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Subsidies to the Use of Natural Resources

Environmental Economics Research Paper No.2
This report was prepared by a consultant,
the National Institute of Economic an Industry Research (NIEIR),
for the Department of the Environment, Sport and Territories.
Commonwealth of Australia, 1996
ISBN 0 642 24864 8

9. Extraction from publicly managed fisheries

9.1 Introduction

Despite a diverse marine fauna and the world’s third largest marine fishing zone, Australia’s commercial fish production is relatively low being ranked 55th on a world scale. This production level reflects the low productive capacity of the fishing zone rather than under-exploitation of the resource.(see Note 1 below) Although it is overall a relatively small industry in Australia, fishing is very important to some regional economies.

Responsibility for fisheries rests with the States for inland waters and three nautical miles off-shore, and the Federal Government for waters between three nautical miles and territorial limits — generally 200 nautical miles.

In 1993–94 the gross value of commercial fisheries and aquaculture in Australia was estimated to be $1607 million, of which privately managed aquaculture contributed around 20 per cent. About 60 per cent of fish production is exported ($1241 million in 1993–94); imports are also substantial being around $586 million in 1993–94. The gross value of the major fisheries categories are presented in Table 22.

The Australian Fisheries Management Authority (AFMA) was established in 1992 by the Federal Government to manage fisheries under Federal jurisdiction. The AFMA manages fisheries within the Australian fishing zone (AFZ) and in some cases to the low water mark in agreement with States.

Fisheries within coastal and inland waters are managed by the states and the Northern Territory; in some cases management is shared with the Commonwealth.

Fisheries in the AFZ and inland waters are predominantly publicly owned and are subject to a range of regulations covering access to the resources and their exploitation. Administration of this community owned resource is difficult as scientific knowledge of fish populations and movements is limited and because policy stances are in a state of evolution. In the ESD project a survey was undertaken on the status of fish species with respect to their sustainability, under the categories of over fished, fully fished, under fished, and uncertain. The survey results shown in Table 23, indicate that when the uncertain category is combined with those of over and fully exploited, Australia should be concerned about fisheries sustainability.

Note 1 Background to the Australian publicly managed fisheries is mainly from the Australian Year Book,1994,the Annual Report of the Australian Fisheries Management Authority, 1993–94 and the ESD-Fisheries Final Report.

Sustainability and economically efficient harvesting is generally the prime aim of fisheries management, covering particular species and overall aquatic ecosystems. In the harvesting of a particular species of fish, conservation means maintaining the abundance of the exploited stock at a level where the long run productive potential of the stock is not impaired. From an ecosystem perspective it also means applying the same principles to by-catch (unintended catch) species and preservation of the aquatic environment.

Biological reference points may be used to guide decisions on acceptable levels of fish harvesting. These reference points are stock levels above which it is deemed prudent to maintain a particular fish stock. Below that stock level there would be concern that the stock might not be viable. There are two main types of reference points: threshold reference points at which the stock faces the threat of collapse; and precautionary reference points which indicate that remedial action (for example strict quotas) should be taken to prevent any more stock depletion.

To translate these biological concepts into economic and social terms the concepts of maximum economic yield (MEY) and optimal social yield (OSY) are used. The maximum economic yield sets a level of catch below a precautionary reference point at which it is estimated that net returns to fishing effort are maximised. The optimal social yield takes into account social factors, such as employment, income and lifestyle stability, associated with particular fisheries. These factors constrain, to some extent, the attainment of MEYs. Due to uncertainty of fisheries stocks, conservative estimates of ‘safe’ catches are becoming more acceptable across Australia as both public and private fishery personnel become more concerned about sustainability of operations.

Sound fisheries management also includes recognition of the impact of fishing operations on the environment,such as the effects of trawl gear on the ocean bed, the loss of marine mammals and birds, and the removal and discarding of non-target species (by-catch).

Table 22 Gross value fishery and selected major fisheries categories ($ million), 1988–1994


1988–89 1990–91 1991–92 1993–94
Prawns 274 263 226 278
Rock lobster 280 277 340 422
Tuna 19 57 114 117
Other fin fish(a) 215 270 264 325
Abalone 86 91 91 177
Scallops 21 42 48 68
Oysters 41 43 43 50
Pearls 65 129 133 139
Other(b) 22 31 30 33
Total 1 022 1 202 1 289 1609

Notes:
(a) For human consumption (excludes aquaculture).
(b) Other aquaculture not elsewhere included.
Source: Australian Bureau of Agricultural and Resource Economics (ABARE), Commodity Statistical Bulletin, 1994, pp.106–108.

 

Table 23 Summary of responses received from Commonwealth and State fisheries agencies on exploitation of species, species groups or stocks(a)


Exploitation category

Over fished

Fully fished

Under fished

Uncertain

 

Agency

F

M

F

M

F

M

F

M

Totals

New South Wales

3

7

2

33

4

3

3

39

94

Victoria

-

2

8

5

2

-

3

1

21

Queensland

-

3

7

29

-

-

-

3

42

Western Australia

-

2

2

11

-

2

-

-

17

South Australia

2

1

1

11

2

5

1

4

28

Tasmania

1

2

-

3

2

7

2

10

27

Northern Territory

-

-

1

-

-

1

-

5

7

Commonwealth

-

8

-

9

-

13

-

8

38

Totals

6

25

21

101

10

31

9

70

 

31

122

41

79

274


Notes:
(a)Number of species, species groups or stocks for which knowledge indicators were returned to the Working Group by Commonwealth, State and Territory agencies.
F = freshwater, estuarine and freshwater/estuarine/coastal mixes; M = marine . Source: ESD-Fish, p.28.


Economic efficiency in fishing operations can only be assessed after sustainable catch levels are set. This is a ‘constrained maximisation’ objective in that the physical constraint on allowable catch is first determined on the basis of the need for conservation of stocks and the supporting ecosystem.

Following the setting of a sustainable catch constraint , industry structure can then be adjusted so that returns to both fishing capacity and fishing effort are maximised. With objectives determined in this way, it becomes clearer how the aims of resource conservation and efficiency in commercial fishing can be interlinked. In many fisheries, excess capacity and competition between fishing units has resulted in low rates of return on investments. Unrestricted or easy access to fisheries can lead to depletion of stocks and low returns to unit fishing entities; however, over the past 20 years legal entry to Australian fisheries has been tightened and now is limited mainly to the purchase of existing licences. Work reported in the ESD-Fisheries Final Report indicates that further improvements in management arrangements are needed to achieve normal or above normal rates of return in Commonwealth and State managed fisheries. Improved management might be achieved by management of inputs such as boats, crews or outputs ( e. g. by transferable quotas), or by pricing (licence fees, etc.) or by a combination of approaches.

World-wide, national fishing fleets have grown too large for existing stocks. The UN Food and Agriculture Organisation (FAO) estimates that $124 billion is spent world-wide each year in order to catch just $70 billion worth of fish(see Note 2 below) Governments apparently make up most of the $54 billion difference with low-interest loans, access fees for foreign fishers , and direct subsidies for boats and operations. These government subsidies keep more people fishing than the oceans can support. It has been estimated that the maximum sustainable harvest can be achieved with only 20 per cent of current fishing capacity.

Rather than carrying the industry as a net budgetary burden, countries could collect rents for the use of fishing grounds as a part of a larger management strategy to limit access. The fiscal and economic benefits of improved management would be very substantial. Thus, for example, Weber estimates that governments could potentially save some $54 billion a year by eliminating subsidies, and earn another $25 billion in rents. If stocks were allowed to recover, FAO estimates that fishers could increase their annual catch by as much as 20 million tonnes, worth about $16 billion at today’s average prices. Although these estimates do not take into account the broader adjustments that societies will have to undergo for the absorption of former fishers into other jobs it gives an idea of the magnitude of the problem.(see Note 3 below)

9.2 Financial subsidies


In principle, commercial use of a natural resource should yield a return to the community, but the ESD-Fisheries final report notes that the combination of past systems and social and political factors in many instances has made this difficult to achieve.

In recent years there has been a concerted effort by the federal and state governments to increase recovery of fishery management costs. In 1994 a taskforce review of cost recovery for Commonwealth fisheries resulted in a government policy to recover 100 per cent of recoverable costs in each fishery.(see Note 4 below) Also in 1994 the AFMA developed a cost allocation policy which allocates all overhead costs across fisheries and community service obligations. This policy was developed and agreed to by the AFMA, the fishing industry and the government. This policy was integrated with the new cost recovery policies and was used as a basis for preparation of the 1993–94 industry levies. In general, the charges being introduced meet the criteria for user charges set out in Chapter 1.

The 1994–95 Commonwealth Budget allocated the AFMA funding of $25.9 million which included $13.8 million recovered from the industry (53 per cent of the allocation). Total fishing industry allocation (includes R&D, other services) by the federal government was $39.0 million of which $17.752 million was recovered from the industry.(see Note 5 below)

As indicated above, public expenditure on fisheries management in Australia is spread among the States and the Commonwealth. Table 24, taken from the ESD-Fisheries final report, presents expenditure, but not revenue, estimates for 1990–91 (before the AFMA was established) indicating an average expenditure of 10 per cent of the gross value of production (GVP).

Note 2 Quantitative information cited Peter Weber, Safeguarding Oceans, State of the World 1994, Worldwatch Institute, Washington DC 1994,p.56.
Note 3 If the transition is not addressed before the problem leads to serious fishing unsustainability the economic, fiscal, social costs could be much higher, as evidenced by the costs involved in the collapse of the Newfoundland (Canada) cod fishery.
Note 4 See Review of Cost Recovery for Commonwealth Fisheries, March 1994 and AFMA Annual Report 1993–94, p.63.
Note 5 Data on AFMA from AFMA/Industry funding arrangements, AFMA Fisheries Policy Paper No. 2, AFMA, November 1992 and AFMA Annual Reports and 1993–94 and Commonwealth 1994–95 Budget Paper No. 1, pp.3.163–4 and John Oliver, AFMA (pers. comm.).

 

Table 24 Expenditure on fisheries management and research: Australia 1990–91


 

States

Commonwealth

Total

Category

NSW

VIC

QLD

WA

SA

TAS

NT

AFS

Other

CSIRO

AUST

Expenditure ($ million)

– Management

10.0

10.6

11.7

7.7

4.6

1.6a

1.4b

18.3c

..

..

65.9

– Research

6.5

2.8

4.2

3.7

3.4

2.5

0.7

11.0

1.61

11.5

47.9

– Total

16.5

13.4

15.9

11.4

8.0

4.1

2.1

29.3

1.61

11.5

113.8

GVP ($ million)

82.6

67.4

167.1

365.6

93.7

114.0

7.4

238.8

..

..

1,136.6

Expenditure as per cent of GVP

– Management

12.1

15.7

7.0

2.1

4.9

1.4

18.9

7.7

..

..

5.8

– Research

7.9

4.1

2.5

1.0

3.6

2.2

9.5

4.6

..

..

4.2

Total

20.0

19.9

9.5

3.1

8.5

3.6

28.4

12.3

..

..

10.0


Notes:
(a) Does not include surveillance and enforcement.
(b) Includes large recreational component.
(c) Total recoverable management costs of the Australian Fisheries Service (AFS) were $5.03 million and this represents 2.1 per cent of the GVP of Commonwealth fisheries. This figure also includes $1.5 million for fisheries adjustment and $4.0 million for foreign fishing supervision.
GVP = gross value of production.
Source:ESD-Fish,p.33:GVP values,ABARE 1991; other data supplied to ESD by Commonwealth and State fisheries management and research agencies.


The Industry Commission reported in 1992 that the States collected only a minor portion (20–35 per cent) of public fishing management costs.(see Note 6 below) It appears that State fisheries agencies in Australia still recover less than half of their costs from the industry but currently there is a concerted push towards higher levels of cost recovery. In Victoria in 1993–94 fees, etc. , covered 45.7 per cent of fisheries expenditures compared with 38.9 per cent in 1992–93. In South Australia the fishing industry and government have agreed to phase in 100 per cent cost recovery over a ten year period; currently the government recovers about 50 per cent of costs.(see Note 7 below) More independent analytical work is required on the extent to which more revenues should and could be recovered from the fishing industry; for example analysis is required on competitiveness, sustainability, regional employment and “public goods” considerations.

In 1994 it is estimated from budget papers and departmental reports, that the combined federal and State fisheries agencies expended about $148 million on fisheries management and recovered about $65 million from the industry in licence, access fees, etc., leaving a net subsidy of about $83 million depending on what proportion of the net costs are allocated to “public goods” values.

Note 6 Industry Commission, Cost Recovery for Managing Fisheries, Report No. 17,1992.
Note 7 State data from departmental Annual Reports.

 

9.3 Environmental subsidies


Besides affecting sustainability of fish stocks, fishing activities can affect the environment in several ways.

Physical structure of the aquatic environment

Bottom trawling, shell fish harvesting and other fishing practices damage the aquatic environment thereby contributing to a reduction in future fish stocks and biodiversity. The ESD-Fisheries final report (p.78) reported that:

“The effect on the marine ecosystem from habitat alteration is little understood and in Australia little is known of the effects of most fishing methods on the environment. There is little or no research on potential impacts on the fisheries except where economic loss to the fishery is apparent or when other ‘uses’ of the aquatic environment may be affected …
There is also growing opinion that the overall physical impact of recreational fishing on the environment is becoming a matter of concern. As the pastime becomes more popular, factors such as anchor damage to the benthos, construction of marinas, the impact of four-wheel drive vehicles on sand dunes and the foreshore, the foraging for bait in the intertidal communities and the loss of fishing lines and lead sinkers (which both entangle and poison bird life) all contribute in some way to environmental damage.”

Water quality

Trawling and shellfish dredging can cause water turbidity resulting in destruction of some aquatic life. Aquacultural activities, particularly where feeding is involved, may increase nutrients and biological oxygen demand resulting in eutrophication (excessive aquatic plant growth). Biocides, antifoulants and other chemicals may be introduced into the environment by aquaculture or other activities. For example, elevated tributyltin (antifouling paint) concentrations have been found in areas of high boating activity in New South Wales, at levels well above the toxicity threshold for some species.(see Note 8 below) Powered boating activities can also lead to elevated hydrocarbon levels.

By-catch impacts

The taking of non-target species, i.e. by-catch or incidental catch, affects a wide variety of aquatic species, including dolphins, seals, turtles, seabirds and non-target fish. An indirect effect is the loss of food for predators which can then affect population levels of target species. Thus biodiversity impacts of by-catch practices may be substantial.

In prawn fisheries , a significant feature of trawling is the high by-catch of ‘trash’ fish and other organisms. Typically, the ratio of by-catch to target species can be as high as 8 to 1 (ESD-Fisheries final report, p.80). Nearly all the by-catch fish are dead when discarded. In the past, by-catch has tended to be regarded as an incidental and inevitable cost of fishing but the biodiversity effects can range from regionally insignificant to globally significant.

Gill nets are used extensively in some Australian fisheries. These nets generally create major environmental damage with a high by-catch of non-target fish, marine mammals, sea birds, turtles and other marine organisms. Gill nets used in the southern shark fishery are bottom set nets that result in relatively little by-catch of non-target species. Driftnets of more than 2.5 kilometres in length are banned in Australian waters.

Note 8 The problems associated with antifouling paints and how they might be resolved are addressed in Maritime Accidents and Pollution: Impacts on the Marine Environment from Shipping Operations, ANZECC paper for Public Comment,March 1995. This paper also addresses other aspects of marine pollution including ballast water, oil and chemical spills and debris.

Commercial exploitation of the fish resource and gathering activities have the potential to threaten species with extinction if not properly managed. Thus, the ESD-Fisheries report indicates that in North America it has been estimated that some 5 per cent of the 151 fish species considered endangered or threatened towards extinction are affected by commercial harvesting. The report also draws attention to the existence of fourteen genetically distinct stocks of barramundi in Australia, and suggests that failure to preserve the genetic diversity of wild stocks will reduce the fitness of the resource.

There has also been a high incidental mortality of seabirds, with albatross being the main victims, using long lining. The birds swoop on the bait, are hooked and consequently drown. An estimate of the mortality of albatross in long lining activities world wide is about 44 000 annually and significant decreases in wandering albatross have resulted. In addition to the obvious effects on albatross populations, this mortality has a considerable economic effect, due to bait loss and therefore lower catch rates. The financial cost to the Japanese long line fleet operating in the southern bluefin tuna fishery alone is believed to exceed A$7 million annually. However, new fishing techniques have been shown to reduce albatross mortality by over 80 per cent and simultaneously increase the productivity of the fishery (ESD-Fisheries final report, p.81).

Debris

Debris from lost or discarded fishing gear can harm and kill wildlife, litter beaches and be hazardous to ships and divers.(see Note 9 below) Gear types involved may be gill nets, lost trawls, discarded fragments of net, or monofilament line fragments. The synthetic materials used in nets do not degrade for a very long time allowing the nets to continue to catch marine life. Other discarded materials from fishing vessels, such as plastic bags also contribute to the problem.

In Australia, it is estimated that as many as 2 per cent of the Tasmanian and Victorian populations of Australian fur seals have signs of entanglement in fishing nets. Many seals have been found with ‘necklaces’ of net. These fragments of net are known to be discarded from fishing vessels and may be either from trawl nets or shark gillnets.

Actions being taken to reduce fishing debris include discussions on the problem with fishers (foreign, domestic) in the AFZ, public and industry education and awareness programs, gear changes and disposal programs, and research.

Ballast water

Ballast water and other wastes from shipping, including fishing vessels, contribute to the worldwide problem of genetic pollution, that is, introduction of species into new habitats where they are not part of the established ecosystem. This leads, through out-competing of local species, to reductions in marine biodiversity. The problem is also associated with the increased incidence of red tides, and other algae blooms which affect shellfish populations.

Risks associated with foreign ballast water are recognised as a significant threat to Australia’s marine ecosystems in the report on the Coastal Zone Inquiry of Resource Assessment Commissions (RAC).(see Note 10 below)

In a 1991 report Jones reported the discharge of ballast water in Australian ports was around 66 million tonnes per year of which an estimated 95 per cent came from overseas, mainly in bulk carriers. Australia introduced voluntary guidelines for ships discharging ballast water in February 1990.(see Note 11 below) The contribution of fishing vessels to this discharge was not examined but is probably very small compared with other shipping.

A 1994 report for the Australian Quarantine and Inspection Service(see Note 12 below) (AQIS) estimated social costs of ballast discharge at about $40 million per year based on ballast water treatment costs of $0.25/tonne. The study stressed the uncertainties associated with this estimate; thus costs could vary from $0.06/tonne to $16/tonne depending on the treatment deemed necessary.

Note 9 For more details on the sources, effects and actions on fishing debris see Jones, M.M., Fishing Debris in the Australian Marine Environment, Bureau of Resource Sciences, Canberra,1994.
Note 10 RAC,Coastal Zone Inquiry: Final Report Overview, p.9.
Note 11 Jones, M.M., Marine Organisms Transported in Ballast Water: A Review of the Australian Scientific Position, Bureau of Rural Resources, Bulletin No. 11, Canberra, 1991.
Note 12 Bio-economic Risk Assessment of the Potential Introduction of Exotic Organisms through Ships’Ballast Water, Report No. 6,Ballast Water Research Series, Australian Quarantine Inspection Service, Canberra, April 1994.

Table 25 Summary of estimated additional costs over five years


Recommendation category

$ million
(1991)

1. Ecosystem and resource management
– includes coastal zone management; marine protected areas, aquatic monitoring, freshwater fisheries.

40

2. Administrative and institutional arrangements
– enforcement and compliance of fishing controls.

20

3. Information systems and research
– includes the data gathering and research component of all recommendations in the Final Report.

50

4. Jurisdictional arrangements

2

5. Education and training

15

6. Other
– labour market adjustment

3

TOTAL

130


Source: ESD-Fish, p.159.


Estimates of environmental subsidies

The ESD-Fisheries Final Report estimated (Table 25) that an additional $130 million over five years (1992–1997) would be necessary to provide a more secure path to sustainable fisheries resource management. This estimate of approximately $150 million in 1994 dollars, or $30 million per year, provides some indication of the environmental subsidies to fishing operations, that is it indicates perhaps the minimum amount necessary to reduce externalities to “acceptable” levels. It does not, however, appear to comprehensively address the range of negative environmental externalities outlined above that are associated with extraction from public fisheries. As such it is probably a very low estimate of environmental subsidies (based on control costs) for this resource activity.

No other data appears to be available on environmental subsidies associated with extraction from publicly owned fisheries in Australia.

9.4 Summary


A summary of the financial and environmental subsidies assessed in this study for public fisheries are presented in Table 26.

Table 26: Summary of financial and environmental subsidies,1994, public fisheries


Activity element Financial subsidies
($ millions,1994)
Environmental subsidies
($ million,1994)
Subsidy removal
instruments
Fiscal implications
($ millions,1994)
Access fees, licences, etc.1 Higher access fees, catch royalties. Significant increase in revenues — mainly to the States.
Public agency costs 2 85
Environmental subsidies 3 30 Environmental levies, regulation of access and fishing practices.
TOTALS $85 million $30 million $115 million

Notes
1,2 Data needs to be split-up into:

(i) access fees (“royalties”) to the community-owned resource; and
(ii) public agency management costs.
Available data on expenditures and cost recovery suggest that:
(i) access fees in fisheries are low compared with the gross value of production — GVP; 10 per cent of GVP would raise about $130 million (though it is not suggested that this is the appropriate access fee); and
(ii) expenditure on management and research as a per cent of GVP average about 10 per cent; and
(iii) recovery of public agency costs is low (50 per cent or less).
A preliminary estimate, based mainly on a review of State budget papers, but also on latest departmental reports,is that about an additional $85 million might be recovered from the industry in access fees and payment for public agency costs.

Estimates of fisheries expenditures and cost recoveries,1994–95
(Budget Statements,etc. estimates were checked with latest available departmental annual reports and, where necessary, adjusted for other payments and receipts.)

 

Estimated expenditure
($ million)

Cost recovery *
($ million)

Commonwealth
Budget statements,1994–95,AFMA Annual Reports.
(see footnote in text)

$39.0

$17.8
45.5%

New South Wales
Budget estimates,1994–95

$20.4

$6.1
30%

Victoria
Budget estimates,1994–95
Budget Paper No. 4

$20.0
(est. of fisheries share of fisheries, fauna and flora allocation)

$10.0
50%

Western Australia
Program statements 1994–95 Volume 1. Budget Paper No. 3

$16.6

$4.2
25%

Queensland
State Budget 1994–95
Budget Paper No. 3


$29.0
(est. of fisheries portion of natural resources management allocation)


$10.2
35%

South Australia
Estimates of receipts and payments

$12.0

$6.0
50%

Tasmania
The 1994–95 Tasmanian Budget

$8.6

$8.6
100%

Northern Territory
Department of Primary Industry and Fisheries,1993–94

$2.6

$0.1
(4%)

TOTALS

$148.2

$63.0

*Estimated from departmental/agency reports.

3. Additional fisheries management costs per year estimated by the ESD-Fisheries Final Report report as necessary for sustainable development over five years. This estimate does not,however, cover all environmental subsidies to fishing operations.


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