Carte Blanche: Can Free Markets Save Fish?
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While many politicians focus on carbon emissions being the key environmental issue of our time, there seems to be little discussion about overfishing and the resulting depletion of fish populations in oceans. That may be intentional. Similar to how the United States government has significantly contributed to global warming, governments around the world continue to play a key role in the overfishing dilemma.
Overfishing is a major global threat to fish species, aquatic ecosystems, and even human populations. According to the United Nations, 90% of the world’s fish stocks are overfished or at capacity, meaning that these entire populations are on the brink of total collapse. Overall, global fishing capacity is at an estimated 250% of the maximum sustainable level. Regardless of the trend towards extinction of wild fish in our oceans, people are going to continue to eat more and more fish. In fact, global fish demand is expected to double by 2050, according the World Resource Institute. This is a good thing – it reflects that the world is getting wealthier and healthier. And, because of free market innovations like fish farming and catch shares, we have the opportunity to allow fish populations to bounce back while meeting increased demand.
The single biggest driver of overfishing has been government subsidizing commercial fishing. Subsidies are harmful because they allow politicians to use tax-payer money to take investment risks without proper incentives or accountability, they distort the market by giving artificial advantages to the politically connected while competitors and consumers suffer, and they encourage the practice of politicians giving favors to the special interests that give them money and deliver votes during campaign season. The unfair nature of fishing subsidies is glaringly apparent when you consider that small scale fisheries received just 19% of global fishing subsidies in 2018, while the remaining 81% was given to large industrial fisheries. Larger, more powerful entities are given advantages because they have more political capital than smaller entities – that’s just how subsidies work.
The most common type of fishing subsidy is for fuel, representing 22% of global fishing subsidies. Fuel subsidies only serve to keep fishing boats on the water as much as possible in defiance of the reality of fish depletion. Other types of fishing subsidies finance vessel and equipment purchases, aid in the development of fisheries and ports, and provide tax incentives to overfish. While certain types of subsidies are aimed at improving depleted fish populations, the majority of them are capacity-enhancing subsidies that encourage overfishing. In fact, capacity-enhancing subsidies accounted for $22.2 billion of the $35.4 billion in global fishing subsidies in 2018.
While fishing subsidies are still a problem in the U.S., there has been significant progress in restoring depleted fish populations by eliminating the especially harmful types of subsidies. There has been some resistance to this. For example, in 2019 the National Marine Fisheries Service (NMFS) proposed to establish a financing program for the construction of new fishing vessels - just the type of subsidy the U.S. has worked hard to eliminate. However, the NMFS withdrew the application in 2020, reflecting public pressure and understanding that these incentives can exacerbate overfishing. NMFS attempted to rationalize their proposed financing program by pointing out that it restricted eligibility to “limited access” fisheries that are “not overfished”. These fisheries are intentionally not overfished and are largely managed with catch share programs, a free-market innovation that’s one of the most effective combatants to overfishing.
Catch shares, also known as individual fishing quotas (IFQs), allow fishermen to hold a share or percentage of the total allowable catch (TAC) of a fishery. For example, if the TAC of a fishery is 1 million pounds of salmon for a season, and a fisherman holds 2.5% share, then he is allowed to catch 25,000 pounds of salmon that season. Government agencies will define a TAC that is sustainable, and fishermen can purchase, sell, or otherwise transfer shares of the TAC. Once the TAC is reached, fishing for that type of fish will halt until the next season.
By holding an enforceable, definable, and transferable property right in the form of catch shares, fishermen can be confident that they will be able to catch the amount the share allows them. When governments impose a catch limit without a catch share program, there is an open race between all fleets in that fishery to fish up to the allowed amount, and nobody can be guaranteed to catch an amount that is profitable. These open races to the catch limit also result in shorter fishing seasons, unnecessary risk-taking like fishing in bad weather, and inefficient use of labor and equipment. With catch shares, efficiency of operations is rewarded with increased profits, and the more efficient fishermen are able to buy shares from those who are inefficient, benefitting the fishermen, consumer, and habitat. Additionally, fishermen are more incentivized to invest in the revival of depleted fish populations. As a fellow from the leading free-market environmentalism think-tank Property and Environment Research Center (PERC) explained, “Rather than fight officials over how much fish they can catch, with what gear, on which days, fishermen now look ahead to the future value of their quota and demand lower catch limits to rebuild populations faster.”
The adoption of this market-based method of fishing sustainability has happened because traditional top-down government regulation has resulted in negative consequences. In the absence of defined property rights via IFQs, regulations incentivize fishermen to do anything to maximize their catch until the limit is reached, often playing dirty to get a leg up. In addition to catch limits, governments will restrict the number of days open to fishing and the size of fishing boats. By implementing catch share programs, fishing seasons have increased because there isn’t a race to fish and boat size doesn’t matter when the fisherman has a pre-determined allowed catch share. In fact, adoption of catch share programs has resulted in less boats on the water as opposed to an open season of unlimited boats.
Data has shown that catch share programs have helped reduce the collapse of fish populations. According to a study of over 11,000 fisheries by Science Magazine, the implementation of a catch share program by a fishery reduces the probability of collapse by 13.7%. This study also found that catch share programs, “not only halt the trend in global collapse, but they may actually reverse it.” In the U.S., these programs are still relatively new, many less than ten years old. But indications are showing that fish mortality is trending downwards.
If more governments adopt these catch share programs, then there is hope that endangered populations of fish can bounce back. Fish farming is another market-based solution that has helped reduce the dependence on strained wild fish for human consumption. These methods are needed because top-down approaches from governments often don’t work in the ways they are intended. However, if governments continue to incentivize fishing beyond capacity by subsidizing it, no regulatory or market-based solution will be able to prevent the mass extinction of fish in our oceans.
