Economic Incentives to improve trawl fisheries management

By Robert Lee FAO Fishery Industry Officer

FAO Regional Office for Asia and the Pacific

Many years of work yet the resources continue fished to their limits or

overfished.

True or False?

Why is this so?What role do Economic

Incentives play?

Contents

• Incentives and Disincentive• Fishing Fleets and Subsidies• Drivers• Different types of subsidies• Policies ?• How can we make them work in our favor• Some case studies, What worked and

what didn’t• Conclusions

Incentive Disincentive

Something that

ENCOURAGES a person to

determination or action

Something that causes a

person to decide NOT to do something

Incentive / Disincentive ????• Depends on who gives and who receives• Who’s objective? Can work both ways….• May require negotiation or not• Usually agreed before an action (written )• May or may not be given on completion of

the agreed action/s• Requires verification on completion• May be in cash or in kind• Who pays – When does it stop? How much?

Subsidy intensity by regionratio of subsidy to value of catch 2003

A bottom-up re-estimation of global fisheries subsidies. Sumaila. U.R., Khan.A., Dyck A.J., Watson. R., Munro G., Tydemers. P., Pauly. D., 18/08/2010

Fuel subsidies study in the Asia Pacific Region Globally Fuel Subsidies (Sumalia, Teh, Watson, Tyedmers, Pauly 2008)

Developed countries = 3 – 7 billion USD Developing countries=1.17 – 1.5 billion USD

In 2000, countries with fuel subsidies

China Philippines India Samoa

S. Korea Samoa Indonesia Tonga

Australia Solomon Is. Malaysia Japan

Sri Lanka Thailand Taiwan Vanuatu

BangladeshWhat does the picture look like today? How many countries give fuel subsidies? Lack of studies……….

Fishing Fleet• Global fishing Vessels 4.360.000 • Asia fishing vessels 3.180.000 (73%)

% change # vessels 2007 -2010

•Increased fuel prices

•Inflation

•Macro economics

•Stagnation in growth

Fishers complain

•Decrease interest rates

•Subsidies

•Energy efficiency

•Loans

•Repairs

•Produce more fuels

Reduce costs and increase efficiency

SituationPolicy

Response

Beneficial Subsidies

Effort increasing subsidies

Ambiguous Subsidies

Result

Beneficial subsidiesDesired Effects & Objective Method/Approach

Reduce fishing effort and Improved food security

Subsidies to promote conversion from fishing to aquaculture and Buy Out

Better Fisheries management

MCS, Stock Assessment, Habitat and Stock enhancement, Research and Development

In technologies in capture and processing, Subsidy to use non destructive fishing gears. Development

of Marine Protected Areas and Artificial Reefs. Funds to combat IUU

Promote culture and aboriginal peopleSubsidy / incentive to carry on indigenous fisheries

management systems

Improved processing Subsidies for Good corporate responsibility, reduce

GHG and improve efficiency savings

Reduced GHG from sector Alternative and less polluting fuels and technology

Export revenue generation Promote Certification schemes,

Fuel subsidies that increase capacityDesired Effects / Objectives Impact Result

Stimulate slowing economy

Reduce transport and production costs

Maintain export competitively

Reduce or maintain cost to consumers.

Expansion of territorial presence

Gain political mileage

Gain a trade advantage

Increase food security

Fuel Subsidy leading to Over capacity Over effort Over subsidy, Increase fuel consumption and Undermine fuel optimization efforts and slow uptake of new technologies (LIFE)

Fishing port construction and renovation programmes support the sector with cheap mooring making fishing less expensive

Price and marketing support, processing and storage infrastructure programs, leading to Over capitalization in processing driving demand leading to over capacity

Tax exemptions and cheap loans, insurance support, duty free inputs, support programs. Financial gains invested in more production (boats and gears)

Subsidized Foreign Access agreements

Anonymous subsidiesIntervention Positive Negative

Emergency rehabilitation programmes after disasters

Stabilize food security, kick start exports, reduce

dependence on food aid, restart livelihoods

Can lead to over capacity (new boats and gears),

should be accompanied by management plans

Vessel and licenses buy back - scrapping of vessels

Reduce fishing capacity rapidly

Effort Transfer, anticipation = > effort. Creep back if not

controlled

Assistance programs to temporarily stop fishing – unemployment insurance,

retraining, social security etc

Reduce effort, improve stocks, maintain social

standards of fisher communities

Subsidy dependence, remain in fishery. Raise fish prices,

reduce costs of fishing. Requires management plans

Provide sea safety equipment and

modernization of vessels to reduce injury and death

Make fishing safer, new cadre of younger fishers,

make fishing more socially acceptable and professional

< Fishing costs and > fishing effort if no management in

place

Assistance programmes to SSF.

May enhance poverty alleviation and food security

May drive over capacity in coastal areas, in migration to

fishing

Incentive vs. Disincentive

Incentive DisincentiveCatch report = low fees Catch report = ++ Taxes

Reduce effort = > Fish Reduce fish = < Income

Fuel Subsidy = > Stimulus National Economy

Fuel Subsidy = < Expenses on Fuel savings

Easy Loans = viable vessels / increase effort

High interest = < viable vessels / reduced effort

Effectively participate in fisheries management = ?????

Possible loss of income and investment = No clear incentive ?????

Trawl Fisheries• Fuel consumption driven by

–vessels size and fishing technique. Fuel > 40% of the total operating costs. (EU and Thailand)

–Trawlers consuming the largest amount of fuel per fishing day of all fishing types

–Small scale fleets, economically much less dependent on fuel price.

–Trawlers consume more but have a higher CPUE and fuel consumption per Kg

–Economically very sensitive to fuel price

Asia pacific Economic Cooperation -2000Study Into the Nature and Extent of Subsidies in the

Fisheries Sector of APEC Members EconomiesCommittee on Trade and Investment

“The possible negative effects of some kinds of transfers can be reduced or minimized when transfer policies and resource management polices are coherent.” Therefore, there is an issue regarding the efficiency of the subsidy programs”.

Synopsis • Incentive for Fisheries Management• Mostly capacity enhancing - • Fuel subsidy or cuts = greatest impact on trawlers• Incentives vs. disincentive • Proper use of incentive = Proper results• More analyses (vessels and value chain) • There is money = in 2003 there was an estimated 2.7 Billion

Subsidy Estimates 2003 (US$ 000's))

Country BeneficialCapacity

EnhancingAmbiguous Total

Indonesia 178,772 787,647 23,279 989,698

Philippines 286,038 609,893 22,895 918,826

Thailand 30,470 497,333 24,796 552,599

Vietnam 283,229 414,184 0.00 697,413

Papua New Guinea 216,373 427,468 18,174 662,015

Totals 994,882 2,736,525 89,144 3,820,551

A bottom-up re-estimation of global fisheries subsidies. Sumaila. U.R., Khan.A., Dyck A.J., Watson. R., Munro G., Tydemers. P., Pauly. D., 18/08/2010

Case Studies

Case 1. Grenada • Objective

– Develop the pelagic long line fishery safely• Strategy

– Provide subsidy –duty free equipment and fuel once a year at Xmas

– Subsidy conditional on updated fishing license

– Fishing license only issued with valid safety certificate

• Measures– Yearly inspections, Training, VMS/VSD

Case 2. New Zealand Sanford Ltd. • Objectives– Sustainable fishing– Profitable, environmentally responsible

• Strategy– Maintain MSC certification and maintain ISO status– Energy efficiency and sustainable development policies – Reduce emissions and GHG

• Measures– Reduce incidental catches of birds and mammals and

impacts on sensitive areas.– Use of fish offal to produce oil to reduce fuel costs– Recycle waste from processing and fishing operations– Corporate – Treatment of workers, good corporate

citizenship – clean up and awareness raising

Case 3. Asia/Pacific Region• Objective– Ministerial policy increase production of B100 bio fuel.– Large surplus 370 000 tonnes– Replace more costly diesel in fishing vessels with B100– Prevent the price of B100 falling due to large inventory– New stocks expected March – April 2013

• Strategy– Provide cheaper fuel to fleet at subsidized price– No clear if any conditions will be applied

• Measures – Not clear – Improved monitoring, catch declarations, improved safety

compliance, cost of conversion to energy efficient options– Will require monitoring system. Political reality

What can be done?

Policy• Energy and incentive policy congruent with

Fisheries Management Plans. What are these?• Formulate Fisheries Energy Policies and have

clear objectives– Reduce emissions, consumption, Increase

efficiency (Kw./Kg) and provide incentives• Holistic view link other subsidy policy (Loans,

Guarantees, Price support, tax exemptions, infrastructure, etc).

• Link Economic and environmental policies• Value Chain studies

Management• Level and time bound subsidy/incentive

related to status of stocks• Use subsidies/incentive for R and D, VMS,

energy efficient technologies• Integrate safety at sea and fisheries

management• Use subsidies as incentive to comply with

Regulations – requires monitoring systems. Who?

• Use subsidy for fisher groups to conduct MCS in protected and sensitive zones

Technology• Make sure installations for new

alternatives do not compromise safety – e.g. biogas

• Technical and economic studies of fuel and value chain fishery subsidy viability.

• Calculate impacts of Ambiguous subsidies• Use Cost of Conversion as subsidy to new

technology, emission reducing fuels, optimization and LIFE

• Monitoring and evaluation of measures

Conclusions• Subsidies / incentives can have negative and

positive impacts on fisheries management • Subsidies and incentives should result in

environmental sustainability.• Energy policies and fisheries policies need to be

integrated for maximum benefit and coherence.• Sustainable development is good business.

(Energy, living resources, recycling, efficiency)• Politics should not endanger responsible

resource management

So, why have the resources continued to be depleted after decades of

fisheries management?

Possible answers• Economic incentives that are inadequate or

inappropriate , that do not reflect the real costs and become disincentives.

• Expecting that people will do the right thing to protect the environment

• Spending billions in capacity enhancing subsidies

• Fisheries managers have no economic incentives to offer protection and conservation of resources.

• Little effective dialogue so because of lack of something to exchange – in spite of money available

What incentives can you suggest for trawl fisheries?

• Reduce capacity (Number of vessels or time fishing)

• > viable vessels• > production• Effectively participate in fisheries management • Reduce bycatch thru BRD, mesh, technical • Temporal and spatial closures• Reduce fuel consumption and GHG

What are the incentives??

Cannot know until we do the analysis of the operations and the value chain

Or its just guess work

Thanks

Reference materials• Fuel price increase, subsidies, overcapacity and resource

sustainability - http://icesjms.oxfordjournals.org/content/65/6/832.full.pdf+html

• World Energy Outlook 2012 - http://www.iea.org/publications/freepublications/publication/English.pdf

• Intermediate technology and alternative energy systems for small scale fisheries - http://www.apfic.org/archive/symposia/1980/53.pdf

• Study into the Nature and Extent of Subsidies in the Fisheries Sector of APEC Member Economies, 2000 - http://publications.apec.org/publication-detail.php?pub_id=668

Reference materials

• Safety at sea as an integral part of fisheries management - http://www.fao.org/docrep/003/X9656E/X9656E00.HTM

• Futures contracts of crude oil NYNEX –http://quotes.ino.com/exchanges/contracts.html?r=NYMEX_CL

• International centre for Trade and Sustainable Development - Tackling Perverse Subsidies in Agriculture, Fisheries and Energy http://ictsd.org/downloads/2012/06/tackling-perverse-subsidies-in-agriculture-fisheries-and-energy.pdf

Thanks for your attention