce emissions
Area: Individual Quotas (IQ) in Sea of Japan & East China Sea
⇒Large-/medium-scaled purse seiners introduced IQs for two species:
・Horse mackerel (HM; マアジ)
・Chub/blue mackerel (CM; サバ)
＊Fishers can harvest HM & CM
under allocated quota limits
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Individual Quota (IQ) in fishery
Two problems in this IQ scheme
(1) Allocated quotas are in shortage ONLY for one species (CM)
⇒ Tight quota limits for one species constrain catch of the other
(2) Quota transfers are allowed only without monetary transactions
⇒ Receiving quotas from others is difficult without monetary incentives
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Quota-Unconstrained species
(HM)
Quota-Constrained species
(CM)
caught together with CM
Violate IQ
tight quota limits
⇒Cannot catch HM any more
Purpose to show:
Constraining effects of tight quota limits are different by:
(1) Whether fishing firms have multiple operational units (fleets)
⇒ Can reallocate quotas internally within firms
(2) Whether fishing firms can access alternative operating areas
⇒ Can avoid pressure from tight quota by operating outside IQ area
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(1) Internal quota reallocation within firm
(2) Access to alternative operating areas
Inside IQ area
Outside IQ area
(internal transfer)
(switch operation)
Relevance for Environmental Economics
This study departs from the traditional view on the trading of harvesting/emission rights in RBM
Traditional view:
Tradability of rights involves trade-off: efficiency vs equity
⇒ Market trading of rights is often restricted to ensure equity
This study:
Restricting market trading of rights may strengthen inequality among harvesters
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3. Estimation Methodology
4. Analytical Results
5. Conclusion
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Conceptual Framework
Purpose:
To analyze how fisher’s heterogeneities
・multiple operational units within same firm
・access to alternative operating environments
affect profits when quota markets do not work
Assumptions:
・Static model within single fishing period
・No uncertainty
・Fisher is assumed to be a price taker
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Structure of joint harvesting in this study
School of HM moves below that of CM
・CM can be caught solely
・HM must be caught together with CM
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CM
HM
CM can be caught solely
Two species are caught
together when catching HM
Conceptual Framework
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joint catch
target catch
non-target catch (bycatch, 混獲)
Tight quota limit
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Total catch≠Target catch
Total catch=Target catch
Target catch
Non-target catch
bycatch
Revenue
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Cost
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Revenue
Cost
Revenue (linear)
Cost (quadratic)
Profit
(negatively quadratic)
Profit (difference)
Iso-profit curves
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Analogue of consumer theory:
“slope of indifference curve = price ratio”
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Slutsky-like decomposition: substitution effects
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Slutsky-like decomposition: substitution effects
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Slutsky-like decomposition: substitution effects
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Slutsky-like decomposition: income effects
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| substitution effect | income effect | Total |
| ＋ | － | ambiguous |
| － | － | － |
Internal quota transfer within same firm
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Internal quota reallocation within firm
(internal transfer)
Internal quota transfer within same firm
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Internal quota reallocation within same firm
internal transfer
Alternative operating environments
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opportunity costs
Summary
Two hypotheses follow from conceptual framework
Hypothesis 1:
Constraining effects of binding quotas are greater for fishers with single operational unit than for fishers with multiple ones
Hypothesis 2:
Constraining effects of binding quotas are greater for fishers without access to alternative fishing grounds than those without
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3. Estimation Methodology
4. Analytical Results
5. Conclusion
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Study site
In 2023, large-/medium-scale purse seiners (大中型まき網) in Sea of Japan & East China Sea introduced IQs for two main species
・horse mackerel (HM; マアジ)
・chub/blue mackerel (CM; サバ)
In this purse seine fishery,
a fleet (船団) is a single operational unit:
・a light vessel attracts fish
・a net vessel captures fish
・a transport vessel carries fish to port
⇒Quotas are allocated at the fleet level
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Sea of Japan &
East China Sea
Allocation of initial IQs for two species
Management years for two species
・HM: January-December
・CM: July-June
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80% of TAC:
Allocated proportionally to
past catch amounts
All Total Allowable Catch (TAC) for each species
in Sea of Japan/East China Sea
20% of TAC:
Equally allocated over fishing fleets
Allocated to individual fishing fleets
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*TAC for CM was equally allocated as emergency measure from January 2023 up to formal start of its IQ (July 2023)
Abundance of CM in Sea of Japan/East China Sea
Average bycatch rate of CM in peak harvest season of HM
CM is often caught together
when catching HM since 2023
⇒ CM became abundant after IQ
⇒ CM quotas became severely
limited relative to HM quotas
(To avoid confusion…)
CM: Quota-Constrained species
HM: other main species
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IQ was introduced
Restricted catch of HM
・Monthly average catch of HM (2022/23/24)
�・Drop in peak season of HM
(April-May) after IQ (2023/24)
⇒Catch of HM was limited by
tight quota limits for CM
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peak season (HM)
Two coping strategies for quota limits
・Monetary transactions are NOT officially allowed in quota transfer
⇒ Quota transfers to other fishers yield no economic incentives
⇒ Fishing firms with multiple fleets avoid quota limits by reallocating quotas internally within firm
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Fishing firm with multiple fleets
(internal transfer)
Fishing firm with single fleet
＊transferred quotas do not carry over to next year
Patterns of internal quota transfer
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Two coping strategies for quota limits
(2) Access to alternative operating environments
・Some fleets are licensed to operate in Pacific Ocean
＊IQ area: Sea of Japan & East China Sea
・sardine (マイワシ) is a main species
in Pacific Ocean
⇒ Access to Pacific Ocean can reduce
the dependence on IQ area
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Sea of Japan &
East China Sea
Pacific Ocean
Proportion of fleets which operated in Pacific Ocean
Some fleets shifted operations to Pacific Ocean after IQ started
・Operating proportions in Pacific Ocean continue to fall until 2022
・Operating proportion rose suddenly in 2023 (after IQ started)
⇒These fleets tried to avoid pressure
from tight quota limits by operating
in Pacific Ocean
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IQ was introduced
3. Estimation Methodology
4. Analytical Results
5. Conclusion
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Analytical dataset
Goal:
Constraining effects of tight quota limits are different by:
(1) Whether fishing firms have multiple fleets
(2) Whether fleets are licensed to operate in Pacific Ocean
Data:
Three types of panel data at fleet level during January 2023 – December 2024 (two years after IQ)
・Daily catches of all species
・Daily records of quota allocations & quota transfers
・Monthly revenues from all species & costs on heavy oil
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Estimation Methodology
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Estimation Methodology
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Estimation Methodology
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First IQ year | Average initial IQ | Sum of additional IQ | Frequency of additional IQ |
HM | 1417.7 tons (76%) | 446.1 tons (24%) | 3 |
CM | 2537.5 tons (70%) | 1149 tons (30%) | 5 |
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Mechanisms & Welfare Consequences
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Using same empirical framework, we further clarify mechanism & welfare consequences:
① Mechanism
② Main analysis
③ Welfare consequences
3. Estimation Methodology
4. Analytical Results
5. Conclusion
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Estimation results: ① Fishing selectivity
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| | |
| | |
| -0.01 (0.12) | -0.02 (0.02) |
| -0.00 (0.11) | 0.00 (0.02) |
| 0.49 | 0.32 |
(Standard errors in parenthesis; bootstrapped in 200 times)
(p-values in joint significance tests)
Estimation results: ② HM catch
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| | |
| | |
| -0.17*** (0.05) | -0.10*** (0.03) |
| 0.07*** (0.02) | 0.07*** (0.03) |
| 0.00*** | 0.11 |
(Standard errors in parenthesis; bootstrapped in 200 times)
(p-values in joint significance tests)
Estimation results: ③ Monthly profit
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| Monthly profit | |
| | |
| -$62,532* (37,030) | -$23,620** (12,028) |
| $27,149 (18,102) | $27,735* (14,400) |
| 0.09* | 0.74 |
(Heteroskedasticity-robust standard errors in parenthesis)
(p-values in joint significance tests)
3. Estimation Methodology
4. Analytical Results
5. Conclusion
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Conclusion
・In this context, fishing selectively between HM & CM does not work
⇒ Fishers try to avoid pressure from tight quota limits through other operational options (if they have)
・Tight quota limits for one species (CM) reduce the catch of the other species (HM) & profits
・These negative effects are smaller if
① fleets belong to firms owning multiple fleets
⇒ internal quota reallocation within firm
② fleets are licensed to operate in Pacific Ocean
⇒ access to alternative operating areas
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Implications for environmental economics
Problem:
Market-based reallocation mechanisms are entirely excluded in the trading of harvesting rights
∵Monetary transactions are not officially allowed in quota transfer
⇒ Quota transfers from other harvesters cannot be expected
Harvesters must rely solely on their own operational options:
① internal quota reallocation mechanisms
② access to alternative operating environments
⇒Harvesters lacking these options are fully exposed to tight quota limits
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Traditionally, tradability of rights involves trade-off: efficiency vs equity
・In trading markets, harvesting rights shift from small to large harvesters
・Pollution concentrates in poor & minority regions
⇒ Market trading of rights is often restricted to ensure equity
But our findings suggest that a uniform ban on market trading may reinforce inequality among harvesters & polluters
Policymakers should carefully restrict the tradability of rights in markets
Ex) imposing caps on annual quota holdings (rather than outright restriction on market trading)
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Implications for environmental economics
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Different IQ management years for two species
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January 2023
July 2023
January 2024
July 2024
Management year for CM (Jan-Dec)
Management year for CM (July-June)
Peak season (HM)
April-May
End
IQ for CM is in shortage at the end
⇒Tight quota limits for CM discourages fishers from catching HM
Usage rates of IQ
Histograms of usage rates of IQ for
in 1st management year
(including additional IQ)
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Usage rates of IQ
Usage rates of IQ for chub/blue mackerel tend to be close to 100% in many fleets
⇒ IQ for chub/blue mackerel is very tight
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Usage rates of IQ
Usage rates of IQ for horse mackerel are below 70% in most fleets
⇒Large waste of IQ for horse mackerel
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Allocation of initial IQs for two species
IQ for horse mackerel (January-December)
・20% of TAC: equally allocated over fishing fleets
・80% of TAC: allocated proportionally to 3 years’ catch amounts
IQ for chub/blue mackerel (July-June)
・20% of TAC: equally allocated over fishing fleets
・80% of TAC: allocated proportionally to 5 years’ catch amounts
*Emergently, small IQs were uniformly allocated to each fleet during January 2023-June 2023 (ex 300 tons in East China Sea)
⇒ Starting periods of IQs for two species coincide overall (Jan 2023)
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Every year, TAC in East China Sea is allocated to JPSA
January 2022
July 2022
January 2023
July 2023
January 2024
July 2024
Horse mackerel
57,600 tons
Horse mackerel
56,700 tons
Mackerel
80,370 tons
Mackerel
82,385 tons
In January 2023, JPSA voluntarily introduced IQ for horse mackerel & mackerel
⇒JPSA allocates TAC to its members as IQ
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TAC in East China Sea is allocated to JPSA every year
January 2022
July 2022
January 2023
July 2023
January 2024
July 2024
IQ was introduced in January 2023
Surge in bycatch rate of chub/blue mackerel
Monthly average catch of chub/blue mackerel (2022/23/24)
Catch of chub/blue mackerel
in 2023 & 2024 (after IQ) is
higher than in 2022 (before IQ)
⇒ Resources of chub/blue
mackerel became abundant
when IQ was introduced
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Bycatch rate
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Shadow value of quota for CBM
Topic: Rights-based management (RBM) in fishery
・Assign private rights to harvest resources & emit pollutants
・Market trading Harvesting/emission rights enhances social welfare
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Individual Quota (IQ) in fishery
Cap-and-Trade in greenhouse gas
Topic: Rights-based management in fishery
・Assign private rights to harvest resources & emit pollutants
・Economic agents internalize social costs of harvesting/polluting
・Market trading of harvesting/emission rights enhances social welfare
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Individual Quota (IQ) in fishery
Want more
Sufficient
Traded
Caught a lot
Got cash