How a catch-quota balancing system can go wrong: An evaluation of the species quota transformation provisions in the Icelandic multispecies demersal fishery

Abstract

Implementation of single-species catch limits in multispecies individual quota systems is problematic because it may incentivize discarding behaviour when quotas for some species limit catch of jointly caught species. Since discarding may reduce economic benefits and bias stock assessments, mechanisms that reduce incentives to discard can be beneficial. However, these mechanisms may be detrimental in the long term if they also pose a risk of stock depletion, which can occur if they enable catch to persistently exceed the total allowable catch (TAC). This study uses a bioeconomic model to analyse potential negative consequences of species quota transformation provisions, using the Icelandic individual transferable quota system as a case study. These provisions allow quota of one species to be transformed into quota of another species at specified rates related to relative market value. The system reduces the degree that the TAC of any particular species constrains catch of other species. However, it also allows catches of some species to exceed TACs, possibly leading to stock depletion. We explore how these provisions may affect long-term sustainability of individual species and profitability of the fishery as a whole. We focus on the extreme case of perfect targeting (i.e. full control of catch composition) to increase intuition on the potential for adverse effects of this system. Various combinations of species profitability are examined to determine attributes of species that lead to greater vulnerability, as well as interactions in species utilization. Consequences of changing harvest control rules are explored, and information needed to monitor for unintended consequences of such a system in practice are discussed. Although the species transformation system is designed to increase economic efficiency, our results show that it could lead to depletion in some cases, and may make it difficult to achieve optimal management goals.