Evaluating the New Zealand Individual Transferable Quota Market for Fisheries Management

The New Zealand ITQ system is a dynamic institution that has had many refinements since its inception more than 15 years ago. Nonetheless, the basic tenets of the system - setting a total allowable catch and leaving the market to determine the most profitable allocation of fishing effort - have remained intact.

This paper assesses the New Zealand system to identify areas of success and/or possible improvement or expansion within it. The reasons for doing so are to highlight beneficial features and to identify features of the New Zealand ITQ system that are relevant to other potential tradable permit markets.

Beneficial features include simple standardized rules for quota definition and trading across species and areas; very few restrictions on quota trading and holding; relative stability in the rules over time; and low levels of government involvement in the trading process.

We find evidence that supports the assertion that fishers behave in a reasonably rational fashion and that the markets are relatively efficient. We do not find major changes in participation in these fisheries as a result of the system. We find evidence that suggests that the ITQ system is improving the profitability of fisheries in New Zealand. In general the evidence thus far suggests that the market is operating in a reasonably efficient manner and is providing significant economic gains.

These factors suggest that New Zealand would want to have non-economic justifications for any significant changes to the system.

Citation

Kerr, Suzi; Richard Newell and James Sanchirico. 2004. "Evaluating the New Zealand Individual Transferable Quota Market for Fisheries Management" in Tradeable Permits: policy evaluation, design and reform, OECD, Ed. Paris. Paper prepared for OECD workshop Ex post evaluation of tradable permit regimes, Paris, January 2003.