TMP 6382

International Review of Environmental and Resource Economics, 2010, 4: 123–161
Use of Incentive-Based Management

Systems to Limit Bycatch and Discarding
Sean Pascoe1 , James Innes2,3 , Dan Holland4 , Mark Fina5 ,
Olivier Thébaud1,6 , Ralph Townsend7,8 , James Sanchirico9,10 ,
Ragnar Arnason11 , Chris Wilcox12 , and Trevor Hutton1
1 CSIRO Marine and Atmospheric Research, PO Box 120, Cleveland,
Queensland 4163, Australia sean.pascoe@csiro.au; olivier.thebaud@csiro.au;
trevor.hutton@csiro.au
2 CEMARE, University of Portsmouth, St George’s Building, 141 High
Street, Portsmouth PO1 2HY, United Kingdom, james.innes@port.ac.uk

3 Tasmanian Aquaculture and Fisheries Institute, University of Tasmania,
Marine Research Laboratories, 5 Nubeena Crescent, Taroona, Tasmania,

7053, Australia
4 Gulf of Maine Research Institute, 350 Commercial Street Portland, ME
04101, USA dholland@gmri.org

5 North Pacific Fishery Management Council, 605 W 4th Avenue, Suite
306, Anchorage, AK 99501, USA. Mark.Fina@noaa.gov

6 Ifremer, UMR AMURE, Département d’Economie Maritime, BP 70,
F-29280 Plouzané Cedex, France.

7 Ministry of Fisheries, PO Box 1020, Wellington, New Zealand
8 College of Liberal Arts, Winona State University, PO Box 5838, Winona,
MN 55987, USA, Ralph Townsend@umit.maine.edu

9 University of California at Davis, Davis, CA, USA
10 Resources for the Future, Washington, DC USA jsanchirico@ucdavis.edu
11 Department of Economics, University of Iceland, IS - 101 Reykjavik,
Iceland. ragnara@hi.is
12 CSIRO Marine and Atmospheric Research, Castray Esplanade, Hobart,
Tasmania, 7000, Australia. chris.wilcox@csiro.au
ISSN 1932-1465; DOI 10.1561/101.00000032

c 2010 S. Pascoe et al.
124 Pascoe et al.
ABSTRACT
In most fisheries, a number of species are unintentionally caught as

bycatch while attempting to catch the targeted species. While much of
the bycatch problem is technological in nature due to imperfect selec-
tivity of the fishing gear, fisher behaviour also plays a major role. How,
when and where fishers choose to fish can influence catch composition
and thereby the quantity of bycatch. Behavioural changes can be encour-
aged through the development of an appropriate set of incentives — both
economic and social — to avoid bycatch and reduce discarding. In this
paper, a number of alternative incentive-based bycatch management
systems are reviewed. The potential applicability of these systems to
quota species, non-commercial species and threatened or conservation-
dependent species (such as turtles, seals, dolphins) is reviewed, and
examples of their application are presented. The review concludes
that incentive-based approaches can reduce the level of bycatch and
discarding in most fisheries.
Keywords: Incentive-based management; bycatch; discarding; marine

conservation; fisheries management.
JEL Codes: Q22, Q27, Q28, D01
1 Introduction
Commercial fishing is typically selective in what is landed, but often less

selective in what is caught. In an effort to maximise profitability, fishers inten-
tionally target certain species and specific components of the population, but
in doing so often catch a range of other species or size groups that may have
little or no economic value and are subsequently discarded. This inciden-
tal bycatch is seen as an undesirable output of fishing by most stakeholder
groups, including fisheries managers, conservation groups and fishers. As
much as 40% of global marine catch is estimated to be bycatch (Davies et al.,
2009), while around 8% is discarded (Kelleher, 2005). Bycatch is also seen
as a potentially threatening process and one that may distort the ecosystem
from its unexploited structure. For example, more than 85,000 turtles are
Use of Incentive-Based Management Systems to Limit Bycatch and Discarding 125
believed to have been caught as bycatch between 1990 and 2008 (Wallace
et al., 2010).
Incidental bycatch (hereafter just referred to as bycatch) is seen as a prob-
lem for several reasons. First, bycatch of commercial species that is discarded
is often not recorded. Hence, stock assessments relying on catch statistics will
be biased, possibly rendering subsequent management decisions erroneous.
Second, discarding of bycatch is considered by many — and sometimes is — a
waste of an otherwise valuable resource (Harrington et al., 2005), as survival
of discarded bycatch is generally low (Alverson et al., 1994). Further, inciden-
tal catches of juvenile (and other small sized and less valuable) target species
may reduce future yields. Third, beyond the foregone value of commercial
species to fisheries, bycatch and discards also entail non-market costs. These
relate to the direct and indirect ecological impacts of fishing mortality as
well as other use and non-use values of non-commercial species to house-
holds. Charismatic and iconic species in particular have a non-market value
to society (Richardson and Loomis, 2009), and bycatch of these species subse-
quently imposes a cost to society when discard mortalities are high. Bycatch
of less charismatic species also has a direct ecological impact and potential
indirect economic effect as the impacts ripple through the food web. Further,
uncontrolled bycatch that leads to non-commercial species being placed on
a threatened or endangered species list will have direct economic impact on
fishers and their dependent communities due to the subsequent restrictions
that may be placed on the fishery.
For the fishers, bycatch may take up a quota allocation or reduce the hold-
ing capacity of fishing vessel that could otherwise be used to land higher
valued fish. Sorting and discarding unwanted catch imposes additional costs,
and in some cases the incidental catch may damage the commercially valu-
able target species while in the nets. Avoiding bycatch, however, also comes
at a cost, with more selective fishing gear often resulting in a reduction in
the desirable portion of the catch, and in some cases being more difficult to
deploy.1 In many cases, the costs of greater selectivity outweigh the benefits
to the fisher, in which case they are not inclined to voluntarily adopt more
selective gears (Innes and Pascoe, 2008), especially in situations where the
rights to fish the commercially valuable fish are not appropriated.
1
For example, tori lines used to reduce seabird bycatch may become tangled, resulting in both
reduced effectiveness of the gear and increased labour time to untangle the lines (Keith, 1999).
126 Pascoe et al.
The use of selective fishing practices is often imposed on fishers by fish-

eries managers, with either the reduction of the environmental impacts or the
enhancement of the future productivity frequently cited as the rationale for
such regulations. Fisheries bycatch is often seen as a technological problem
due to imperfect selectivity of fishing gear. As a result, technological solu-
tions are often imposed, for instance use of larger mesh sizes, square mesh
panels, separator grids, or other escape devices in trawl fisheries. In theory,
technical solutions could result in reductions in bycatch of between 25% and
64% if global fishing fleets achieved even somewhere between the minimum
and median performance of gear modifications used in experimental stud-
ies (Hall and Mainprize, 2005). These technologies, however, are not being
adopted, as such systems often impose costs on the fishers in terms of reduced
targeted catch, and hence lower profits than by using less selective tech-
nologies. Further, where they are forcibly imposed, the associated additional
costs provide an incentive for fishers to modify these technologies in order
to limit their impact on their target catch (Campbell and Cornwell, 2008;
Innes and Pascoe, 2008), which subsequently may reduce their effectiveness
in terms of bycatch reduction. Other command and control measures, such
as fishery closures in response to bycatch limits being exceeded, have been
found to have adverse impacts. For example, in the case of the Hawaiian long-
line swordfish fishery, reduction in fishing effort by the US fleet as a result
of a turtle bycatch limit resulted in increased effort by other fleets, with a
subsequent tenfold increase in the number of turtles caught relative to the
expected bycatch of the displaced effort (Rausser et al., 2009).
While command and control systems may create incentives which result in
reductions in the effectiveness of bycatch regulations, incentives can also be
created to increase the willingness to adopt more selective fishing gear or fish-
ing practices. The lack of improvement in economic profits from widespread
adoption of more selective gears suggests that there may be limited incentive
for rational, forward-looking fishers to invest in, or assist in the development
of, such technologies (Abbott and Wilen, 2009). However, incentives to adopt
and develop more selective fishing gears can be created through appropri-
ate fisheries management policies. Incentive-based management instruments,
and market-based instruments in particular, are gaining increasing attention
in the management of fisheries for their ability to simultaneously improve
both economic performance and the sustainability of the resource (Davis
and Gartside, 2001; Grafton et al., 2006). For example, individual transfer-
able quotas (ITQs) create incentives for fishers to adjust their operations to
maximise profits rather than catch, while the associated caps on total fishery
catch ensure the stocks are rebuilt where necessary. While most attention
has focused on market-based instruments such as ITQs, the potential role of
social drivers in changing fisher behaviour is also gaining increasing recogni-
tion (Grafton, 2005).
In this paper, a number of potential incentive-based systems for reduc-
ing bycatch and discarding are reviewed, and the success of these systems
where they have been applied is examined. In the next section, we provide
an overview of the incentives that naturally exist to discard some species
in commercial species. This is followed by a review of incentive-based sys-
tem that can be applied to reduce or offset the natural incentives to discard,
including financial incentives, quota-based incentives, trade-based incentives
and social incentives. We conclude with a discussion on which type of system
may be best suited for a particular bycatch issue.
2 Incentives to Discard in Commercial Fisheries
Classical economic models of fisheries assume a single species exploited by a

homogeneous fishing technology (Gordon, 1954). In reality, most fisheries are
characterised by joint production. That is, the application of fishing effort
results in the catch of a number of species (or size classes) simultaneously
stemming from less than perfect selectivity of fishing gear and overlapping
populations of marine species. Further, heterogeneity in fishing practices,
gear types and skipper skill all contribute to differing catch compositions
across the fleet.
Joint production is a necessary, but not sufficient condition for discarding.
The decision to land or discard an individual fish will depend on a number
of factors. Discarding involves labour costs in terms of sorting the catch and
in discarding the unwanted marine species. These latter costs are likely to be
negligible at the margin, but exist nevertheless. Landing a product also results
in costs, including the costs of storage on board (which could also involve
an opportunity cost if the hold space was limited), labour costs involved
in unloading, and the costs incurred by the fishers associated with getting
their product to market (e.g., ice, packaging and freight).2 Fishers have an
incentive to land the product only if the price received exceeds the costs of
2
This latter cost will vary considerably from fishery to fishery, and in some instances may be
borne by the processor or buyer.
128 Pascoe et al.
landing. Where a species has little or no commercial value such that fishers
would incur a net cost in landing the product, the rational action would be to
discard it. This is true under any management system. For non-commercial
species, the decision to discard is effectively independent of the management
system as the market provides no incentive to land the product. Even under a
discard ban, economically rational fishers may not comply with the ban if the
cost of landing the product is more than the expected penalty from discard-
ing, taking into account the probability of detection, the probability of being
convicted and the size of the penalty if imposed (Hatcher and Gordon, 2005).3
Management creates additional incentives to discard some of the catch of
commercial species. The greatest incentives to discard commercial species in
multispecies fisheries are created under an output control system,4 primar-
ily as a result of catching species for which quota are not held. In fisheries
characterised by a joint production technology where different species are
caught in relatively fixed proportions, over-quota catch could be effectively
eliminated by ensuring that total allowable catches (TACs) of the species
were aligned with the catch composition. Quota trading would allow individ-
ual fishers to balance their individual holdings with their catches and at the
same time, internalise the cost of catching bycatch species as fishers must
acquire quota to cover their catch (Sanchirico et al., 2006). However, few, if
any, fisheries are characterised by a fixed proportions technology. The com-
position of the output mix generally has some discretionary element with
some random variation, but it may be costly to avoid catching one species
while targeting the other (Singh and Weninger, 2009). This is expected to be
the case in most fisheries, where fishers may be able to increase the propor-
tion of one species or another in the catch through varying their targeting
behaviour (for example, timing and location of fishing effort), although the
final catch composition is still likely to be a combination of several species
(Squires, 1987; Pascoe et al., 2007, 2008). The degree to which catch compo-
sition is discretionary depends on a number of economic (e.g., relative cost of
using more selective fishing gear or fishing in ‘‘cleaner’’ areas) and ecological
3
Social factors such as social norms and perceptions of legitimacy are also influential in deter-
mining compliance behaviour (Hatcher et al., 2000), and social incentives can potentially be
created to counter this, as will be discussed in subsequent parts of the report.
4
With minimum landing sizes, a requirement exists to comply with the regulation and discard
the catch. In most cases, there would be only limited incentives not to comply with the regu-
lation as the market value of the undersized fish would be zero (or negligible). This is not an
incentive-based system but is a command and control regulation, so is not considered further.
(e.g., spatial distribution of the species and degree of overlap) (Abbott and
Wilen, 2009). In determining appropriate TACs, managers need to anticipate
any changes in fisher targeting behaviour that may arise from changes in the
incentives they create.
Random variations in catch composition arise because the relative abun-
dance of different species (and sizes of fish of a species) frequently varies
considerably across a fishery. This variability is affected by a range of factors
that are often unknown or poorly understood. Consequently, catch composi-
tions effectively contain a random component. Imperfect information about
relative species abundance (and cohorts differing by size) in any place or time
may result in catch compositions diverging from quota holdings. The addi-
tional cost of purchasing/leasing additional quota (including any potential
transactions costs involved in finding the additional quota) to cover unan-
ticipated catch generated by this uncertainty reduces the benefits of landing
this catch.
Another form of discarding associated with output controls is highgrading,
which is the practice of discarding lower grade (i.e., lower value) catch of
commercial species in order to retain quota for use for the higher grade catch
of those species (Anderson, 1994). Highgrading is generally size related as
prices (per kg) tend to increase with size for most commercial marine species,
and the fisher’s incentive to high grade increases the more ex-vessel prices
are differentiated by size or quality of individual fish (Squires et al., 1998).
However, highgrading is only economically viable as a strategy if the price
differential between the grades exceeds the cost involved in discarding and
replacing a portion of the catch (which involves additional time fishing, haul-
ing and re-sorting). To some extent, highgrading is likely to occur even in the
absence of a quota system as many small size grades of commercial fish have
little or no market value and the cost (including the opportunity cost of the
hold space they occupy) of landing the fish outweigh the revenue received.
Although generally seen as a major problem for individual quota
management (Copes, 1986), highgrading is potentially less of an issue than
over-quota catch for many fisheries. For example, empirical studies in Iceland
suggest that quota-induced highgrading in trawl fisheries is generally less
than 5% of the catch (Kristofersson and Rickertsen, 2009). The incentive to
high grade relies on both the price difference between size grades and the costs
of replacing the discarded catch (which requires additional fishing effort).
With increasing fuel prices, highgrading is likely to become even less of an
130 Pascoe et al.
issue for fuel intensive fishing activities such as trawling, which is often seen
as one of the least selective fishing methods due to the nature of the gear.
3 Potential Incentive-Based Systems to Reduce Bycatch and Discards
A hierarchy of potential incentive-based bycatch management systems is pre-

sented in Figure 1. Incentives can be created by influencing the returns from
fishing, either directly through penalties or rewards for particular behaviours,
or through introducing mechanisms that create a cost associated with the
behaviour, such as individual quotas. Financial incentives directly affect the
returns from different fishing activities, while the latter provides an incen-
tive for fishers to minimise their impacts through either technological mea-
sures or behavioural changes. Bycatch quotas, particularly when they are
imposed at the individual level and are transferable, create incentives for fish-
ers to reduce bycatch cost-effectively. Incentives can be externally imposed
through restricting access to certain markets unless a set of environmental
standards are achieved. Behaviour can also be modified through influencing
social norms, making what was an acceptable practice in the fishing com-
munity unacceptable. Personal moral values are largely based on perceptions
of what is acceptable to our peers if not society as a whole. Where these
perceptions do not adequately align with policy objectives, education and
Bycatch
incentive
systems
Market Social-
based based
incentives incentives
Modify
Financial Market
Quotas social
incentives access
norms
Bonds/ Spatial
Tax/ Subsidy/ Bycatch Revenue Eco- Trade
Insurance effort
levies rewards quotas quotas labelling barriers
quotas
Figure 1. Hierarchy of incentive-based bycatch management systems.

other forms of moral suasion can provide fishers with information which may
re-shapes their attitudes and values, and induces socially desirable behaviour
(Sutinen and Kuperan, 1999).
4 Financial Incentives
Financial incentives aim at changing behaviour through either rewarding or

penalising different types of outcomes. The former may be achieved through
either a subsidy or other similar reward system, while the latter is generally
associated with taxes or charges relating to the undesirable outcome.
The use of subsidies in fisheries is generally discouraged, and there are
international pressures to reduce all forms of subsidies in fisheries by organ-
isations such as the FAO and the OECD. At a global level, subsidies to the
fishing industry are one of the key factors that have led to overcapitalisa-
tion and overexploitation in many fisheries. Even ‘‘environmentally friendly’’
subsidies can result in increased exploitation by reducing the cost of fishing5
(Cox and Schmidt, 2006).
The use of direct subsidies — where the costs of reducing bycatch and
discarding are offset to an extent through a direct payment by government —
is limited in fisheries. Where these exist, they are usually related to reducing
the cost of fishing gear to encourage their adoption (Cox and Schmidt, 2006).
Indirect subsidies such as publically funded research and development of
environmentally friendly fishing gears are generally more common. While
there exists a public good argument to support such research, the need for
such research may only exist as there are no incentives in the fishery to
actively seek these technologies. Instead, the technologies are imposed on the
industry once developed through command and control mechanisms. The
development of appropriate incentives in fisheries that will create a demand
for such technologies may also inspire innovation within the industry.
A ‘‘reward’’ based system has been proposed for the Bering Sea Pollock
fishery to reduce the bycatch of salmon as part of a broader bycatch manage-
ment plan for the fishery (Wilen, 2009; National Oceanic and Atmospheric
Administration, 2010). The basis of the system is that fishers are paid a
5
For example, reduced on-deck sorting costs and reduced net maintenance costs from the use
of subsidised bycatch reduction device potentially reduce the marginal costs of fishing, and,
although reducing bycatch, may consequently increase total fishing effort on the target species
(Cox and Schmidt, 2006).
132 Pascoe et al.
reward for the amount of bycatch avoided, with the size of the reward related
to the degree to which the fisher reduced his or her bycatch relative to the
worst performing boats in the fishery. Hence, the scheme provides incentives
for vessels to reduce their bycatch, and rewards them in proportion to their
achievement.6
The alternative to subsidies, and incorporated also into the proposed Bear-
ing Sea reward system above, is the use of penalties for bycatch. In the case of
the proposed Bearing Sea system, fishers also incur a penalty for bycatch that
essentially funds the reward system, with the effect that the best performers
gain a net reward, while the worst performers incur a net penalty.
Penalties can be used in their own right for bycatch management. Bycatch
is an unpriced input factor in the production process. As such, there is no
incentive for fishers to limit bycatch except through the opportunity cost it
imposes in terms of time (e.g., to dispose of the bycatch) and holding capac-
ity, and the potential effect on harvest costs (e.g., the consumption of bait
and hooks that might otherwise catch fish). Pricing bycatch appropriately
provides incentives for fishers to adjust their production and fishing effort
allocation accounting for these additional costs, and provides an incentive
for fishers to adopt technologies that reduce these costs through reducing
bycatch.
Explicit prices for bycatch can be implemented through a bycatch tax sys-
tem, where fishers pay a fee for each unit of bycatch caught. A tax system in
this regard is a fee or levy charged by government for access to the bycatch
resource, and is not related to the revenue or profitability of the vessel. Fish-
ers are able to explicitly balance the benefits of fishing in a given area or
time period (i.e., the value of the retained catch) against the costs of fish-
ing, including the cost associated with bycatch. An advantage of such a tax
system is that, theoretically, different species can attract different tax rates
thereby ensuring the greatest protection to the most vulnerable species.
The potential benefits of a bycatch tax in reducing the level of bycatch
have been demonstrated theoretically by a number of authors (Jensen and
Vestergaard, 2002; Sanchirico, 2003; Diamond, 2004; Herrera, 2005; Singh
and Weninger, 2009). These have generally considered bycatch of non-
commercial species that are normally discarded, including also bycatch of
6
Arrangements for the management of bycatch in the fishery were not finalised at the time that
this paper was written, although current indications are that the reward system is not going
to be adopted.
megafauna (e.g., seals, turtles, seabirds), and aim to correct the externality
by placing an explicit price on these bycatch species. In such a case, individu-
als would be responsible for paying for their own level of bycatch. In contrast,
Jensen and Vestergaard (2002) proposed a tax based on the stock size of the
species of concern, with all fishers paying the same penalty if the stock size
is below the desired level. The system was primarily related to over-quota
catch and subsequent discards (or alternatively illegal landings — a similar
problem in terms of the impacts on the stock). The key mechanism in this
model for reducing discarding, however, was the consequent removal of the
quota system with the tax as the sole control mechanism.
Despite the demonstrated theoretical benefits in terms of reduced bycatch,
bycatch taxes have had little acceptance as a bycatch management tool
(Brown, 2000; Sanchirico, 2003). Bycatch taxes are perceived as a means of
transferring any economic profits generated through management to the gov-
ernment via the tax revenues, and fishers are no better off financially than
under un-regulated conditions (Sanchirico, 2003), and may, in fact, be worse
off as they previously would have retained any economic benefits associated
with the bycatch.
Although not considered in any of the theoretical analyses, a bycatch tax
system would be very difficult to enforce. Fishers have no current incentive to
declare their level of bycatch at present, and imposing a tax on any declared
bycatch/discards would provide a greater disincentive to comply. Observer
coverage would need to be substantial, and the costs of the observer program
may be considerable. Using revenues raised from bycatch taxes to cover the
costs of observers may offset these costs. However, the net social gain from
the reduced bycatch may be negligible if not negative once these enforcement
costs are considered. Further, if fishers change their behaviour in light of the
tax system (as it is intended to achieve), then revenues from the tax will
decrease while enforcement measures will need to be retained at the same
level. Advances in video-based monitoring systems in recent years, however,
may make this a viable option, as they are relatively cost effective.7
7
Video monitoring systems have been successfully trialled aboard Danish whitefish vessels where
they were found to be both highly accurate and substantially cheaper than observer coverage
(Dalskov and Kindt-Larsen, 2009) and a number of Scottish whitefish trawlers are currently tak-
ing part in trials. Within Australia, the Australian Fisheries Management Authority (AFMA)
is implementing video monitoring systems in some of the major fisheries, including the pelagic
longline fishery and the northern prawn fishery.
134 Pascoe et al.
Examples of such a tax scheme are few, although one such scheme has
been implemented in Namibia. Fishers are licensed to operate in a particular
fishery, and are allocated (and pay for) quota for the main species in the
fishery. However, the set of quota species are also caught as bycatch in the
other fisheries. To prevent them from targeting species that they do not have a
license for, a bycatch fee is charged, at a rate that is substantially higher than
the quota fee. In 2006, the total bycatch fees contributed 12% of the total
fees collected from the industry (MFMR, 2008). The effect of the fee on total
bycatch and fisher behaviour, however, has not been assessed.
A form of tax has been applied to reduce the level of discards of over-quota
bycatch (i.e., management-induced discarding). The New Zealand ‘‘deemed
value’’ system seeks to provide incentives to reduce discards of over-quota
catches while still providing incentives to remain within the quota. Further,
New Zealand introduced many new species of relatively low value that have
primarily been bycatch species into the Quota Management system. This
effectively creates a system of individual bycatch quotas and, through the
deemed value system, a bycatch tax. The deemed value approach allows
fishers to land and sell over-quota catch, but pay a fee (NZ$/kg, varying
by species and stocks) in order to do so without prosecution. The effective
price received for the fish is then the market value less the deemed value.
New Zealand introduced deemed values largely to reduce the transactions
costs of balancing under a comprehensive quota system. The fisher is able
to pay deemed values for part of the fishing year and then enter the market
infrequently to lease large blocks of quota, thereby avoiding the transactions
costs of many small trades. Further, for very small amounts of bycatch left
unbalanced at the end of the year, paying the deemed value avoids ending
up in the uneconomic situation where the transactions costs of finding quota
exceed the value of the fish.
The objective of the deemed value fee is to provide sufficient incentive to
land the over-quota catch, but not sufficient incentive to target the species
(Sanchirico et al., 2006). New Zealand attempts to achieve this by setting the
deemed value above the lease price of quota and below the landed price of
fish. This provides an incentive to lease quota rather than paying the deemed
value. But if a small amount of bycatch is landed accidentally, the fisher
will not lose money by landing it, which substantially reduces the incen-
tive to discard. For most species, the deemed value charged to the fisher
increases as their level of unaccounted for (i.e., over-quota) catch increases
under ‘‘differential deemed values’’ (Peacey, 2002). This implicitly creates
and upward sloping marginal cost of overfishing. The differentials also create
increasingly strong incentives to seek quota to cover the catch rather than
just pay the penalty (Peacey, 2002).
A financial penalty-based system is also used in Iceland. Boats are per-
mitted to ‘‘carry back’’ 5% of their next year’s quota allocation to cover
over-quota catches. Catches above this 5% carry-back provision must go to
the local auction house, where the proceeds are split between the govern-
ment (80%) and vessel owner (20%) (Sanchirico et al., 2006). As with the
NZ deemed value, the aim of allowing fishers to retain part of the value of
the over-quota catch is to cover the variable costs of fishing, and crew wages
in particular (Sanchirico et al., 2006), reducing the incentive to discard this
catch.
The key advantage of such a tax is that information on total catches of
quota species are potentially less distorted by the quota system. However,
such a system does not completely eliminate the potential for discarding
over-quota catch. The actual level of the penalty is a key determinant of the
effectiveness of the system (Marchal et al., 2009). Given the costs of landing
over-quota catch (including the opportunity cost of the hold space it con-
sumes), if the residual return (i.e., price less the deemed value) is too low,
the fishers are still likely to discard the catch unless there is some enforce-
ment mechanism to dissuade them. Conversely, if the residual value is too
high, incentives can be created to increase the catch or at least make insuffi-
cient attempt to avoid catching it. This is not necessarily targeted over-quota
catch, but as the returns from the set of all species caught will increase, effort
expended and the associated incidental over-quota catch will correspondingly
increase.
Consequently, a system without a deemed value-type tax may result in
less total over-quota catch, but more discarding. Trade-offs need to be made
about the value of the additional information obtained, higher incomes for
the fishers, and potentially higher bycatch rates. Prohibitions on the sale of
bycatch reduce the bycatch level, but they also reduce social welfare (Boyce,
1996).
5 Assurance Bonds and Insurance
Assurance, or performance, bonds are economic instruments commonly used

in environmental management (Shogren et al., 1993; Cornwell and Costanza,
1994; Ferreira and Suslick, 2001; Bagstad et al., 2007). In most applications,
136 Pascoe et al.
assurance bonds require the user of the resource to place a sum of money
deemed equivalent to the potential damage that the activity can have on
the environment or more commonly the cost of its remediation. This bond is
refundable provided the damage is not incurred, or is repaired by the resource
user (e.g., through offsets or habitat restoration work).
In the context of fishing, the instrument would require the industry to
place funds into a trust. These funds would be returned provided the industry
achieved a pre-determined performance target in terms of bycatch reduction
against some base level. Such a system could operate at either the individ-
ual level or at the level of the industry, with each industry member having
joint and several liabilities for the actions of industry as a whole. This latter
option creates incentives for self-regulation and fosters collaboration in terms
of information sharing (e.g., how to avoid the bycatch). However, it may also
create perverse incentives: if the individuals believe the industry target will
be exceeded, they have no individual incentive to reduce their own bycatch
and incur the additional costs in doing so. As they would have already con-
tributed to the fund and believe these to be lost, they have no incentive to
incur additional costs by bycatch avoidance. This is effectively the prisoner’s
dilemma — it is in everyone’s interest to collaborate, but if trust regarding
the behaviour of others is absent, then it is in each individual’s interest not
to collaborate. Once the trigger level has been exceeded and the bond is lost,
there is no incentive for any further bycatch reduction. Thus, to be effective,
the industry may need to impose some individual-level accountability, per-
haps through contractual agreements, even if the assurance bond is at the
industry level.
Even if individuals initially believe that others are reducing their bycatch,
there may still be incentives for some individuals not to conform. As avoiding
bycatch results in increased costs to the fisher, some will choose to free-ride
on the behaviour of others and not reduce bycatch. Eventually, this behaviour
will create the belief that the bond is lost, with bycatch increasing again.
Consequently, although a fishery level assurance bond has the potential to
be self-regulating, the incentives to the individual not to comply will most
likely result in this being ineffective as a bycatch management option.
Alternatively, assurance bonds could be levied directly at the indi-
vidual fisher level. However, as with the other market-based incentive
approaches, there is no incentive for fishers to accurately report their level
of discarding, and widespread surveillance coverage would be necessary.
Electronic surveillance systems may be suitable for such a task. For exam-
ple, each haul could be videoed, with the level of discards determined by the
difference between what is landed and observed to be caught.
An alternative to an assurance fund would be through imposing a financial
liability for breaching a bycatch cap or rate, and allowing the potential to
insure against this liability. The key difference between this and an assurance
bond is that with the former, the funds need to be provided up-front before
fishing can take place, whereas in the latter the industry only need to raise
the funds in the event that the performance is not achieved. Both effectively
represent a fine for non-performance. A potential benefit of an insurance-
based system is that the risk could be potentially sold on the insurance
market, with industry members paying a premium to the insurer. Compul-
sory insurance-based systems have been proposed to provide incentives for
fishers to avoid stock collapse (Ludwig, 2002), and to provide income sup-
port in commercial fisheries in the advent of adverse environmental effects
(Herrmann et al., 2004; Mumford et al., 2009). Such systems are common
place in other maritime sectors, particularly to cover the potential costs of
oil spills from tankers (Zhu, 2007).
Where the insurance market is used to spread the risk, the premiums paid
would reflect the insurer’s perception of the probability of liability, which
in turn will be influenced by the fishers’ past performance and adoption of
mitigation technologies (Ludwig, 2002). Poor performers in terms of bycatch
would most likely incur a higher premium, while adoption of mitigation tech-
nology may attract a discount. This would provide additional incentives for
individuals to modify their behaviour, and provide incentives for the industry
to take collective action in improving and sharing knowledge (e.g., includ-
ing industry-funded research into bycatch mitigation approaches or sharing
of information on bycatch ‘‘hot spots’’) (Mumford et al., 2009). Such a sys-
tem would also place some of the monitoring burden on the insurers. For
instance, if there are random audits by the managers with large penalties for
detected violations, then there will be an incentive for the insurers to either
(1) have high premiums (which may deter fishers from entering the contract
and effectively therefore the fishery) or (2) verify the quality of operators
independently and on an ongoing basis. The second option is effectively just
real-time risk profiling of the fishers that they insure.
Such schemes are likely to be most effective when the chance of bycatch
incidence is relatively small, and is highly observable. For example, bycatch
138 Pascoe et al.
of turtles and marine mammals are more readily observable, and potentially
more avoidable than general bycatch of non-commercial species.
6 Quota Systems
The benefits of rights-based systems are well recognised in terms of their abil-
ity to improve sustainability of target species (Grafton et al., 2006; Costello
et al., 2008) and profitability in fisheries (Fox et al., 2003; Dupont et al.,
2005). However, quota systems are often criticised for the incentives they may
also create to increase discard in commercial fisheries (Copes, 1986; Turner,
1997). Empirical evidence in more recent years challenges some of these crit-
icisms, with a growing body of evidence suggesting that, in many cases,
discarding and habitat damage can decrease under rights-based systems pro-
vided that the incentives are implemented appropriately (Kristofersson and
Rickertsen, 2005; Sanchirico et al., 2006; Redstone Strategy Group, 2007;
Branch and Hilborn, 2008).
The fundamental principles underlying ITQs and quota trading may be
of value to the management of non-commercial bycatch species. Three types
of quota systems have been proposed: (i) a bycatch quota system (an out-
put control, either at the level of the fishery or individual tradeable bycatch
quota); (ii) a tradeable effort-based quota (an input control); and (iii) a
revenue-based quota system. The first two systems have been applied to both
commercial and non-commercial species, while the latter has been proposed
to reduce highgrading and ‘‘over-quota’’ catch.
6.1 Bycatch Quotas
Bycatch quotas may be either at the fleet level (i.e., an aggregate total allow-
able bycatch) or the individual vessel level. The incentives created differ
depending on which level is implemented.
To date, examples of bycatch quotas are limited, and these have generally
been aggregate quotas rather than individual quotas. An aggregate total
allowable bycatch limits or reduces bycatch by capping the total permissible
level of bycatch over a specified period of time. Once the threshold level is
reached a fishery may be closed for the remainder of the season. Such bycatch
quotas can be applied at either the fishery or vessel level and may be adjusted
over time to reflect the state of the bycatch species stock or slowly reduced
if the aim is to encourage vessels to become more efficient in this respect.
This method of regulation will only propagate improvements in performance

if bycatch quotas are set at levels that are likely to be limiting under current
conditions (and consequentially result in a loss of revenue once reached).
An advantage of this method of regulation is that the method/s by which
preventing a closure may be achieved is left to the fishers to best decide as only
the permissible level of bycatch is set. In doing this it overcomes the criticism
oft levelled at more ‘‘command and control’’ orientated management meth-
ods, such as the mandatory application of technical measures (e.g., TEDs),
that ‘‘one size’’ does not ‘‘fit all’’ when local circumstances or regional varia-
tions possibly render them ineffective or inappropriate. A further advantage
is that in specifying an exact number a clear and easy to understand goal is
set and can be worked towards, even if the level at which it is set is disputed
(Bache, 2003).
A clear disadvantage of the approach, as demonstrated repeatedly in fish-
eries managed through fishery-level quotas rather than individual quotas, is
that such limits may propagate rather than reduce the incentives to race to
fish, with consequent adverse impacts on fleet economic performance. Mod-
elling approaches have suggested that such fishery-level bycatch quotas may
lead to excessive discards, shortened seasons, and foregone target species har-
vest, even with very efficient (in terms of low bycatch) fishing gear (Abbott
and Wilen, 2009).
There are a number of cases where bycatch limits for non-target species
are imposed on fisheries, although these have mostly been related to bycatch
of megafauna. In the USA, a potential biological removal rate (PBR) is set
under the Marine Mammal Protection Act (Wade, 1998). The PBR is defined
for several fisheries, being the maximum numbers of marine mammals that
may be taken by fisheries. This is calculated annually and is designed to
ensure few enough animals are taken so that stocks do not fall below levels
considered to be optimally sustainable.8
An annual total level of dolphin catch is set under the Agreement on the
International Dolphin Conservation Program (AIDCP) for vessels operating
in the eastern tropical Pacific (ETP) purse seine fishery. This is divided
between the states and then vessels taking part in the fishery but as result
8
The optimal sustainable population level (OSP) being defined as the number of animals which
will result in the maximum productivity of the population or species.
140 Pascoe et al.
of limited entry and other regulations pertaining to this fishery the TAC is
not binding.9
New Zealand also uses output controls to manage bycatch of Hooker’s sea
lions in the squid fishery (Bache, 2003; Diamond, 2004; Chilvers, 2008). The
number of sea lions killed is monitored with observers on a proportion of
vessels and the fishery is shut down when a certain number have been killed
(based on extrapolating from observed vessels). A maximum level of fisheries-
related mortality (MALFIRM) is also set for marine mammal10 bycatch
in New Zealand and is again centred on maintaining healthy stocks of the
species. However, incomplete observer coverage means it is not possible to
accurately calculate the actual level of bycatch so the maximum permissible
take is combined with the likelihood of catching a sea lion on any given tow
(the so-called ‘‘strike rate’’ determined using data from vessels with observers
present) to determine the maximum number of tows vessels may undertake
in the season. This fishery was closed very early in the year 2000 due to
unusually high levels of Hooker’s seal bycatch (Bache, 2003) consequentially
also limiting both the total quantity and period over which squid could be
landed. Between 1996 and 2007, the fishery has been closed early six times
out of 12 fishing years, with two other years initially closed but overturned
by the Court of Appeal (Chilvers, 2008). This suggests that the mechanism
is successful in terms of sea lion conservation, but comes at a cost to the
industry in terms of forgone fishing opportunities.
The costs imposed on the industry from using the MALFIRM method of
management has resulted in the industry investing heavily in ways to reduce
their rates of sea lion bycatch (Bache, 2003). This resulted in the development
and application of a sea lion excluder device (SLED), similar in concept to
the turtle excluder device (TED), as well as increased sharing of information
amongst vessels to reduce sea lion bycatch (Wilkinson et al., 2003; Diamond,
2004). The reduced likelihood of seals drowning as a result of coming into
contact with this modified gear has led to a discount rate being applied to
vessels utilising the technical measure (Wilkinson et al., 2003). This allows
them a greater overall number of tows per season and therefore a potentially
longer season and a higher level of landings.
9
A total limit of 5,000 dolphins was set for 2008 with actual mortality estimated at 1,169 for
the year (IATTC, 2010). The total mortality of dolphins in the fishery has been reduced from
about 132,000 in 1986 to less than 900 in 2007 (www.iattc.org/DolphinSafeENG.htm).
10
Specifically those that are considered threatened or to belong to geographically or genetically
discrete stocks.
Aggregate bycatch quotas have also created incentives for fishers to develop
formal information sharing systems to reduce bycatch. In the US North
Pacific and Alaska trawl fisheries, a number of fleet communication pro-
grams have been designed to share real-time information about bycatch ‘‘hot
spots’’ (Gilman et al., 2006). These have been found to have been effective
at reducing bycatch cost-effectively and thereby avoid pre-mature closures
of fisheries in many cases (Gilman et al., 2006). In pollock and groundfish
fisheries in Alaska, a system known as SeaState was created to share infor-
mation between vessels on locations with high levels of bycatch of prohibited
species (halibut, crab and salmon) which cannot be retained in trawl fish-
eries (Holland and Ginter, 2001). This program has been running since 1994,
with 100% fleet participation in recent years. The system relies on observer
data which is processed daily and returned to participating vessels in the
form of digital charts identifying ‘‘hot spots’’ to avoid. In one fishery this
evolved into a regulatory closure system, which was applied differentially
based on a vessel’s performance, with cleaner boats exempt from some clo-
sures. Although the effectiveness of this system at reducing bycatch is not
entirely clear or at least has not been formally evaluated (Holland and Ginter,
2001; Gilman et al., 2006), the system is clearly effective at distributing infor-
mation cost-effectively.
Bycatch reduction arising from information sharing has been effective else-
where also. An information sharing program in the US Atlantic longline
swordfish fishery was estimated to have reduced bycatch rates of marine
turtles by around 50% (Gilman et al., 2006). Similarly, halibut and seabird
bycatch has been reduced as a result of a fleet communication program in
the US demersal longline fisheries for cod and turbot (Gilman et al., 2006).
Fleet communication programs for controlling bycatch are likely to be effec-
tive when there are strong economic incentives for individuals or the fleet to
reduce bycatch. Observer coverage, or some alternative form of monitoring,
is also critical to ensure compliance with the bycatch caps and to ensure that
economic incentives to reduce bycatch are actually created (Gilman et al.,
2006).
As noted previously, a main problem with bycatch is that when it has
no value to the fisher, it is typically discarded. While value can be created
through a taxation system as outlined previously, this can also be achieved
through the allocation of individual transferable quotas for the bycatch
species. Several authors have suggested the use of individual transferable
bycatch quotas (ITBQs) as a means of reducing bycatch (Boyce, 1996;
142 Pascoe et al.
Edwards, 2003; Diamond, 2004; Herrera, 2005; Hannesson, 2006; Ning et al.,
2009). ITBQs improve efficiency in a fishery by creating a ‘‘shadow price’’
associated with use of the quota reflecting the level of economic rents derived
from the use of the quota. This shadow price, while different for each individ-
ual, manifests itself in the form of a quota trading price. Fishers with a shadow
price greater than the trading price are likely to buy quota, while those with
lower shadow prices are likely to sell. Given the shadow price reflects the
catch compositions of the vessels, this guides quota to those boats that can
use it most efficiently. By creating a quota market for bycatch, fishers have
an incentive to lower their own bycatch and sell their quota to fishers less
able to lower bycatch, fostering innovation and adoption of new technologies.
Relatively few real-life examples of ITBQs can be found, although this may
be a definitional artefact as quota systems in Australia and New Zealand
(and no doubt elsewhere) include species of low value that are not primary
target species and might otherwise be considered bycatch. In 1996, Canada
instituted an individual vessel bycatch quota (IVBQ) for its trawl fleet, which
helped reduce total fleet bycatch from 681 mt in 1995 to 140 mt in 1996
(Diamond, 2004). These quotas were non-transferable, and once the vessel
reached its bycatch quota for a particular area, would need to either cease
fishing or move to an area where it had available bycatch quota. Vessels
could opt to be part of the IVBQ program (Option A), which required them
to pay for 100% observer coverage, or opt out of the system (Option B),
which involved less observer coverage but restrictive landing requirements
(Diamond, 2004). Despite the high observer cost, more than 90% of the fleet
carried observers in 1996 (Diamond, 2004).
Substantial reductions in halibut bycatch have been achieved since the
allocation of bycatch quota to cooperatives in the Central Gulf of Alaska
rockfish fishery. An important element of that program is that saved bycatch
is ‘‘rolled over’’ and may be used in other fisheries later in the year, cre-
ating an incentive for bycatch reductions, even when allocations are not
constraining. The North Pacific Fishery Management Council is currently
considering reducing the amount of bycatch ‘‘rolled over’’ to a level that
maintains the incentive, but achieves overall bycatch reductions. Cooperative
agreements in the Central Gulf of Alaska rockfish fishery typically include
bycatch performance standards. If those standards are not met, the coopera-
tive has the authority to issue a ‘‘stop fishing’’ order and review the offending
vessel’s fishing practices and gear use. If the cooperative determines that the
circumstances justify further measures, it may require the offender to wait

until others in the cooperative have completed fishing to avoid exceeding
the cooperative’s allocation or even to prohibit the offender from fishing any
remaining allocation. In the first year of individual bycatch quotas in the
Central Gulf of Alaska rockfish fishery, catcher vessels fishing cooperative
allocations reduced halibut bycatch sixfold from approximately 35 pounds
per ton of rockfish in the five years preceding the program to approximately
6 pounds per ton of rockfish (NPFMC, 2008).
ITBQs are also part of the proposed incentive program for the Bering Sea
Pollock fishery, aimed at reducing bycatch of salmon. In this case, the pro-
gram is designed as an alternative to the reward system previously described
(Wilen, 2009; National Oceanic and Atmospheric Administration, 2010).
Under the program, participants receive a base allocation of salmon bycatch
quota in proportion to their pollock allocations. The base allocation is supple-
mented by a share of the vessel’s underharvest of salmon bycatch in preceding
seasons. The plan is intended to accommodate bycatch uncertainties by cre-
ating an incentive for banking bycatch allocations when bycatch rates are
relatively low to allow for greater bycatch in years when bycatch rates are
relatively high (NPFMC, 2009).
ITBQs have been suggested for both megafauna (Hannesson, 2006; Ning
et al., 2009) as well as fish species — either commercial (by-products) or
non-commercial (Boyce, 1996; Diamond, 2004). However, the evaluation of
these programs has been model based rather than experience based as, to
date, such programs have not been implemented. These analyses generally
ignore enforcement issues (Boyce, 1996), which are likely to be considerable.
Unlike commercial species, where there is an incentive to land the product
and thereby evidence of its capture is readily observable, there is no incentive
to record quantities of fish that are not landed, especially if doing so can
reduce future fishing opportunities.
Based on the experiences of aggregate bycatch quota (and also experiences
with general ITQ programs) in different fisheries around the world, elements
of successful bycatch quota programs include: (1) individual accountabil-
ity, in the form of individual bycatch quotas or ITBQs, (2) 100% observer
coverage (or at least some reliable form of surveillance), (3) relatively small,
manageable fleets, (4) limited landing ports that can be readily monitored,
particularly if observer coverage is less than 100%, (5) reliable enforce-
ment, (6) penalties that are true disincentives and (7) some flexibility in the
144 Pascoe et al.
system for fishers to have alternatives to manage their bycatch (Diamond,

2004). While this is an idealised set of requirements, it is most likely imprac-
tical to achieve all for every fishery given the costs of observer programs, and
most successful ITQ fisheries do not have all of these characteristics.
A variation on individual bycatch quotas has been proposed as an
incentive-based approach to limiting habitat impacts of fishing. Holland and
Schnier (2006) propose a system in which individual fishers receive trans-
ferable quotas for habitat impacts denominated in units of habitat damage.
Damage need not be directly monitored but rather could be a tracked with
a virtual habitat model that updates the current state of habitat over time
based on fishing events and habitat recovery rates. Fishers are charged habi-
tat quota units according to the marginal habitat damage estimated by the
model; the marginal damage rate is a function of the state of the habitat in
the area fished in the type of gear fished. Fishers consume their quota based
on where and when they fish and the gear they use, with the penalty sys-
tem providing incentives to either operate in areas where less damage will be
incurred, or adopt fishing gear that will have a lower impact. Quotas could
be tradeable, allowing vessels that can more cost-effectively reduce habitat
damage to sell quota to other fishermen, thereby reducing the total cost of
habitat protection.
6.2 Effort Quotas
Given the difficulty of observing quantities of bycatch in a catch-based quota

system, an alternative is to regulate fishing activity. Effort restrictions are
generally associated with command and control regulations as they impose
hard constraints on activities, but these constraints can be softened through
allocating effort quotas to individuals and allowing some degree of transfer-
ability. This in turn provides greater flexibility for the fishers to adjust their
behaviour through the incentives the transferable effort quotas create.
To date, examples of effort quotas to control bycatch are relatively limited.
The New England groundfish fishery has, since the mid-1990s, been managed
primarily with a system that uses a combination of individual days at sea
(DAS) allocations, seasonal and year-round closed areas and trip limits to
indirectly constrain catch to target levels. In order to avoid overfishing of
some weaker stocks, DAS have been progressively reduced over the years;
however, there are some groundfish stocks for which catches remain well
below target levels (Holland, 2010). In an attempt to allow more catch of
these stocks while limiting ‘‘bycatch’’ of weaker stocks, a system called B-days
has occasionally been used for directed effort on some species.11 Individuals
are allowed a certain number of additional fishing DAS (B-DAS) which they
can use for directed fishing on these stocks (Haring and Maguire, 2008), but
if they exceed a given rate of catch of other fish stocks they have the option
to ‘‘flip’’ the trip and use A-DAS. The rationale is to provide additional
fishing opportunities with incentives to limit bycatch of weaker stocks but a
means to land inadvertent catches rather than having to discard them. The
effectiveness of the system, however, is questionable, as most of the fleet has
been driven to the edge of economic viability, while the individual trip limits
have resulted in considerable discarding (Holland, 2010).
An effort-based bycatch quota can also be developed following the prin-
ciples of the individual habitat quota previously described (Holland and
Schnier, 2006). The hook decrementation system recently implemented in the
Australian Eastern tuna and billfish fishery is effectively an example of such
a system (Pascoe et al., 2009, 2010). Individual fishers have an individual
hook quota. In the management system, the rate at which this quota will be
consumed depends on where and when they fish. Areas with high bycatch of
species of concern (mainly seabirds, turtles and sharks) will attract a high
penalty rate, whereas other areas with little bycatch may attract a much
lower rate. An evaluation of the scheme suggested that effort could be reduced
in high bycatch areas at substantially lower cost to the industry than a full
closure (Pascoe et al., 2010).
6.3 Revenue or Value Quotas
The concept of a revenue-based quota is aimed at reducing discarding of

quota species through either highgrading or over-quota catch (Turner, 1997).
Unlike weight-based quota system, quota programs that regulate the value
of harvested fish, in theory, never induce discarding (Turner, 1997). As lower
valued species (or sizes of species) consume less of the available quota, there
is no incentive to discard them. For example, four smaller fish weighing in
11
The DAS system in recent years has also included “differential” DAS counting with time spent
fishing in certain areas counted at higher rates. For example, areas in the inshore Gulf of Maine
have had 2:1 counting whereby each DAS used in that area is counted as 2 DAS. The purpose
of this system is to reduce catches of weaker stocks, particularly cod and yellowtail flounder
rather than control bycatch, but it is an example of how effort quotas have been modified to
achieve a better species balance of total catches in a multispecies fishery.
146 Pascoe et al.
total 4 kg but with a total value of $4.00 consume 4 kg worth of weight-

based quota. By comparison, a 2-kg individual fish of the same species may
also have a value of $4.00, but consume only half the quota to land. There
are incentives to discard the fish (i.e., high grade) under the weight-based
system in order to maximise the value of the landed product. However, under
a value-based system, $4.00 worth of smaller fish has the same value of $4.00
of larger fish, so there is no incentive to high grade provided that the fish
have some commercial value.12
A key advantage of such a system is that more reliable information is
derived from the landings data. As the incentives to discard are reduced,
landed catch should reflect actual catch. However, such a system also has a
number of recognised drawbacks. First, prices fluctuate over the year. While
this does not affect the operation of the quota system, the actual quantity
of fish that will be landed is unknown until after the event. Assigning a con-
stant price to a species for the purposes of the quota management system
will distort the incentives within the fishery. For example, if the defined price
is substantially greater than the market price at the time then incentives to
discard re-emerge.
A second drawback of the system is that managers do not have control over
the catch composition, and there is no incentive to target or avoid particular
species other than their cost of capture (which provides the same incentive
under effort controls). The system as devised by Turner (1997) is based on
a total revenue quota for each vessel rather than a species-specific revenue
quota. As a result, the catch composition is relatively unconstrained, and the
only benefit of such a system is the efficiency gains it may generate through
autonomous adjustment. While a species-based revenue quota may help to
reduce highgrading, it would not help in the case of over-quota discarding.
Another serious drawback of this system is that it does not provide incen-
tives to maximise the value of the catch through targeting higher value
(e.g., larger) fish or by handling that increases quality. In many ITQ fisheries,
the gains from increasing the value of the fish landed have been greater than
efficiency gains from reduced costs (Hamon et al., 2009), and these would
likely not occur with a revenue quota system.
12
Where hold space is a binding constraint, high volume low valued species may still be discarded
in preference to higher valued species that may occupy the same or less space. This incentive
exists even the absence of any quota system.
Despite these limitations, simulations of a revenue quota system suggest

that economic profits in the fishery are generally greater than under an uncon-
strained system (i.e., no bycatch management) and also a bycatch trip limit
approach. However, they are not as efficient as a price-based system (Herrera,
2005). Singh and Weninger (2009) compared landings taxes, bycatch quotas
and revenue quotas and found that landing taxes were more efficient than
species-specific quota regulation and that revenue quotas fared the least well.
7 Consumer-Driven Incentives to Avoid Bycatch: Market

Access and Eco-labelling
The previous instruments effectively focused on creating a cost associated

with bycatch that altered fisher behaviour. However, increasing consumer
preferences for goods produced with minimal environmental impact has a
direct impact on the price received for the target species, with the social
cost of the externality effectively being captured in the lower price for the
species sold on the market. Such measures are beyond the control of fisheries
managers as they operate post-harvest, but are still within the possible scope
of fisheries policy makers, particularly through their influence over trade.
Such restrictions, or the threat of them, create incentives for fishers to reduce
their environmental impact, including bycatch and discarding.
7.1 Market Access
Fishers, like many other primary producers, increasingly operate in a global

market. While environmental standards can be imposed at a national level
via the enforcement of management plans implemented at the fleet level, this
imposes an additional cost on these fishers that may not be borne by their
competitors in this global market. Further, the implementation of such regu-
lations reflects the society of these nations’ preferences for more sustainable
production. In the absence of globally uniform and binding restrictions and
agreements, any nation wishing to effectively raise standards beyond their
own borders (and create more of a level playing field) needs to employ other
means to create incentives for others to comply. One method is the use of
trade measures. These generally take the form of sanctions prohibiting the
import of fish or related produce from the fishery in question.
Relevant legislation and instances in which market access has been
restricted or denied on the grounds of excessive bycatch are limited. They
148 Pascoe et al.
include shrimp import restrictions to the USA aimed at reducing turtle

bycatch, tuna import restrictions (again to the USA) aimed at reducing dol-
phin bycatch, and US bans of fish imports from nations using drift nets in the
high seas. Within Australia, fisheries must pass an environmental audit in
order to be permitted to export under the Environment Protection and Bio-
diversity Conservation Act 1999 (EPBC Act). As with import restrictions,
this export restriction creates incentives for the industry to achieve a set of
environmental objectives, one of which involves bycatch and discarding.
The use of trade restrictions currently faces an international institutional
barrier. Foremost of these are the World Trade Organisation (WTO), and for-
merly the General Agreement on Tariffs and Trade (GATT), panels’ dislike
for measures perceived as barriers to trade and their preference for multi-
lateral agreements (over unilateral) in the pursuit of environmental action
(Joyner and Tyler, 2000; Benson, 2003). Furthermore, in order to unilater-
ally have significant influence any nation applying such action would need
to control a substantial share of the market. Otherwise the fishing nations in
question have the option of supplying alternative markets, significantly weak-
ening their incentive to comply. A review of regulatory regimes (Carr and
Scheiber, 2002) suggests the relationship between the WTO requirements
and trade measures to enforce environmental standards continues to be a
matter of controversy due to the political economy of fisheries making the
adoption, implementation and enforcement of effective conservations stan-
dards extremely difficult. Opponents to trade sanctions argue that greater
gains might be achieved by assisting exporting countries to improve their
environmental standards (Bache, 2000).
The effectiveness of such measures is far from proven and the associated
costs difficult to predict. An obvious potential cost to the nation imposing
restrictions could arise in the case where measures ultimately limit supply
and consequentially increase prices. Many markets may simply not be willing
to bear such costs, especially if others are not being seen to do so.13 Empir-
ical analysis suggests that the restrictions relating to shrimp imports have
imposed costs on US consumers in terms of higher shrimp prices (Hudson
et al., 2003). Conversely, dolphin-friendly tuna prices in the USA are reported
to have fallen over the period 1980–1999 but this may be due to a range of
non-restriction-related reasons (Golan et al., 2001).
13
In many regards this is a common problem for any bycatch limitation program as all increase
the cost to fishers and many reduce the potential supply of target species.
A further difficulty with barriers to markets as a bycatch management

instrument is that the incentives are created at the fleet level rather than
the individual level. For the individual fisher, changing their behaviour will
not necessarily guarantee that the environmental standard is met for the
fishery as whole, so any costs incurred may go unrewarded. Conversely, there
are incentives to free-ride on the behaviour of others if there is the belief
that the environmental standard will be met. As a result, other management
instruments may need to be introduced in any case to ensure the standards
are met.
7.2 Eco-labelling
An alternative to denying market access through the explicit prohibi-
tion of imports is product differentiation via labelling schemes. Industry-
independent labels that provide additional information, relating for example
to method of harvest, allow consumers to make informed choices and effec-
tively ‘‘vote with their feet’’ on matters of concern. Numerous eco-labelling
systems exist for marine products, ranging from self-certification to indepen-
dent certification (e.g., the Marine Stewardship Council, or MSC) (Jacquet
et al., 2010; Ward and Phillips, 2010).
The only labelling scheme that specifically relates to bycatch is that for
‘‘dolphin safe’’ tuna, and even this label neglects to account for all the
other types of bycatch associated with this fishery (i.e., tuna, billfish, other
cetaceans or ‘‘other’’ bycatch).14 The majority of schemes are broader in
scope, designed to indicate that a fishery operates ‘‘sustainably’’. Somewhere
within this definition of ‘‘sustainable’’ the majority of schemes (e.g., MSC)
give some level of consideration to factors such as the impact a fishery has
on other fisheries and the marine ecosystem. However, the level of bycatch
and extent to which it is considered are harder to ascertain. While bycatch
reductions have been observed in MSC certified fisheries, these may be due to
the introduction of other regulations or systems than a result of certification
per se (Ward and Phillips, 2010).
The main incentives for fisheries to attain certification are typically pre-
sented as benefits from price premiums and access to new markets, although
14
In some instances, eco-labelling may exacerbate bycatch of these other species. The shift in
practice from setting purse seine nets on dolphins to fishing aggregating devices (FADs) in
response to the demand for dolphin safe tuna is believed to have increased the bycatch of
turtles (Gilman and Lundin, 2010).
150 Pascoe et al.
maintaining existing market access is also important where there are increas-
ing expectations of environmental awareness (Ward and Phillips, 2010).15
If fisheries perceive such benefits do exist then this may make them more
inclined to conform to certification requirements. While benefits of certifica-
tion are often unclear at the fishing firm level, the costs associated with certi-
fication are potentially high (Ward and Phillips, 2010), resulting in relatively
low uptake by industry (Kaiser and Edwards-Jones, 2006).
Suggestions that eco-labels may allow fisheries to realise a price premium
are based on the assumption that consumers concerned enough to purchase
these products would be willing to pay some form of premium to ensure
environmental standards are realised and maintained. While the MSC report
that some of their certified fisheries do command higher prices, citing increas-
ing demand and retailer commitment for products displaying their label, the
evidence for this is believed to be primarily anecdotal (pers. comm. James
Simpson, MSC, December 2008). In fact, the existence of any price premium
for fisheries that have attained MSC certification or some similar status
is generally unclear. It varies by fishery and clearly identifying any price
increase as having resulted from certification is difficult due to the complex-
ity and number of factors that can influence seafood markets (Roheim and
Sutinen, 2006). ‘‘Dolphin safe’’ tuna was reported to be achieving an initial
price premium of around US$ 400 per ton (Vogel, 1995) and was believed
to reflect a combination of higher demand and fishing costs. The price of
Thames herring was reported to rise 50% immediately after receiving MSC
certification in the year 2000 but relatively quickly returned to nearer its
original level (Jaffry et al., 2001). A study of the potential benefits for MCS
certification for the Maine lobster fishery concluded that consumers would
not be willing to pay a higher price for certified product (Goyert, 2009). Ulti-
mately the effect labelling has on the long-term availability of a product will
largely influence any relative or absolute movements in price. It is probable
that as more fisheries achieve certification their niche market will erode and
so with it the initial price premium first movers may attain.
The greatest limitation of labelling schemes is their reliance on the majority
of consumers being informed and concerned enough to ensure an objective
is met, especially in the face of a price differential. If, for whatever reason,
15
The MSC also list secure contracts, good reputation, improved relationships, economic
stability, confidence in the future (http://www.msc.org/business-support/the-value-of-msc-
certification).
consumers are indifferent to the issues at hand, labelling will be of little or no

incentive to ensure problems such as bycatch are reduced. It is believed that
the number of Asian consumers that discriminate between products on the
basis of environmental attributes or impact is still very low and are conse-
quentially not targeted by groups such as the MSC, yet Asia consumes over
two-thirds of the world’s seafood (Jacquet and Pauly, 2007) and a change in
preferences in these markets could have potentially significant ramifications
for fish prices globally. This, combined with the possibility that future growth
markets are likely to be in Asia, Latin America and Africa, areas where the
impact of sustainability labelling is anticipated to be weak, means that their
overall effectiveness could be marginalised (Jacquet and Pauly, 2007).
If consumers’ willingness to pay for certified product is limited as it appears,
an alternative approach is to gain the cooperation of retailers (Kaiser and
Edwards-Jones, 2006; Jacquet et al., 2010). In the United Kingdom nearly
90% of seafood is now sold through supermarkets (Jacquet et al., 2010),
with the main supermarkets now all having some form of policy relating to
the sustainability of the fish they supply, and many moving towards only
supplying fish certified as being sustainably harvested. As supermarkets are
by far the largest retailers of fish in the United Kingdom accounting for
around 89% of fish sales by value in 2006,16 this may prove to be signifi-
cant for fisheries failing to attain certification. In 2006, Wal-Mart and its
subsidiaries announced plans to purchase only MSC certified fish within
3–5 years (Marine Stewardship Council, 2006). As of 2006, approximately
60% of the fish Unilever sold in Europe came from sustainably managed
sources and they are working towards a target of 100% (Roheim and Sutinen,
2006). The Dutch Association of Food Retail has also committed to supplying
only MSC certified fish from 2011. If enforced on a broad enough scale such
corporate purchasing policies would effectively represent barriers to market
for uncertified fisheries, creating benefits of certification that otherwise would
not exist.
While labelling schemes may not be able to guarantee specific goals are
achieved they are a useful second-best solution when more stringent regu-
lations directly prohibiting imports are rejected by the WTO. The need to
ensure specified standards are being adhered to is possibly a major limitation
of such schemes. Even when sufficient incentive exists to obtain certifica-
tion the primary incentive of a fishery may be to attain certification and not
16
See www.just-food.com/store/product.aspx?id=60731
152 Pascoe et al.
necessarily achieve the underlying requirements, resulting in the so-called

‘‘window dressing’’ of performance indicators (Jaffry et al., 2001).
8 Social Incentives
The focus on incentive-based measures to reduce bycatch relies on the premise

that bycatch is potentially as much a consequence of behaviour as technology
(Abbott and Wilen, 2009). The emphasis on economic incentives as an alter-
native to command and control management measures in fisheries reflects a
dominant view in the wider literature that fishers are economically rational
individuals, seeking to maximise profits and/or minimise risks (Cornwell and
Costanza, 1994). While fishers may generally behave in ways that conform
to these neoclassical economic expectations, social norms and expectations
also influence their behaviour (Cornwell and Costanza, 1994).
Research in areas of fisheries compliance suggest that social factors play
a significant role in influencing behaviour (Hatcher et al., 2000; Raakjær
Nielsen and Mathiesen, 2003; Hatcher and Gordon, 2005). In particular,
social norms and beliefs about others’ behaviour affect the decision to comply
with a regulation, along with economic incentives to comply (i.e., expected
fines given probability of detection).
Relatively little research has been undertaken in examining how social
incentives can be used to modify behaviour with regard to bycatch, with
the exception of megafauna such as turtles. Education and other forms of
moral suasion have been successful in changing attitudes with regard to other
issues in fisheries (Sutinen and Kuperan, 1999). Changing social norms has
also been found to be beneficial in terms of bycatch reduction, and working
with communities has proved beneficial in reducing bycatch of sea turtles
(Peckham et al., 2007). In principle, there is no reason why bycatch of other
species could not also benefit from a program to change fisher attitudes.
Economic incentives are most effective if there is a belief that the desired
outcomes are benefit to the community. Getting community buy-in to
bycatch reduction may be more important than the availability of the fishing
gear and other regulations (Santora, 2003). Both on their own are necessary,
but not sufficient conditions for bycatch reduction. Without community buy-
in, there is an increased likelihood that the gears will not be properly used so
will be less effective in reducing bycatch. Community buy-in includes involv-
ing fishers in the design of any regulation as fisher knowledge can result in
better targeted actions that are more effective in terms of reducing bycatch
with a lower impact on the profitability of the vessel (Santora, 2003).
Modifying fisher attitudes and beliefs involves substantial interaction with
the industry, potentially more so than introducing an economic incentive
system. Changing attitudes also takes time. However, a program to change
fisher attitudes coupled with a program that rewards fishers for changing
their behaviour is most likely to be more effective than either program
independently.
9 Summary and Conclusion
The increasing potential of incentive-based measures for the management of

targeted species is well recognised (Grafton et al., 2006), and is attracting
increasing attention for the management of bycatch species. To date, actual
examples of incentive-based measures are limited, although they have been
granted considerable attention in the theoretical literature.
From the review of the alternative management systems, it appears that the
various incentive-based systems have different impacts across different types
of species (Table 1). For quota species, the most effective way of reducing
over-quota catch is through the quota system itself, ensuring that TACs for
Table 1. Summary of Potential of the Incentive-Based Management

Systems to Reduce Bycatch and Discarding.
Quota Non-quota Marine megafauna and
speciesa species charismatic species
Financial instruments
• Subsidies X X X
√
• Taxes ↔ ↔
√
• Deemed values X X
√
• Bonds and insurance X ↔
Market-based instruments
√ √
• Bycatch quotas X
√ √
• Habitat quotas X
√
• Revenue quotas X X
√
Market Access X ↔
√
Social incentives ↔ ↔
√
Key: positive impact on bycatch reduction, ↔ could contribute to bycatch reduc-
tion in some cases, X unlikely to be a useful bycatch reduction instrument.
a
Reduce discarding of over-quota catch and incentives for highgrading.
154 Pascoe et al.
different species are not technically incompatible, and that an efficient quota
trading system exists (Pascoe, 1998). However, fishing activities are hetero-
geneous; and ‘‘ex post’’ catch compositions are subject to random influences
that may result in some imbalance between catches and quota holdings even
if the TACs of jointly caught species are roughly in balance with their relative
catch rates. While trading could compensate for this, in many instances quota
markets are imperfect, and additional transactions costs over and above the
lease price may reduce the efficiency of the system (Pinkerton and Edwards,
2009). Consequently, it is unlikely that the problem of discarding due to over-
quota catch will disappear completely even if TACs are set in an optimal
manner and an effective quota market is operating. These end-of-the-year
balancing problems may be reduced by allowing certain overages to be carried
over to the next year. Further, due to price of quota and differential market
value of individual fish in the catch, incentives may still exist for price-related
discarding (high grading) even in a well-functioning quota system as well as
other management systems.
Revenue quotas are likely to have the greatest impact on reducing discard-
ing of quota species due to high grading and (what is currently considered)
over-quota catch. However, the loss of control over the quantities of individual
species that are caught may render this option more costly than beneficial,
particularly if rebuilding of stocks of particular species is important. The rev-
enue quota system can be modified by imposing particular prices on certain
species to encourage targeting towards or away from them. However, this
will re-introduce incentives to discard. The revenue quota system may also
undermine incentives to increase the value of catch.
New Zealand’s experience with deemed values suggests interesting oppor-
tunities to complement a bycatch quota with an economic incentive. When
the lease price of quota is below the landed price, a deemed value can be
set between two values. This provides an incentive to lease quota but also
reduces incentives to discard. Deemed values are able to reduce the transac-
tion costs of a quota system, by allowing fishers to enter the quota market
less frequently.
While deemed values have some desirable features, they are not perfect
solutions. Even if the deemed value is less than the landed price, the fisher
still has incentives to discard if the costs of landing (such as ice and labour
or the opportunity cost of hold space) exceed the margin between the landed
price and the deemed value. And in fisheries where the bycatch is completely
constraining on the target stock, the lease price of the bycatch quota will
exceed the landed price of the bycatch species because of the opportunity
cost of the foregone target species. In this case, the deemed value must be
set above the landed price, so the incentive to discard re-emerges. On the
other hand, there is a value of the improved information obtained on actual
catches under a deemed value system that must be assessed against the risk
of higher overall catches. And, as with most economic incentive systems to
reduce bycatch, deemed values have the clearest application when high levels
of monitoring are also used. The great concern over deemed values is likely to
be that total allowable catches can be exceeded. Increasing the deemed value
as the level of over-quota catch increases reduces the incentives to continue
fishing and take the species as bycatch, but also reduces the incentives to
land the bycatch.
For non-commercial fish species, bycatch quotas and ‘‘habitat’’ quotas may
offer some benefits in terms of reducing overall bycatch. A difficulty with
bycatch quotas is at-sea surveillance and enforcement. There is currently no
incentive to record the catches of these species, and the introduction of a
quota effectively imposes a cost on their capture if recorded which will create
further incentives not to record them. It is hard to see how this problem
can be avoided without increased monitoring and enforcement activities, and
either observer coverage or video surveillance would need to be relatively
widespread. Habitat quotas may be easier to monitor given current vessel
monitoring systems (VMS). Developing an appropriate spatial and temporal
effort penalty system to achieve bycatch reductions may be complex, but is
not impossible. The main drawback, as in any effort control, is that there is
no direct link between the level of effort and the level of bycatch produced.
For megafauna and charismatic species, taxes may be a more viable option
than a quota system. A tax-based system imposes a penalty on the capture
of these species, thereby providing an incentive to avoid their capture. Unlike
the non-commercial fish species, their capture is likely to be less frequent and
readily observable using video surveillance techniques. Compliance with the
system can also potentially be enhanced through working with the industry
(i.e., develop social incentives). While the reduced incidence of the bycatch
may make a penalty-based system more viable, it may operate to make the
bycatch quota system less viable. With fewer incidences, the number of buyers
and sellers of quota will be low (i.e., the quota market is thin), and transac-
tions costs are likely to be high (Newell et al., 2005). Further, fishers may be
156 Pascoe et al.
reluctant to trade quota if they believe they may have difficulty re-acquiring
it if needed in the future. In such a case, the efficiency gains often associated
with tradeable quotas would not eventuate.
In summary, we conclude that there is not a silver bullet for addressing
bycatch. Different instruments and different combinations of these instru-
ments will be required to provide the most net benefits given the type of
bycatch that managers aim to reduce. Further empirical research should allow
the identification of the necessary and sufficient conditions for effective imple-
mentation and the advantages and limitations of the alternative approaches
in different contexts.
Acknowledgments
Support for the development of this paper was provided from several sources.
SP, OT and TH were supported by the CSIRO Wealth from Oceans Flagship
and the Australian Fisheries Management Authority funded project ‘‘Use of
incentives to manage fisheries bycatch’’. JI and CW were supported by the
Management Tools Program under the CERF (Commonwealth Environment
Research Facilities) Marine Biodiversity Hub, with additional support for JI
under the Australian Endeavour Scholarship programme. The authors would
also like to thank Anthea Coggan for some useful comments.
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International Review of Environmental and Resource Economics, 2010, 4: 123–161

Use of Incentive-Based Management

Street, Portsmouth PO1 2HY, United Kingdom, james.innes@port.ac.uk

Marine Research Laboratories, 5 Nubeena Crescent, Taroona, Tasmania,

04101, USA dholland@gmri.org

306, Anchorage, AK 99501, USA. Mark.Fina@noaa.gov

F-29280 Plouzané Cedex, France.

MN 55987, USA, Ralph Townsend@umit.maine.edu

Tasmania, 7000, Australia. chris.wilcox@csiro.au

ISSN 1932-1465; DOI 10.1561/101.00000032

In most fisheries, a number of species are unintentionally caught as

Keywords: Incentive-based management; bycatch; discarding; marine

JEL Codes: Q22, Q27, Q28, D01

Commercial fishing is typically selective in what is landed, but often less

The use of selective fishing practices is often imposed on fishers by fish-

2 Incentives to Discard in Commercial Fisheries

Classical economic models of fisheries assume a single species exploited by a

3 Potential Incentive-Based Systems to Reduce Bycatch and Discards

A hierarchy of potential incentive-based bycatch management systems is pre-

Figure 1. Hierarchy of incentive-based bycatch management systems.

Financial incentives aim at changing behaviour through either rewarding or

5 Assurance Bonds and Insurance

Assurance, or performance, bonds are economic instruments commonly used

6.1 Bycatch Quotas

This method of regulation will only propagate improvements in performance

circumstances justify further measures, it may require the offender to wait

system for fishers to have alternatives to manage their bycatch (Diamond,

6.2 Eﬀort Quotas

Given the difficulty of observing quantities of bycatch in a catch-based quota

6.3 Revenue or Value Quotas

The concept of a revenue-based quota is aimed at reducing discarding of

total 4 kg but with a total value of $4.00 consume 4 kg worth of weight-

Despite these limitations, simulations of a revenue quota system suggest

7 Consumer-Driven Incentives to Avoid Bycatch: Market

The previous instruments effectively focused on creating a cost associated

7.1 Market Access

Fishers, like many other primary producers, increasingly operate in a global

include shrimp import restrictions to the USA aimed at reducing turtle

A further difficulty with barriers to markets as a bycatch management

consumers are indifferent to the issues at hand, labelling will be of little or no

necessarily achieve the underlying requirements, resulting in the so-called

The focus on incentive-based measures to reduce bycatch relies on the premise

9 Summary and Conclusion

The increasing potential of incentive-based measures for the management of

Table 1. Summary of Potential of the Incentive-Based Management

Abbott, J. K. and J. E. Wilen. 2009. “Regulation of Fisheries Bycatch with Common-pool

Branch, T. A. and R. Hilborn. 2008. “Matching Catches to Quotas in a Multispecies Trawl

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