•  Quota shares are as divisible as practically possible; that is, a quota share holder is able to sell or rent out any portion of his or her quota share.
  •  The tenure of quota shares is either long term or permanent, in order to minimize uncertainty in the fishing business and encourage long-term planning and stewardship among quota holders.

Each of these factors has social and/or legal implications. A number of negative side effects of free transferability must be considered. To the extent possible, these effects should be reduced with as little infringement on transferability as possible, to minimize the economic losses involved. These side effects will differ from one fishery to another, and they should be analyzed in the context of each fishery to design the most appropriate program.

Economic Aspects of Transferability

Transferability of IFQs has two main, and related, economic purposes:

  1. Achieving rationalization of the industry by allowing some participants to leave the industry with a compensation financed by the industry itself, that is, to be bought out by other industry participants; and
  2. Ensuring that IFQs are held by those who are willing to pay the highest price for them. This promotes efficiency in the industry because those who are willing to pay the highest price for quotas would normally be those who expect to utilize them most profitably, either by doing so at a lower cost than others or by transforming the fish into a more valuable product.

At this point, a short remark on item (2) is appropriate. It is sometimes alleged that those who are willing to pay the highest price for quotas are the ones with the easiest access to capital. In efficiency terms, this is not a negative factor; there is often a strong relationship between having access to capital and being able to utilize quotas efficiently. The value of quotas as investment objects derives from the ability to use them for generating net profits from fishing. To achieve a return on investment in a high-priced quota, the quota holder will have to use it efficiently himself or to lease it to someone who can do so. It is not likely, however, that persons or financial institutions will invest their money in quotas unless they can be assured of a reasonable return on their investment, which again would contribute to greater economic efficiency in the fishing industry.

In addition to achieving greater economic efficiency, transferability is also intended to mitigate imbalances that may occur in the initial allocation. For example, although crew members did not receive initial allocations of IFQs in the Alaskan IFQ fisheries, they now own 11.2% of the halibut quota share and 4.6% of the sablefish quota share. This would not have been possible without transferability.



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