It is useful to distinguish between the ways in which transferable quotas may promote economic efficiency in the short and the long run. In the short run, transferability leads to lower operating costs and a higher production value in fisheries plagued by harvesting overcapacity. Those who can fish at the lowest cost or produce the most valuable product are able to buy or lease fishing quotas at a price that is acceptable to both buyer and seller. In the long run, transferability of quotas can be expected to produce optimally sized fishing fleets. A person or firm with a given quota will have no economic incentive to invest in more or larger fishing vessels than needed to take this quota. Alternatively, if there are economies of scale in fishing for the target species, those who wish to invest in vessels of an optimal size but have insufficient quota to utilize the vessels fully will be able to buy additional quota for this purpose.

Quota transactions may produce inequitable results, in the fishing industry as in other industries. Various methods can be employed to avoid or reduce inequitable results that otherwise would emerge from the marketplace, for example, restricting the types of vessels or the areas in which quota can be traded, establishing accumulation limits, and requiring owners to be on board vessels. However, since unfettered market transactions normally lead to enhanced efficiency, some trade-off between efficiency and equity is likely.

Other rules may be necessary to govern the subsequent transfer of initially allocated shares. It may be desirable to allow individuals who did not receive initial allocations to buy and hold IFQs. There must also be consideration of whether the distribution of quota shares among classes of holders and regions should be allowed to vary over time.

In designing the sablefish and halibut IFQ programs, the NPFMC considered a prohibition on transferability to avoid consolidation of ownership, divestiture of coastal Alaskan residents from the fishery, and creation of windfall profits from transfers (Pautzke and Oliver, 1997). Ultimately, the council decided to allow transfers, albeit restricted, to permit new entry into the fisheries and maintain significant Alaskan ownership. The amount of the total quota share pool that can be owned or controlled by individuals and companies is restricted, and quota transfer provisions and ownership limits are specified to prevent overconsolidation of quota share in the fleet. The council also created vessel size and operational quota share categories within which transfers are limited. Other controls include the requirement that certain categories of quota share may be purchased only by individual fishermen who must be on board the vessel and fish the quota share.

Social Aspects of Transferability

Free transferability of quota shares is likely to have a range of social implications, as judged from both theoretical predictions (Copes, 1986; see Figure 3.1) and the empirical evidence available (McCay et al., 1995; Pálsson and Pétursdóttir, 1997). These effects occur both among and within communities.

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