Can property rights solve Can property rights solve fisheries collapse?fisheries collapse?

Christopher Costello*Christopher Costello*Associate Professor – Resource EconomicsAssociate Professor – Resource Economics

Bren SchoolBren School

Advisory Board Address: April 11, 2007Advisory Board Address: April 11, 2007

* Costello@Bren.ucsb.eduPhoto: Environmental Defense

Fisheries are DecliningFisheries are Declining

• Ecological collapseEcological collapse– BiodiversityBiodiversity– Productive capacity Productive capacity – Ocean healthOcean health

• Economic collapseEconomic collapse– Lost jobsLost jobs– Working waterfrontsWorking waterfronts– Economic valueEconomic value

Worm et al. 2006. Science.

Economics 101: IncentivesEconomics 101: Incentives

• Open Access FisheriesOpen Access Fisheries– Entry until no further Entry until no further

incentive incentive

• Managed FisheriesManaged Fisheries– Excessive investmentExcessive investment– Race to fishRace to fish– Destructive fishing Destructive fishing

technologytechnology– Short seasonsShort seasons– Poor quality productPoor quality product

• Stocks decline, Economic Stocks decline, Economic value is lostvalue is lost– Costs ~$75B to make $70B Costs ~$75B to make $70B

in Revenue in Revenue Fishing Effort

EconomicReturn

Cost

Revenue

E*

Max Economic Profit from fishing effort, E*

An Alternative: An Alternative: Dedicated Dedicated AccessAccess

Taxis in NYC…Taxis in NYC…

• Assign “dedicated access privileges”Assign “dedicated access privileges”

• Securitize an asset for the fishermanSecuritize an asset for the fisherman– Platform for investment, trade Platform for investment, trade

• Economic TheoryEconomic Theory: : Have your fish and eat them tooHave your fish and eat them too

• Recent reports provides strong supportRecent reports provides strong support– Biodiversity, economic returns, stability, jobsBiodiversity, economic returns, stability, jobs– By 2015: $140B/yr revenue, $90B/yr profitBy 2015: $140B/yr revenue, $90B/yr profit

Catch SharesCatch Shares

• Individual Transferable Individual Transferable QuotasQuotas

• Can lease/sell rightCan lease/sell right• Scientific ChallengesScientific Challenges

– Set quotaSet quota– Allocate permitsAllocate permits– Establish trading rulesEstablish trading rules

• AK Halibut, Canada AK Halibut, Canada groundfish, NZ groundfish, NZ fisheries, Iceland fisheries, Iceland fisheriesfisheries

0 100 200 300 400 500 600 700 800 900 10000

50

100

150

200

250

Stock

Gro

wth

T

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)(max

)/1(

Spatial Property RightsSpatial Property Rights

• ““Territorial User Territorial User Rights in Fishing” Rights in Fishing” (TURFs)(TURFs)

• Incentive to preserve Incentive to preserve stockstock

• Scientific Challenges:Scientific Challenges:– Match ecology and Match ecology and

economicseconomics

• Distinct from Distinct from marine marine protected areasprotected areas

• Used extensively in Used extensively in

Japan, Chile, MexicoJapan, Chile, Mexico

James Watson: F3 Biocomplexity

Vizcaino, Baja California

Santa Barbara Channel, CA

CooperativesCooperatives

• Group of fishermen Group of fishermen cooperate on:cooperate on:– Harvest Harvest – MonitoringMonitoring– MarketingMarketing

• Governance & Governance & bioeconomicsbioeconomics– Co-managementCo-management

• Lobster - Baja CaliforniaLobster - Baja California• Sea Urchins – San DiegoSea Urchins – San Diego• Geoduck Clam - CanadaGeoduck Clam - Canada

Producción de Langosta FEDECOOP

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1970 1975 1980 1985 1990 1995 2000 2005

Temporada de Pesca

Kg

FEDECOOP: Mario Ramade

FEDECOOP: Mario Ramade

From Science to SolutionsFrom Science to Solutions

• Sustainable Fisheries Group Sustainable Fisheries Group

• ““Barefoot Ecology”Barefoot Ecology”

• ““Biocomplexity” researchBiocomplexity” research

• Ocean Governance - GSDOcean Governance - GSD

• California’s Ocean Protection CouncilCalifornia’s Ocean Protection Council– California Fisheries Fund ($2M to $17M)California Fisheries Fund ($2M to $17M)

Policy QuestionsPolicy Questions

• Privatizing the oceans? Presents a paradox:Privatizing the oceans? Presents a paradox:– More public control, less security in rightsMore public control, less security in rights– Less security in rights, less investmentLess security in rights, less investment

• Private sector investment?Private sector investment?– New financial instruments New financial instruments – Political viability?Political viability?– Attractive to investors?Attractive to investors?

• Further Questions?Further Questions?

Photo: Environmental Defense