Potential benefits of a wealth based approach to fisheries management: an assessment of the potential resource rents in UK fisheries

Sponsor: IDDRA Ltd. on behalf of DEFRA

Duration: June 2009  to February 2010

Project staff: Prof. Trond Bjorndal, Dr. Mintewab Bezabih, Dr. Prem Wattage and Dr. Aaron Hatcher

Project Profile

A sustainably managed fishery will generate resource rent – a return from fishing over and above what is required to compensate labour and capital.  According to the Food and Agriculture Organisation of the United Nations, a large proportion of fisheries worldwide are overexploited.  Moreover, many fisheries are characterised by substantial fleet overcapacity.  According to a recent report by the World Bank, one outcome of stock depletion combined with excessive levels of effort is dissipation of resource rents which is estimated at $50 billion annually worldwide.  Hence, understanding the nature and degree of rents in fisheries is necessary to enable policy makers to design management instruments that can achieve sustainable exploitation patterns.

Many fish stocks exploited by UK fishermen are also overexploited.  The Department for the Environment, Food and Agriculture (DEFRA) has given a contract to IDDRA, a consulting firm, and CEMARE, to analyse current and potential resource rents in UK fisheries.

CEMARE’s responsibility has been to undertake bioeconomic analyses of three fisheries – North Sea herring,  nephrops in the Irish Sea and demersal fisheries in the North Sea.  A bioeconomic analysis of a fishery combines a biological model of population dynamics with an economic model of the fishing fleet. Economically optimal exploitation of a fishery will occur at the stock level that maximises the present value of resource rents. A bioeconomic model can provide an estimate of this optimal stock level, together with the associated optimal harvest and effort levels. The determinants of the optimal stock level are the natural productivity of the stock, the price of the product and the cost of harvesting, which depends on the technology employed. Moreover, the interest rate is important, as this is used to "convert" future rents into current values.
 Here, we will look briefly at the results for the North Sea demersal fisheries – cod, haddock and whiting.  Most of the UK catches are by trawler fleets and seine netters.  For 2006, the realised resource rent for UK North Sea demersal fleets was £13.4 million.

If the total allowable catch quotas (TACs) are unchanged, but vessels are allowed to operate at their optimal levels and fleet size is reduced to the minimum, potential rent is £57.6 million. This implies that the £44.2 million is dissipated due to excessive effort.

The optimal stock levels for the three fisheries were analysed.  The results call for substantial investments in stocks: the cod stock should increase more than five fold, from 176,000 tonnes in 2007 to a level of 930,000 tonnes; haddock almost three fold from 670,000 tonnes in 2007 to 1.8 million tonnes, and whiting more than four times.

These investments will call for a reduction in harvests to allow stocks to recover. After stocks have been rebuilt to their optimal levels, a sustainable fishery will imply higher TACs than those observed in recent years. Combined with optimal fishing effort, this can in due course lead to an annual rent from the North Sea demersal fisheries of about £ 530 million per year.  Of this, 60% might accrue to the UK.
For the demersal fisheries, rent is dissipated due to excessive effort and depleted stocks.

The results from the three case studies are very much in line with other empirical estimates of resource rent, including studies of Western Channel sole, Norwegian spring spawning herring, Northeast Atlantic bluefin tuna and Indian Ocean tunas.  As such, they clearly show that fisheries are capable of yielding substantial rents – if managed sustainably.

For further information, contact Christopher Martin