NZ Fishery Management & the ITQ system: Implementation & Participation
This blog entry looks at how IEM, when implemented properly, can help to overcome what seem like insurmountable environmental conundrums. The situation with Global fish-stocks is such as case: the problem seems impossible, but New Zealand, through good integrated policy, is showing the rest of the world how it can be done. I am going to demonstrate how the implementation of out ITQ system is just the sought of IEM response we need to be taking to resource management.
But first, we'd better have a look at the problem of fisheries, and the tragedy of the commons, to put in perspective what a significant achievement our fishery management practices are.
The “Tragedy of the Commons” is a theorem which describes the dilemma which occurs when multiple individuals, acting independently and rationally according to the economic principles of self-interest, will ultimately over-use a shared finite resource, even though it may be obvious that it will be detrimental to all in the long term if this occurs. This is the case because the benefits of exploiting the resource by each extra unit accrue to the individual, who is motivated to maximize private benefit from the resource, while the extra unit of cost imposed by the extra unit of the exploitation are carried by all those reliant on the common. When the resource units produced by a common-pool resource have a high value and no institutional framework constrains the way these units are appropriated, individuals will have strong incentives to exploit the resource leading eventually to congestion, overuse, and eventually the collapse of the ecosystem surrounding the resource.
Because of the difficulty of excluding potential beneficiaries, the problem of free-riding is a serious threat to any effort to moderate harvesting and improve the long-term outcomes achieved from the use of the common-pool resources. If some individuals are cooperative and do not harvest as many units, the benefits so generated are shared among all other users, whether the others cut back on their harvesting or not.
Although the notion of the tragedy of the commons was evident in the thinking of the classical Greek philosophers, the first modern reference to the idea as an economic principle is found in the lectures of W.F. Lloyd to Oxford University in 1832.[1] It was subsequently expanded on by Garrett Hardin in 1968 in relation to the issue of over-population, using examples such as fishing stocks, Government-owned grazing land, and US water pollution.[2] Since that time, it has been a commonly-held belief among many ‘free-market’ environmentalists and academics that the capability of central government analysts to design optimally efficient rules to govern and manage common-pool resources, to maximise both profitability and environmental outcomes.
When it is assumed that all common-pool resources share a homogeneous structure and are interlinked, simple models of how they work will be constructed and adopted. The presumption is then that the public interest will be best served through central government representatives implementing standardised rules for the region that determine the optimal level of harvest, divide this total amount into quotas, allocate quotas to individuals and firms within the industry, and then create a market for these transferable quotas to be traded to achieve Pereto-perfect efficiency. In this way central government can apply identical regulation to control a wide range of natural resources and effectively ‘solve’ the environmental problem. While this theory assumes that government will have access to reliable statistical information on key variables for an entire region, the reality is instead that huge variance will exist within all data, if that data is even available, and management strategies that are effective for one natural resource may not work for other examples due to issues of scale, complexity and practicality.
The two most common solutions to this problem are the application of private property rights or government regulation. While the tragedy of the commons is often used as an argument for the necessity of government intervention in management of open-access or common pool resources, some authors argue that this isn’t always necessary because social and cultural responses, such as communal self-regulation, can offer more effective solutions to the problem. Firstly, the dominant contemporary view that market failures caused by externalities can be best solved through privatisation or government control through regulation. One solution is for an integrated approach to management, or comanagement, whereby local communities manage natural resources, assisted by central government through devolution of real autonomy and responsibility, including decision-making powers, while at the same time protecting them from external forces such as predatory corporations and pressure from outside users, which can subvert the aims of community management.
Common-property institutions, involving socially constructed systems of norms and rules that allocate rights, limit access, and regulate the use of commonly-held resources exist over most common-pool resources at a local community level. Within these institutional arrangements resource-users hold clear and secure rights to resources, but overarching rights and management decisions are vested in the group of users as a whole; both rights and responsibilities for joint use are specified, and graduated sanctions are applied in cases of non-compliance.[3]
A substantial body of contemporary research suggests that in a large number of instances common-pool resources can actually be more effectively and sustainably governed through co-management institutions or common-property arrangements, rather than by state control or privatisation. To be effective these must exist within the local culture and institutional environments of those who depend on the whole ecosystem for their livelihood. Therefore, the specific institutional arrangements that will be most effective in the management of a particular resource must consider the specific spatial and temporal scales, as well as the nature of the relationships that already exist around the use of the resource.
It has been shown that cooperation with institutional arrangements fitted to local ecosystems will be much more successful in attracting local buy-in, than distant and faceless centralised management.[5] Effective monitoring by officials and users is an essential ingredient of sustainable common-pool resource institutions. If those involved recognise and understand the system it will possess a greater degree of local legitimacy and users will be less likely to engage in illegal harvesting.
Taylor (1996) expresses a view that for common-pool resources to be regulated effectively and sustainably through a community-based model of voluntary cooperation, a firm basis of community, in its wider sense, involving direct, long-term, multi-stranded relations between people in a particular location, with a stake in the long-term well-being of their region and its resources must be already present.[6] Provided the basis for this community is pre-existing, he claims that an integrated approach to management, or comanagement, whereby local communities manage natural resources, assisted by central government. This must include devolution of real autonomy and responsibility, including decision-making powers, while at the same time protecting the community management structures from external forces such as predatory corporations and pressure from outside users, which can subvert the aims of community management.[7] Ostrom (1990) identifies eight central requirements that are necessary for effective co-management of common-pool resources to occur:
“Clearly defined boundaries. The boundaries of the resource system, and the individuals with rights to harvest resource units, are clearly defined.
Proportional equivalence between benefits and costs. Rules specifying the amount of resource units that a user is allocated are related to local conditions and rules requiring labour, materials, and/or money inputs.
Collective-choice arrangements: Many of the individuals affected by harvesting and protection rules are included in the group who can modify these rules.
Monitoring. Monitors, who actively audit biophysical conditions and user behaviour, are at least partially accountable to users and/or are users themselves.
Graduated sanctions: Users who violate rules-in-use are likely to receive graduated sanctions (depending on the seriousness and context of the offense) from other users, officials accountable to these users, or both.
Conflict-resolution mechanisms: Users and their officials have rapid access to low-cost, local arenas to resolve conflict among users or between users and officials.
Minimal recognition of rights to organize. The rights of users to devise their own institutions are not challenged by external governmental authorities, and users have long-term tenure rights to the resource
Nested enterprises (for resources that are parts of larger systems): Appropriation, provision, monitoring, enforcement, conflict resolution, and governance activities are organized in multiple layers of nested enterprises.”[9]
An example of successful adoption of co-management can be found in the New Zealand Individual Transferable Quota (ITQ) system. Until the early 1980s, most fisheries were either completely unmanaged or managed under command-and-control regulations that governed the size of vessels, type and number of nets, the duration of the fishing season, and zones in which fishing could take place. These kinds of regulations failed to check the number of vessels or the level of fishing effort, while encouraging the industry to work around equipment restrictions, rather than investing in more efficient practices and technologies. [10] Under these regulations, fishermen had no sense of ownership over the fish until after they were caught, and no interest in the long-term preservation of the fishery. This created a race to fish, with the result that the majority of commercial fisheries throughout the world are chronically over-harvested and on the verge of collapse. This classic example demonstrates both the tragedy of the commons in an open-access scenario, and the failure of Government regulation to effectively address the problem through command and control.
In 1986, New Zealand established a quota system governing all commercial species of fish, with more than 150 local fishing-community markets for fishing quotas. This localised approach to quota management, in which local fishermen are involved not only in monitoring and compliance activities, but also in the quota allocation and total annual catch limit setting, has ensured that fishermen have a vested interest in both the short and long-term health of the fishery and the ecosystem as a whole. Newell et al. (2005) assess the evidence and find support for the claim that the market for quota permits is successful and profitable.[11] While no conclusive data has yet been gathered, initial evidence suggests the fishery levels are also substantially improved as a result of the scheme.[12]