ARTICLE IN PRESS

Marine Policy 34 (2010) 859–867

Contents lists available at ScienceDirect

Marine Policy

0308-59

doi:10.1

� Corr

E-m

journal homepage: www.elsevier.com/locate/marpol

Lease quota fishing in a changing rock lobster industry

Ingrid van Putten a,�, Caleb Gardner b

a CSIRO Marine and Atmospheric Research, GPO Box 1538, Hobart, Tasmania 7001, Australiab Tasmanian Aquaculture and Fisheries Institute, University of Tasmania, Private Bag 49, Tasmania 7001, Australia

a r t i c l e i n f o

Article history:

Received 18 December 2009

Received in revised form

11 January 2010

Accepted 11 January 2010

Keywords:

ITQ

Lease fishing

Rock lobster

Profitability

Industry structure change

7X/$ - see front matter & 2010 Elsevier Ltd. A

016/j.marpol.2010.01.008

esponding author. Tel.: +61 3 62325048.

ail address: ingrid.vanputten@csiro.au (I. van

a b s t r a c t

The Tasmanian rock lobster industry has been managed by Individually Transferable Quotas (ITQs) and

several input control measures since 1998. In this study, nine years of rock lobster fishing business data

were used to categorise the catch and quota ownership traits and examine the response to the

introduction of ITQ management. More specifically the study investigates how profit drivers moderated

industry structure change.

Owners who are not active fishers (investors) have steadily grown in number with a commensurate

expansion of the lease quota market. A cap on the maximum allowed number of quota units per legal

entity of 200 units (around 2% of the total) was implemented at the start of ITQ management and this

has proven effective in the maintenance of diverse ownership with little processor control. Active

fishers who lease in quota (lease dependent fishers) took a large proportion of the total catch in 2007.

An economic pressure to expand lease operations was identified, which accrued through better

utilisation of capital. The pressure to increase in size through leasing in quota exists for businesses with

small holdings. In contrast, as ownership of quota increased to approximately 30 units, the marginal

profitability of fishers increased through the opposite process, that is, reducing fishing activity and

supplementing income by leasing out quota. Income supplementing appears to be a transitional state,

and in time these quota owners will move to the more stable state of ‘‘investor’’.

Thus the fishery is trending towards a smaller number of highly active lease fishers with units

supplied by a broad group of investors. Lease fishers need to move into the large-scale category catching

at least 75 units to achieve a normal economic profit and remain viable in the long run. However, they

face barriers to entry to this large catch category through high upfront capital investment costs. Other

potential issues for management that arise are that their higher financial stress increases compliance

risk and their lack of investment in quota assets reduces incentive for stewardship of the resource.

& 2010 Elsevier Ltd. All rights reserved.

1. Introduction

Individually transferable quotas (ITQs) are one of the numberof policy tools used in fisheries management [1]. In an ITQmanaged fishery the owner of quota has rights to a proportion ofthe total allowable catch (TAC). ITQs were first introduced in NewZealand and Iceland in the early 1980s followed by the SouthernBluefin Tuna fishery in Australia in 1984 [2,3]. There are currentlya significant and growing number of ITQ managed fisheriesaround the world.

After almost 30 years, a considerable number of studies haveinvestigated the bio-economic implications of ITQ management.Many reviews of ITQ managed fisheries have shown improvementin bio-economic outcomes and reduced risk of fisheries collapse.Improvements are mainly driven by market forces whereindividuals who own quota will maximise their profits. As such,

ll rights reserved.

Putten).

quota will gravitate towards those who are most ‘efficient’ interms of fishing cost. Frequently, overall industry fishing capacityis reduced, thereby increasing the total economic benefitsfrom harvesting due to lower overall fishing costs per unit ofcatch [3–5].

Even though efficiency gains are achieved, various authorshave indicated that there are several negative socio-economic andenvironmental impacts of ITQ management. For instance, capacityreduction disproportionally affects crew members who aregenerally not allocated quota when ITQs are introduced [1].Reduced employment opportunities for crew members may alsoapply to the harvesting and processing sector. High grading anddiscarding of quota species also occur in ITQ managed fisherieswith consequent environmental impacts [3].

One of the combined effects of trade in the quota sale marketand efficiency gains may be the concentration of quota owner-ship. Over time few large businesses may end up controlling themajority of quota. Monopolization in the fishery can lead toconcentration of economic power, for instance, in relation tocontrol in the lease quota market. This power situation could

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I. van Putten, C. Gardner / Marine Policy 34 (2010) 859–867860

easily be abused through charging lease quota fishers high leaseprices [1,6]. Another effect of the concentration of ownership maybe in relation to the geographical distribution of quota, which istransferred from one region to another.

Although there are a significant number of studies that haveinvestigated the success or otherwise of ITQ management infisheries [3,7–10], few have analysed the socio-economic implica-tions of the development of a quota lease market [6]. Moreover,empirical analysis of fisher participation in the lease quotamarket, and the behavioural drivers that shape industry structure,is lacking.

The purpose of this current study is to fill that gap through theanalysis of rock lobster fishing business data for nine yearsfollowing ITQ introduction. The response to ITQ introduction interms of catch and quota ownership traits is examined. Morespecifically the study investigates how profit drivers moderatedindustry structure change. The next sections are organisedas follows. A brief history of the Tasmanian rock lobster industryis followed by an outline of the rock lobster lease tradeand a characterisation of the industry between 1999 and 2007.The results of the empirical analysis are presented in the nextsection followed by a discussion of the results and policyimplications.

1.1. History of the rock lobster fishery

The commercial Tasmanian rock lobster industry was firstregulated by a series of input controls introduced stepwisethrough time including size limits in the 1880s and limited entryin the 1960s [11–13]. Sustained declines in catch rates throughthe 1990s resulted in the introduction of an individual transfer-able quota (ITQ) management system in 1998 [7].

Current management measures under the ITQ system includerules designed to limit the rationalisation of the fleet andownership with a maximum of 50 traps per vessel and amaximum ownership of 200 quota units. Fishers are required toown at least one quota unit and control a minimum of 15 unitsbefore they can go fishing. Limited entry controls led to leasingand investor engagement in the industry, which increasedfollowing the introduction of ITQ management.

The fishery is managed as a single zone despite significantregional differences in biology [14]. In 2008, the total allowablecommercial catch (TACC) was 1523.5 tonnes with 315 fishinglicenses and 214 active vessels [15]. The TACC was split amongst10,507 quota units at 145 kg per unit. Indigenous and recreational

0

1000

2000

3000

4000

5000

1999 2000 2001 2002

Quo

ta u

nits

(num

ber)

Lease quotaunits tradedQuota unitssold

Fig. 1. Annual sale and lease volumes of

fishers take additional catch, which is comparable to thecommercial catch near population centres [16].

Rock lobster fishing is the second most important Tasmaniancommercial fishery in terms of revenue ($60 million at landing),after the abalone fishery. The industry includes a processingsector of over 50 licensed processors and an estimated 700 peoplewere directly employed in the Tasmanian rock lobster fishing,processing and handling sectors in 2006–07 [8]. Around 95% percent of the total catch is purchased and exported by processors,while the remainder is sold directly by the fisher.

1.2. Quota trade

Rock lobster fishers responded to catch limits under ITQs byexpending a greater portion of their effort inshore to target higherpriced red rock lobster rather than paler and lower valued lobsterfrom deep-water [17,18]. The fleet size, as well as the spatialfishing patterns, also changed with the introduction of ITQs, witha contraction of the fleet from 280 vessels in 1998 to 214 vesselsin 2008. This was a result of increasing catch rates plus relaxationof closed seasons and vessel trap limits.

Changes have also occurred in quota ownership and trading(Fig. 1). The volume of quota units traded peaked at almost 7% ofthe total units immediately after introduction of ITQs in 1998. Asecond peak occurred in 2006, around the time when catch ratespeaked and the capacity for the fleet to take the TACC wasgreatest.

Quota units initially traded for approximately $AUD13,000 perunit, rising steadily increasing to $AUD45,000 in 2004. Unit pricesthen declined in 2005, which was attributed to a reduction indemand for product from the Asian markets due to SARS. Pricesrecovered in 2007 before falling again in 2008 to $AUD23,000 dueto a decline in catch rate and a broader fall in business assetvalues with the global financial crisis. Trade in quota unitsresulted in a higher number of both small and large licenseholders but fewer mid-size operations so that the industryaverage of units owned per operator remained stable at around40 quota units (Fig. 2).

Unlike quota unit sales, lease trade volumes have increasedsteadily, with 60% more units traded in 2007 than in 1999 (Fig. 1).This trend implies increasing separation of ownership fromfishing activity with the fleet becoming increasingly reliant onleased quota.

Although the number of quota units leased is recordedofficially, there is no formal recording of lease prices. Interviewed

2003 2004 2005 2006 2007

quota units between 1998 and 2007.

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I. van Putten, C. Gardner / Marine Policy 34 (2010) 859–867 861

fishers reported that the average lease quota price increased by45% from around $AUD12 to $AUD22/kg between 1999 and 2007.Economic theory suggests a relationship exists between the quotasale price, the quota lease price, and the profitability of theindustry. For example, in 2008 both the lease price and the saleprice of quota units fell in response to rising costs associated witha decline in CPUE.

Internationally in ITQ managed fisheries, the lease quota tradetends to be influenced by on-market activities of processors,which can undermine objectives of the ITQ system [6]. Processorscan use quota ownership to control supply and also control thetiming of supply. Pinkerton and Edwards [6] observed that thiscould be inefficient due to asymmetry in information and marketpower between processors and fishers.

It is notable that the experience in Tasmania has been verydifferent with only around 1% of rock lobster quota owned byprocessors. Processors report that the cap of 200 units per legalentity is too small for their gain significant market share, so theygenerally choose not to purchase any quota. Tasmanian processorinvolvement in the lease quota market is mainly for ‘socialnetworking’ purposes, connecting quota owners with fishers,which enhances market share but also delivers a service for thesame reason they may supply bait at cost. That is, by facilitatingthe trade between quota owner and fisher, the processor mayhope to increase fisher loyalty.

Brokers also facilitate trades between quota owner and fishers.Broker facilitated trading accounts for around 20% of trades in

0

10

20

30

40

50

60

10 20 30 40 50 60 70 80Quota units f ished

Fish

ers

(num

ber)

Fig. 2. Quota units fished per operation and the num

Table 1Positive and negative implications of lease fishing for fishers and the communities.

Positive implications of lease fishing Negative implication

Less capital required than for purchasing access rights Investor market powe

cohesion

Lease cost becomes an operational expense, which is

recovered when the catch is sold

Profit margin compre

access rights

Avoids the problem that owned access rights cannot be

depreciated unlike other business investment

Fishers reliant on leas

resource, for example

Leasing increases fisher flexibility to respond to market and

catch signals

Investor owners hold

Opportunity for gains through rise in price through the season

(speculation)

Lease fishers are shie

costs—this means the

Allows use of capital equipment to full capacity to lower

average fixed costsa

Risk of capital loss w

changes in price or fi

Trading is simple as it can occur by telephone while fishing Increased compliance

Promotes fleet rationalisation to remove over-capitalisation Compression of profit

a A trait of the Tasmanian rock lobster ITQ system is that quota units are linked to

their quota holding entitles them to. This has created a market for quota units where

operates a vessel that can carry 50 traps will lease in an additional 20 units, which h

efficiently with 50 traps.

Tasmania (pers comm. S Withers, DPIPWE). Quota owners reportthat they use brokers mainly for the provision of administrationservices. However, quota owners can also use brokers to distancethemselves from the trade to avoid any feelings of guilt frompursuing higher prices at the expense of the lessee [19]. In a smallcommunity of fishers, where there is a high probability that leaserand lessee will know each other, this ‘moral economy’ may beparticularly relevant.

1.3. Characterisation of the quota lease market

Increase in trade of units in the lease quota market from 2929to 4634 is also reflected in the number of participants in the leasequota market, which increased from 257 to 289 individualsbetween 1999 and 2007. Benefits to fishers of participating in thelease trade have been well documented in the expansion oftradeable access rights, especially ITQs; however, the negativeimplications of leasing quota have been less well explored. Table 1outlines the positive and negative implications to fishers of leasequota fishing (based on [6,9,10,20]).

We distinguish between five categories of participants in thelobster fishery network (Fig. 3).

Lease quota units are supplied by active fishers and investors.

Investors do not fish themselves, whereas quota redistributors andincome supplementers are both active fishers. Quota redistributors

lease quota both in and out, for either a net gain or a net loss of

90 100 110 120 130 140 150 160 170 (number per f isher)

ber of fishers for 1999 (grey) and 2007 (black).

s of lease fishing

r may undermine fisher community structure and has negative impact on social

ssion in response to increased catch rates and consequent increased demand for

ing have a higher personal discount rate and are thus reduced stewardship of the

, care in handling undersize or support of conservative management

management power but lack direct observation of the resource

lded from changes in stock abundance because the lease price responds to

y have reduced benefit/harm from stock rebuilding/collapse

here access rights are leased early in the season to secure access, followed by

shing costs.

risk due to margin compression

margins may stifle innovation

units of gear (traps) so that fishers can only use the physical number of traps that

all the catch has been taken. For example, a fisher who owns 30 quota units but

ave no catch remaining. Thus they can catch their 30 units of catch quota more

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I. van Putten, C. Gardner / Marine Policy 34 (2010) 859–867862

quota units. Lease dependent fishers only lease quota in and do notlease any of their own quota out to other fishers. In total, four quotaowners groups are involved in the lease quota market; three of thegroups are also ‘active’ fishers. Independent fishers do not trade in thelease quota market but simply fish their own quota.

The number of independent fishers has fallen by 22% after ITQintroduction in 1998. In absolute terms, this group was the secondlargest group in 1999 and was the smallest group in 2007 (Fig. 4).In contrast, investors were the fastest growing group in theTasmanian rock lobster industry, up by 85% from 1999 to 2007(48–89 individuals). Investors were responsible for supplyingaround 54% of lease quota in 2007. Quota redistributors are agrowing group and make up 24% of the quota owners in 2007.Overall, quota redistributors are one of the two groups responsiblefor the increasing demand for lease quota. At the same time theysupply around 30% of lease quota to other fishers. The main fishergroup responsible for around 53% of demand in lease quota arelease dependent fishers. This group has not increased in numberbut remain significant and were the second largest group in 2007.

2. Methods

Short run demand for lease quota is a function of profitability,which in turn is a function of price and catch rate. Demand is also

Investor

Income supplementers

Lease dependent

fishers

Quota redistributors Independent

fishers

Active fishers Lease quota market

Fig. 3. A theoretical representation of a lease quota trade network for the

Tasmanian rock lobster fishery.

0

20

40

60

80

100

120

1999 2000 2001 2002 2003 2004

Par

ticip

ant c

ateg

ory

(num

ber)

Fig. 4. Number of individual in each Tasmanian rock lobster fishery participant catego

parks, water and energy).

influenced by variation in recruitment of stock plus fisherymanagement decisions such as the size of the TACC, althoughthese generally affect demand by way of changes in catch rate. Inthe long run, demand for lease quota is also affected by changes incapital reflected in the size of the fleet.

In this analysis, the sensitivity of rock lobster fisher’s profitmargins to fishing effort and ownership characteristics wasconducted with financial data collected in 2007 through bothface to face and mail out surveys (n=30). Summary data wereverified ex-post by a selection of the fishers who had participatedin the survey. Accounting profit was estimated from the variablecost of fishing trips (predominantly oil and fuel, food andprovisions, and deckhand labour) and annualized fixed costs(predominantly depreciation of capital equipment, repairs andmaintenance, vessel registration, license fees, insurance, andbusiness administration). For lease fishers the cost of fishing alsoincludes the cost of quota. Accounting profit was simply the totalrevenue minus the total costs.

Accounting profit does not include the opportunity cost ofequity capital and time in calculating revenue but the measurehelps to explain short run business decisions. Economic profit wasalso considered and only occurs when accounting profit exceedsopportunity costs. Economic profit generally explains long-termbusiness prospects. This is because a negative economic profit,even if accounting profit is positive, will lead to firm shutdown inthe long run unless there are some non-monetary benefitsassociated with fishing.

In the analysis below the focus is mainly on accounting profit,as fishers indicated that, in their year to year decisions to remainin the industry, they did not explicitly consider opportunity costs.Accounting profit best explains observed changes in industrystructure between 1999 and 2007. Economic profit is discussedmainly in the context of predicted longer term industry develop-ments.

3. Results

Costs of individual businesses were influenced by theirownership of quota and their scale of operation. Not surprisingly,accounting profit per unit catch was clearly reduced where leasecosts are paid relative to cases where the quota is owned,although economic profit is equivalent because lease cost equalsthe opportunity cost of owning quota (Fig. 5). Fishers with high

2005 2006 2007

Investors

Lease dependent fishers

Income supplementors

Quota redistributors

Independent fishers

ry between 1999 and 2007 (data supplied by the Department of primary Industry,

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15 40 70 100 130 160 19015

40

70

100

130

160

190

Fishing effort (number of quota units fished)

Onw

ersh

ip c

hara

cter

istic

s (n

umbe

r of q

uota

uni

ts o

wne

d by

fish

er)

$0-$100K

$100K-$200K

$200K-$300K

$300K-$400K

$400K-$500K

$500K-$600K

$600K-$700K

Fig. 5. Accounting profit at $100,000 intervals between $0 and $700,000 for the fishing firm for different combinations of quota ownership characteristics (quota owned)

and fishing effort (quota fished) (2007 financial data).

I. van Putten, C. Gardner / Marine Policy 34 (2010) 859–867 863

quota ownership have greater ability to pay higher lease costsbecause they can subsidise lease costs with accounting profitsfrom their quota assets. The scale of operations affected costs withlower average fixed costs for businesses where capital was fullyutilised through either the leasing or buying of additional units.This implies higher average total costs for smaller operations,which contributed to the shutdown of vessels with small quotaallocations after ITQ introduction in 1998 [7].

Fig. 5 shows that if fishers own small amounts of quota (up toaround 40), they can most easily increase their total annual profitby increasing their fishing effort (along the horizontal axis). Theshape of the boundaries between the profit levels, and theapparent discontinuity between 25 and 60 units is caused bystepped changes in the cost structure and economies of scale. Forinstance, a small fishing operation that fishes less than 35 units isless likely to employ a full time deckhand, is more likely to have asmall vessel, fish close inshore, and have low operating costs.

At higher fishing effort, the average accounting profit/kgincreases with respect to the numbers of quota units owned(along the vertical axis). In Fig. 6, average accounting profit/kggenerally increases from right to left, which indicates averageaccounting profit/kg is enhanced by fishing less—that is,becoming an income supplementer or at the extreme, an investor.There is a tipping point at ownership in the region of 30 units,where firms with holdings below this amount can increaseaccounting profit per kg through leasing in additional quota. Incontrast, firms with holdings greater than this amount would beable to increase average accounting profit/kg by leasing out quota(becoming income supplementers). This suggests an equilibriumpoint in the long run for the fishery with active new entrants

building unit ownership around 30 units and achieving highfishing activity through leasing.

In reality there is dynamic change within years and betweenyears in the fishing effort and ownership characteristics ofTasmanian rock lobster fishers (1999 and 2007 shown in Fig. 7).The top right-hand corner of Fig. 7 represents an area of high totalannual accounting profit and high average accounting profit/kgbut only a small proportion of fishers are represented in this area.The majority of fishers in both 1999 and 2007 appear in the lowerleft quadrant and are characterised by low total annualaccounting profit and a low average accounting profit/kg (85%and 72% of all fishers in 1999 and 2007, respectively).

In 1999 there was clustering along the horizontal unitownership axes of 40 and 50 units, which were the respectivevessel limits in 1997 and 1998 and onwards. This patterndisappeared by 2007, which implies diminished importance ofinput controls on the structure of firm’s quota holdings. Theclustering of points along the diagonal in 1999 was associatedwith independent fishers, a group who have diminished (Fig. 8).

Fishers below the diagonal line (A–C) lease some of their quotain. A chi square test indicates that there are significant differencesin the number of fishers above, on, and below the diagonal(p=0.0010) and also the number of fishers in each quadrant(p=0.00764). If the boundary for 1999 is set at 70 (using 1999prices), the difference is significant at the 10 percent level withp=0.0646.

In the short run a rock lobster fisher will have an accountingprofit greater than zero if they fish 25 units and own only oneunit. Lease dependent fishers who appear to the left of the verticalline (e–f), but fish more than 25 units (i–k) make an accounting

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15 40 70 100 130 160 19015

40

70

100

130

160

190

Fishing effort (number of quota units fished)

Ow

ners

hip

char

acte

ristic

s (n

umbe

rof q

uota

uni

ts o

wne

d by

fish

er)

$5-$15/kg

$15-$25/kg

$25-$35/kg

$35-$45/kg>$65/kg

$55-$65/kg

$45-$55/kg

Fig. 6. Rock lobster fisher average accounting profit/kg for different quota ownership characteristics and fishing effort combinations (2007 financial data). Accounting

profit/kg ranges from a minimum of $5/kg (black) to a maximum of $65/kg (palest) at $10/kg intervals.

I. van Putten, C. Gardner / Marine Policy 34 (2010) 859–867864

profit and are expected to survive in the short term but not in thelong run unless they change their business structure. Economicprofit takes into account the opportunity cost such as skipperwages. Fishers who appear to the right of the vertical line at 75units (e–f) in Figs. 7 and 8 are expected to survive in the long runbecause results from the model indicates that Tasmanian rocklobster fishers who own and fish 75 units fishers make aneconomic profit of zero.

Overall, the number of lease dependent fishers has grownbetween 2007 and 1999. Fifty two percent of all fishers whoappear in the lower left quadrant below the diagonal and are leasefishers who only make an accounting profit and do not fully covertheir skipper wages and opportunity costs. The remainder offishers in the lower left quadrant are above the diagonal and arethus income supplementers.

A significantly change in the number of large fishers into thelower right and upper right quadrant occurred between 1999and 2007. Fishers in the lower right quadrant represent largefishing operations with high total annual profit but low averageprofit/kg. A small but higher than expected number of fishersappear in the upper right quadrant where they achieve a highannual profit and a high profit/kg. These large size fishingoperations, likely to survive in the long run, comprise 26% offishers and caught 47% of the TACC in 2007. Their contribution hasgrown from 1999 when they comprised 13% of fishers and caught31% of the catch.

Even though there are many differences between Tasmanianrock lobster fishers in terms of the ownership characteristics andfishing effort, there is some homogeneity for these variableswithin the five quota owner groups (Fig. 3). Predictably, amongstactive fishers, lease dependent fishers own fewer quota units than

their peers (average=32, SD=18.039, n=754) however, theiraverage fishing effort over the nine-year period was significantlyhigher (average=60, SD=26.133). This group largely comprisesthe increased number of fishers in the lower left quadrant (Fig. 7).Lease dependent fishers are likely to be full time fishers, spendingmany days per year at sea (around 128 days), travelling tomultiple fishing grounds and more remote areas. They are likelyto have larger boats which are necessary to access these moredifficult and remote waters.

Quota redistributors on average own more quota units than anyof the other fisher groups (average=49, SD=30.527, n=559) butfish slightly less intensively than lease dependent fishers. Theaverage number of quota units owned by quota redistributors hasincreased between 1999 and 2007. Changing ownership andfishing effort characteristics for this group has resulted in a moveup and to the right, towards the top right quadrant, where totalannual profits and average profit/kg are high. These full timefishers are spending an increasing amount of time at sea as theyfish more intensively but, on average, they spend less time at seathan lease dependent fishers.

Income supplementers comprises the fisher group most likely toinclude individuals who are ‘lifestylers’ or older fishers who havenot quite retired into the investor category but no longer want tofish full time. They are not yet investors because they maintainsome level of activity in the fishing industry. Income supplemen-

ters fish significantly less intensively than the other groups(average=20, n=381, SD=16.258) and even though on averagethey own 39 units, they lease more than a third of their quota out.The fishing activities of these fishers most often consists ofdaytrips close to shore. They do not need to fish many days tocatch their quota enabling them to be involved in other income

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0

50

100

150

051001050

Fishing effort (number of quota units fished)

Ow

ners

hip

char

acte

ristic

s (n

umbe

r of q

uota

uni

ts o

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fish

er

1999High total annual profitHigh average profit / kg

Low total annual profitHigh average profit / kg

Low total annual profitLow average profit / kg

High total annual profitLow average profit / kg

0

50

100

150

051001050

Fishing effort (number of quota units fished)

Ow

ners

hip

char

acte

ristic

s (n

umbe

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uni

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wne

d by

fish

er)

High total annual profitHigh average profit / kg

2007

High total annual profitLow average profit / kg

Low total annual profitLow average profit / kg

Low total annual profitHigh average profit / kg

Fig. 7. Tasmanian rock lobster quota owners and their respective fishing effort and ownership characteristics in 1999 (upper) and 2007 (lower) 1999 prices were adjusted

by the inflation rate, and the actual price changes for lease price, quota sale price, rock lobster price, and catch rate. The long run point of zero accounting profit in 1999 was

around 70 compared with 75 units in 2007.

I. van Putten, C. Gardner / Marine Policy 34 (2010) 859–867 865

generating activities at times of the year when they do not fish.These fishers occur above the diagonal and are at an extreme interms of the ratio of units owned to those fished for the fewindividuals in the top left quadrant.

4. Discussion

Fisher’s ownership and fishing effort characteristics were usedto estimate accounting and economic profit for Tasmanian rock

lobster fishers. The current industry structure, as it has developedsince ITQ introduction in 1998 can be explained by fisherprofitability and their dependence on lease quota. The likelyfuture economic contribution of different types of fisher groupsand future industry structure can be predicted on the basis ofexpected short and long-term survival of fishing businesscombined with industry and lease quota trading trends observedafter quota introduction in 1998.

After 1998, the amount of lease quota units traded in the leasequota market has increased. There are more participants in the

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A B

CD

Independent fishers (A-C)

Lease dependent fishers (A-B-C)

Income supplementers (A-C-D)

Quota redistributors (A-B-C-D)

Investors (A-D)

e

f

g h

i

k

Fig. 8. Schematic diagram of the area where the five fisher types are located in

Fig. 7. Arrows indicate the economic forcing of fishing businesses in terms of scale

of catch taken.

I. van Putten, C. Gardner / Marine Policy 34 (2010) 859–867866

lease market than in the past, with 93% of quota ownersparticipating in this market in 2007. Similar growth trends inlease trade have been observed in ITQ fisheries around the world[e.g. 21]. In combination with growing lease quota trade, threekey dynamics are observed for different Tasmanian rock lobsterfisher types.

Firstly, the industry is characterised by a growing number ofinvestors. The number of investors has grown by 85% over thisnine-year period and they contribute the majority of the supply oflease quota units. The investors group appears to be increasingfrom the ranks of the income supplementers and independent fishers

with the size of these groups falling since 1999. Income

supplementers are ‘lifestylers’ or older fishers who are not quiteretired but no longer want to fish at peak capacity. In Tasmania,retiring fishers appear less inclined to sell their quota now than inthe past, and tend to retain quota when they reduce their fishingactivity. A significant reason for this behaviour is the avoidance ofcapital gains tax, plus transferring ownership of quota units tosuperannuation funds reduces personal income tax liability.Independent fishers, who do not trade in the lease market, arealso a dwindling group. Many independent fishers reduce fishingactivity gradually, first becoming income supplementers thenultimately investors.

A feature of Tasmanian lease quota supply is that the size ofinvestor quota holdings is small relative to many other ITQfisheries. Elsewhere fish processors dominate the investors

group, which is a source of problematic power relationshipsin the market [e.g. 21–23]. In Tasmania concentrated quotaownership by processors or any other entity has been avoided dueto a rule that limits maximum ownership to 200 units. By limitingthe number of units, processors cannot gain adequate marketshare to make investment in quota units worthwhile, leavingroom for smaller size investors that characterise the Tasmanianindustry.

The second important change since ITQ introduction in 1998 isthat there are more large lease dependent fishing operations. Theseintensive fishing operations appear to be able to achieve a healthyeconomic profit ensuring long run survival in the industry. Manysmaller lease dependent fishing operations make an accountingprofit and survive in the short term, but do not cover opportunitycost of capital and skipper labour needed to remain viable in thelong run. If these smaller lease dependent fishers do not obtainnon-monetary benefits from fishing, they will either exit theindustry or scale up their effort.

New entrants face the choice of exiting the industry or scalingup operations as they typically start as smaller operators. Thesefishers face barriers to long run viability as they need to increasethe scale of their fishing operation and catch large amounts of fish,but face high upfront capital investment costs to scale up theirvessel. They also need to compete in the lease market for quotawhere the lease price is influenced by bidders who may havemore experience in fishing. Renewal in the Tasmanian rocklobster industry is a subject of much stakeholder discussion.Schemes enabling new and young industry entrants to purchasequota ‘to buy into the industry’ are being discussed althoughthese risk simply alters the dynamic of the lease price barrier toentry without altering the rate of renewal.

The third key development in the Tasmanian rock lobsterindustry since quota introduction is the increasing number ofquota redistributors, fishers who lease quota both in and out. Theexistence of this group is related to the ease with which leasequota units can be traded, the stability of lease price through theseason, and the lack of supply later in the season. Quota is tradedeasily and can be arranged by telephone while still out at sea, orexample in the case of having caught more than expected. Thistrade is particularly relevant between companies or familybusinesses where some redistribution of lease quota willcompensate for a shortage or excess of quota units between trips.Future studies investigating social networks in the lease marketmay provide further insight into trade between quota owning andfishing entities. Fishers report that they also lease quota both inand out to increase technical efficiency by circumventing aTasmanian gear control regulation. For example, a fisher whoowns 30 quota units is only allowed to operate 30 traps, yet theirvessel may be authorised to operate a maximum of 50 traps. Toincrease efficiency inventive, operators are ‘purchasing’ units, at avery low cost, for which the allocation has already been caught(so-called empty units). This enables fishers to carry more trapsthan they have ‘full’ quota units. The majority of this trade of‘empty’ units is probably not recorded but may be responsible fora small inflation of lease trade data.

The significant changes were observed in the Tasmanian rocklobster fishing industry since quota introduction have implica-tions for future policy and industry governance. Firstly thelong-term viability of fishers who depend on lease quota favourslarge-scale operations, which creates a barrier to entry into thefishery. Industry renewal appears possible only through a changein the market equilibrium for lease cost. Alternatively, furtherconsolidation of the fleet may occur towards a smaller number ofhighly active fishers. The changes seen over the period of thisstudy were driven by firms seeking to lower their average fixedcosts and this would be expected to continue driving businessdynamics. One trend that has started to emerge is the sharing ofvessels between firms so the equipment is in constant use andfixed vessel costs are shared. This drive to lower average fixedcosts also suggests fishers will be able to respond less to seasonalprice signals for lobsters because of the need to keep the effort ofindividual firms at full capacity. The presence of a large group ofsmaller fishers who operate below normal economic profit bringswith it significant non-compliance and enforcement issues [6].

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Concerns may also arise in relation to potential differences instewardship attitudes for marginal fishers who have littleinvestment in the industry.

Acknowledgements

The authors thank Tasmanian rock lobster fishers, Dr. SarahJennings from the University of Tasmania, Dr. Beth Fulton, andother internal reviewers at CSIRO for their insightful comments.

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