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Download The Impacts of Individual Transferable Quotas in Canadian Sablefish Fisheries: An Economic Analysis by Adam Soliman BSc. , Alexandria University, 1999 A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF Master of Science in THE FACULTY OF GRADUATE STUDIES (Agriculture Economics) THE UNIVERSITY OF BRITISH COLUMBIA (Vancouver) July 2010 © Adam Soliman, 2010 Abstract In 1990, the Department of Fisheries and Oceans implemented the Individual Transferable Quotas (ITQ) system to achieve its management goals. The purpose of this study is to investigate the effectiveness of this system. It aims to determine whether and how the ITQ system creates an economically viable industry; what problems the ITQ system has generated and what factors should be considered in addressing them; and what the risk of holding these quotas is to the fisher. To this end, I will focus on efficiency as a critical dimension of economic viability and the fisher’s competitiveness. I will begin by comparing the ITQ to the Limited Entry system which preceded it and explore claims regarding the impact of ITQs on the sustainability and viability of fishing firms and the sablefish fishery. Next, I will conduct a detailed and comprehensive analysis of the industry’s cost structure that highlights the value/purchase price of the quota, which is widely considered to be a crude measure of industry profitability. This analysis will examine Barichello’s (1996) model in order to calculate the risk associated with holding sablefish quotes and Monk and Pearson’s (1989) Policy Analysis Matrix (PAM) in order to determine whether the sablefish industry is efficient. I will then source industry information to compute the costs of fishing by conducting a financial analysis of firms that are representative of the sablefish fishery. The cost structure presented in the financial analysis will be utilized to apply the PAM to the sablefish fishery, which will determine whether it is efficient and if the ITQ system has created a highly subsidized industry. My analyses will demonstrate that the industry is economically viable under the ITQ system and that if the ITQ system was meant to correct market failures in the sablefish industry, it has partially succeeded in doing so. Key findings will be related to criticisms of ITQs and the implications of these findings will be considered. Lastly, I will detail the questions that the research has raised and make recommendations for future research. ii Table of Contents Abstract................................................................................................................................................................ii Table of Contents................................................................................................................................................iii List of Tables ....................................................................................................................................................... v List of Figures....................................................................................................................................................vii Acknowledgments ............................................................................................................................................viii Dedication...........................................................................................................................................................ix Chapter 1: Introduction........................................................................................................................................ 1 Focus of Inquiry ..................................................................................................................................2 Chapter 2: Literature Review............................................................................................................................... 4 The Limited Entry System....................................................................................................................5 Implementation of ITQs .......................................................................................................................7 Claims about ITQs.............................................................................................................................13 ITQs and Sustainability......................................................................................................................13 ITQs and Sustainability of Pacific Sablefish.........................................................................................15 Economic Viability............................................................................................................................19 ITQs and Economic Viability in Sablefish ...........................................................................................23 Chapter 3: Method ............................................................................................................................................. 28 The Policy Risk Parameter .................................................................................................................28 The Policy Analysis Matrix ................................................................................................................29 The PAM and Pacific Sablefish ..........................................................................................................33 Chapter 4: Data Analyis..................................................................................................................................... 36 The Policy Risk Parameter .................................................................................................................36 Financial Analysis .............................................................................................................................40 The Policy Analysis Matrix ................................................................................................................59 Chapter 5: Discussion ........................................................................................................................................ 64 Subsidy Sources ................................................................................................................................64 iii Extra-competitive Economic Returns ..................................................................................................65 Armchair Fishing and Technical Efficiency .........................................................................................66 Barriers to New Entrants ....................................................................................................................66 Initial Quota Allocation......................................................................................................................66 Innovation.........................................................................................................................................67 Cooperation Among Fishers ...............................................................................................................67 Chapter 6: Conclusion ....................................................................................................................................... 71 Recommendations for Future Research................................................................................................72 ITQs: Privilege or Property? ..........................................................................................................72 Armchair Fishing..........................................................................................................................73 Enforcement or Cooperative Games ...............................................................................................73 Resource Rent or Subsidies............................................................................................................74 Pricing the Resource .....................................................................................................................75 Quota Values and Policy Risk ........................................................................................................75 The DFO’s Mandate......................................................................................................................76 Policy Recommendations ...................................................................................................................72 Recommendations for Fisheries Yet to Utilize ITQ ..........................................................................72 Recommendatons for Fisheries Already Utilizing ITQ .....................................................................72 References.......................................................................................................................................................... 80 Appendix: Technical Appendix ......................................................................................................................... 84 iv List of Tables Table 1 Quantities of Actual Catch; Total Allowable Catch (TAC), Overage or Underage (Difference Between TAC and Catch), Fishing Season Length and No. of Active Vessels by Year..................6 Table 2 Joint Project Agreement Financial Contributions of the Department of Fisheries and Oceans
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