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The significance of economic incentives in fisheries management under the CFP.

Objective

The project will examine the implementation at the national level of those key policy components of the CFP, which are intended to control fishing effort and fishing mortality. The focus of the project will therefore be on the measures adopted by different Member States in order to fulfil their obligations under the basic conservation and management regulation relating to the observance of national catch quotas and to achieve the reductions in fleet capacity agreed under the MAGPs

The focus is put on the subsequent types of management:

1. Quota management systems (output regulation)
2. Effort management systems (input regulation)
3. Fleet capacity adjustment

Economic Incentives, definition

Economic incentives can be used by managing authorities (principals) to induce particular responses or behaviours from investors or actors (agents) in the fishing industry, either by reducing profits (in the case of negative incentives) or by increasing profits (in the case of positive incentives). When trying to determine the minimum value of the premium which should be paid from the principal (managers) to the agent (fisherman) to switch from one target species to the other, for example, fisheries managers are faced with an optimisation problem with a number of economic constraints. Problems like this can be handled using available software (such as GAMS used by several project partners).

Quantification

Economic incentives materialised in the shadow value of circumventing or violating specific management stipulations will be quantified wherever possible. This will happen along the lines explained in the above optimisation problem, once we have identified where, when and how economic incentives are implemented through existing management schemes. Hereafter, quantification could take various forms which will have to be determined after the objectives of the CFP on Member State level and the economic incentive types have been identified. Without laying down any precise approach and methodology, a number of aims are listed:
Effort management: In the investigation of effort regulation the limitation of number of vessels and fishing days with respect to certain quota limitation would lead to a larger profit of a given species. This profit will be calculated in an optimisation model used in the sub-project. The profit will lead to a reallocation of effort by the fisherman towards this species. Should managers want to prevent fishermen from targeting this species, the necessary compensatory payment would be calculated as equal to the profit (marginal) from fishing this species. The method used is to construct a model that optimise the profit of a vessel/or group of vessels subject to a number of constraints (linear/non linear programming). The optimisation produces marginal profits which are the shadow value of having the constraints relaxed e.g. have an extra fishing day or an extra tonne of fish.

Capacity adjustment: A different type of quantification is the premium that is paid for decommissioning (capacity adjustment). Here the economic incentive is laid down in advance by the managers, and the sub-project would investigate the premium structure and the size of payment and relate this to the numbers of vessels, GRT and horsepower withdrawn. The premium is the economic incentive to persuade fishermen to choose decommissioning rather than to keep on fishing.

Quota management: A third type of quantification is associated with individual transferable quotas. The price of the quota is an estimate of the premium that has to be paid to fishers to, say, reduce the catches of a particular species. If a quota market exists, managers could use the price of a quota as an indication of the magnitude of the economic incentive a fisherman needs to go on fishing, and consequently what is needed to prevent him from fishing. Where no legal quota trading exist, quantification may be difficult. Nevertheless, the capital that is accrued in these rights is an estimate of the magnitude of an economic incentive and it would be important to identify where and how the capital is accrued in the absence of a market. In principle the same method as the one used in effort regulation could be applied in an attempt to estimate the value of quota rights.

General objective

The objective of the project is to investigate the role and significance of economic incentives in the management of European fisheries, within the framework of the Common Fisheries Policy.

Specific objectives

- To identify the role and significance of economic incentives in the management of European fisheries in the context of the CFP; in particular to examine how the behaviour of fishing firms in response to national policy measures have aided or hindered the achievement of management objectives;

- to produce a set of guidelines for policy makers suggesting how the design of fishery management measures could be improved by taking economic incentives into account.

The study approach

Case studies are selected in the five Member States participating in the project:

Denmark, France, Italy, the Netherlands and the United Kingdom.

The configuration of the case-studies will be as follows:

- quota management systems will be studied in the United Kingdom, the Netherlands and Denmark;
- effort management systems will be studied in Denmark, Italy and the Netherlands;
- capacity adjustment programmes will be studied in the United Kingdom, France and Italy.

At the start of the project a general methodological framework will be developed by the co-ordinator in order to provide the conceptual foundation for the study.

The overall analysis of the role and significance of economic incentives in fisheries management will be approached from the perspective of the economic theory of agency. This characterises the contractual relationships between individuals in the economy in terms of a principal and one or more agents. The principal (in this case the fishery management authority) seeks to ensure that the aggregate of the choices of all the individual decision-making agents (fishing firms) is in the interest of the principal. However, the (private) interests of the individual agents may not be the same as the (public) interests of the principal. If perfect enforcement of desired behaviour on the part of all agents is not feasible, the principal must try to establish an incentive scheme that will align the interests of the agents with those of the principal. Where this is not achieved there is an incentive alignment problem that will tend to produce a sub-optimal outcome (at least from the principal's point of view). This conceptual approach has been applied to a variety of situations, including problems of environmental quality and the modelling of international fisheries relations.

The methodological framework will also outline the context for the study through a summary of the relevant areas of the CFP and an identification of the policy limits within which national management measures have been implemented.

Against the background of this conceptual and contextual framework, the specific methodology for each of the case-studies will then be developed jointly by the relevant groups of participants. Each specific case-study methodology will be adapted to the particular type of management measure under consideration, the precise details of national policies in this area and the nature of the requisite datasets identified.

However, the basic questions that each of the studies will seek to answer at the national level may be summarised as follows:

- How was the national management system designed and implemented?
- What were the general and detailed objectives in terms of Community obligations and national priorities?
- What were the results in terms of the stated objectives, and what other results were apparent that might be of interest to policy-makers?
- What were the economic incentives, affecting the behaviour of fishing firms in response to the management measures, that impacted on the results observed?

In order to identify the appearance, operation and consequences of economic incentives in each of the national studies, both quantitative and qualitative analyses will be employed, depending on the particular management objectives involved and the extent of data availability at the national level.

A comparative analysis of the results of the national studies will be undertaken within the appropriate groups of participants in order to produce the results of the case-studies on different types of management measure.

During the final phase of the project a synthetic treatment of the results of the case-studies will be undertaken by the co-ordinator. A key issue to be explored here will be the interaction between different types of management measure and the overall objectives of the CFP. The overall results will be interpreted and discussed against the background of the literature on the economics of fisheries management. Finally, the conclusions of the project will be presented in the form of a set of clear guidelines on how the design of fishery management measures could be improved by taking economic incentives fully into account.

Funding Scheme

CSC - Cost-sharing contracts

Coordinator

UNIVERSITY OF SOUTHERN DENMARK
Address
Niels Bohrs Vej 9
Esbjerg
Denmark

Participants (4)

Institut Francais de Recherche pour l'Exploitation de la Mer
France
Address
155, Rue Jean Jacques Rousseau
92138 Issy-les-moulineaux
Istituto Ricerche Economiche per la Pesca e l'Acquacoltura
Italy
Address
Via Benedetto Croce 35
84100 Salerno
LANDBOUW ECONOMISCH INSTITUUT
Netherlands
Address
Burgemeester Patijnlaan 19
Den Haag
UNIVERSITY OF PORTSMOUTH HIGHER EDUCATION CORPORATION
United Kingdom
Address
Locksway Road
Southsea