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Measuring and assessing capacity in fisheries. 1. Basic concepts and management options

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3. ASSESSING CAPACITY


Some estimate of the existing level of fishing capacity in a fleet and the corresponding level of overcapacity in the fishery. To this end, many countries have developed a range of capacity indicators, mostly based on physical attributes of the fleet (FAO, 2000). Key indicators of capacity applied in many countries are measures such as gross tonnage (a measure of the volume of the vessel), engine power and the number of boats. In some countries, engineering measures such as vessel units, generally based on a combination of characteristics, have also been developed. More recently, output based measures of capacity have been developed that relate to the potential level of output of a fleet.

Input based measures of capacity involve an implicit assumption that the level of output is related to the level of physical inputs employed in the fishery. If these inputs were fully utilized, then the capacity of the fleet would be a function of these inputs. The level of utilization in this case would relate to the level of activity (e.g. days fished). Hence, the capacity of the fleet is related to the fixed inputs employed, e.g. capacity is assumed to be a function of boat size, engine power, etc., on the assumption that they are fully utilized. As a consequence, changes in effort levels do not change the potential output of the fleet, so do not directly affect the capacity (just capacity utilization).

The link between the level of inputs and the level of outputs is generally the basis for management of fisheries using input controls. Changing the level of inputs (e.g. through buyback) or their utilization (e.g. through days at sea restrictions, seasonal closures) is assumed to have a proportional effect on the level of output. However, this relationship is often not proportional, and changes in the distribution of the inputs can have a substantial effect on the output in a fishery even if the total input-based “capacity” is unchanged.

Output based measures of capacity attempt to measure the potential output and/or the level of capacity utilization directly, usually at the individual vessel level. Implicit in the estimation of the output based capacity measure is also a relationship between the level of fixed inputs, their level of utilization and the level of output. However, the methods for estimation do not generally impose the same assumptions that are implicit in the input based measures. As a result, the measures are not affected by the distribution of inputs.

While providing a better estimate of capacity and capacity utilization in fisheries (FAO, 2000), the output-based measures are not as useful for the purposes of many current management schemes. Most fisheries are managed using some form of input control, and if the management system is not changed, the only way to reduce capacity under such a management system is to withdraw some inputs and input-based measurement is necessary. Consequently, there is a need for both types of measures in fisheries management, with identification of the relationship between the different measures an important component of the management information system.

In this section, issues relating to the use of both input and output based measures of capacity are discussed. In some cases, insufficient information exists to develop either measure for the formal assessment of capacity. In these cases, indicators of overcapacity may be required, and some potential indicators of excess and overcapacity are presented.

3.1 Input-based capacity

A single fleet harvesting from a single stock can be used to illustrate the input-based capacity approach. The intent is to find a fleet size that can harvest a targeted level of output. In most fisheries, some long-term potential yield (LTPY) can be identified based on an assessment of the fish stock. This may be the maximum sustainable level of landings (i.e. MSY) that can be produced by a fishing fleet, or alternatively some other sustainable yield that corresponds to the objectives of management. For example, a bioeconomic model can be used to find the maximum economic yield (MEY), where capital investment in the fleet and the abundance level of the fish stock are such that profits are maximized. MEY is less than the MSY and is supported by a higher stock abundance and lower effort level. The larger stock size reduces the cost per fish landed for the same level of fishing effort exerted by the fishing fleet.

Associated with a target yield is a target effort level, and it is this that is used to determine the most appropriate fleet size. This requires assumptions about the level of capacity utilization that is to be employed in the fishery. A given level of effort may be produced by a larger number of underutilized vessels or a smaller number of fully utilized vessels. From an economic perspective, the latter is preferable, but full utilization may not be a realistic objective in some cases. For example, with fluctuating stocks some underutilized capacity may be appropriate under “normal” conditions to take advantage of the peak conditions. Similarly, stock recovery may require vessels to be underutilized during the recovery process, but fully (or at least more) utilized when the stocks had recovered. The use of input based measures of capacity therefore also requires some measure of target capacity utilization.

Seasonality and fluctuating stocks will increase the complexity of measuring overcapacity using input-based measures. When fish stocks are only available during certain times of the year either because they are migratory (tunas, for example) or because of regulations restricting access, measures of overcapacity become more subjective. Larger fleet sizes may be needed to harvest the resource if the fleet or portions of the fleet are restricted to a single or different geographical area. Larger vessels may be needed to follow or intercept the fish stock as it follows its migration route over the fishing season. The more powerful the individual vessels, the fewer vessels are needed in the fishing fleet. Many possible vessel and fleet size combinations are possible to harvest a particular target yield. For a single fleet and stock, the fleet that harvests the target level of output at the lowest possible cost is optimal.

Fluctuating stocks are also a common occurrence in fisheries. Different environmental conditions can cause abundance levels in different year classes, between fishing grounds and stocks of the same species. Likewise, changes in fishing pressure on predator, prey and competitor species can lead to different stock abundance levels over time. As mentioned above, with high variability in stock recruitment, fleet size needs to be larger to harvest the target level of catch during high abundance years than would be needed for a more stable fish stock, resulting in some capacity underutilization in the “average” years.

Another factor that makes input-based measures of overcapacity more difficult to measure is the existence of a single fishing fleet that exploits separately several different stocks or species of fish (i.e. operates in several different fisheries). Individual fishing vessels can move between fishing grounds in response to changes in relative abundance levels and productivity by using the same gear in a different location or by switching fishing gear types to harvest different species of fish. Multiple species of fish are also commonly harvested by single gear types such as long-lines, gillnets, and trawl gear. Regulations designed to reduce overcapacity in a fishery for one species of fish could inadvertently increase overcapacity in a related fishery if the vessels have the capability to switch gear types or fishing grounds.

Determination of the level of overcapacity is also made more difficult if multiple stocks are exploited simultaneously (i.e. a multispecies fishery). In a multispecies fishery, a high valued species could cause the fishing fleet to produce such a high level of effort that any incidentally caught species could be driven to extremely low levels. The economic solution in an open access fishery may be to concentrate fishing effort on the high value species while depleting the lower valued species. This market driven solution may not comply with the precautionary approach of fishery managers.

An additional complicating factor in understanding and measuring capacity is the existence of multiple fleets. When exploiting a single species, each fleet of vessels using different gear types will harvest different amounts of the TAC based on their gear catchability for that species. A sub-allocation of the total TAC for each fleet can be used to measure capacity, but establishing an economically efficient sub-allocation for each fleet depends on relative prices, fleet characteristics such as catchability of each gear type, and relative abundance of the fish stock. In addition, in open access fisheries where overfishing is occurring, harvests by one fleet could impact the operating costs for other fleets. Regulations designed to eliminate overcapacity that reduce the size of one fleet could result in the expansion of the other fleets.

With multigear, multispecies fisheries, identifying a target yield for each individual species becomes a secondary issue. What is more relevant is the total level of fishing effort and the configuration of the fleet that best satisfies the range of objectives faced by managers across the set of species in the fishery. Generally, sustainability is an overriding consideration, as any outcome must be biologically sustainable for each species individually. The optimal yield of each species, however, is determined by the optimal fleet and effort level taking into account the full range of activities. Bioeconomic models can be used to determine the fleet size and structure, effort allocation and resultant yields of each species across the fisheries that best achieve the management objectives. Overcapacity then becomes the difference between the existing fleet and that which is required to achieve the management objectives. In such a complex system, however, the optimal fleet is likely to be sensitive to costs and market conditions, so a robust measure of overcapacity may be unobtainable.

Input-based capacity involves more than just the vessel or boat used to harvest fish. Labour as well as capital and the stock or stocks of fish also need to be considered when developing input-based capacity measures. Identifying a target fleet size to compare to existing fleet size is also difficult when multiple inputs and outputs are being considered and fishing firms have the option to switch species relatively quickly. Seasonality of stocks can also complicate the ability to determine the optimal mix of inputs to use in producing a desired output level per firm. If more than one stock is available on a seasonal basis, the optimal fleet size may depend on the least abundant species availability, and undercapacity may exist for other species that the fleet or fleets exploit. When fish stock abundance fluctuates, optimal fleet size will change from year to year and between species. The most abundant stocks may experience undercapacity if inputs are used to harvest from the least abundant stock. Alternatively, overcapacity may exist for the least abundant stocks if inputs are set to harvest the more abundant species at their target levels.

3.2 Output-based capacity

Alternatively, output-based capacity measures can be estimated and used as the basis for managing a fleet of fishing firms. Output is based on the level of capital invested in the fishery, the amount of labour employed and the abundance of the fish stock. As such, it can be considered an index of capital, labour, and the stock abundance. Rather than treating a mix of inputs in the capacity measurement and management process, one output in the single species fishery can be used to determine overcapacity levels. In addition, most biological stock assessments identify the LTPY for a fishery in terms of a level of harvest that can be sustained over time. This allows comparisons of the firm and fleets’ output levels with the target level of output determined to be sustainable by fishery managers.

If the single fleet exploiting a single species fishery, output-based capacity measures are developed as follows. First, the efficient level of output can be determined for inefficient vessels and then the most productive level of output can be selected. This information can then be used to determine both the levels of excess and overcapacity that exist in the fishery. A slightly higher level of excess and overcapacity will exist when stock abundance fluctuates greatly to reflect the increased capacity needed to harvest at the larger MEY level, or when seasonality exists. For example, excess capacity will be larger during years of lower abundance, and insufficient capacity may exist during years of exceptionally higher abundance. The point, however, is that output-based excess and overcapacity levels can be measured without first determining the optimal mix of inputs used in the production process.

In the case where a single fleet of vessels exploits multiple stocks or species of fish with the same or different gear types, output-based capacity measures can still be estimated. In the case of fishers switching between fisheries by changing the type of gear types used, each fleet can be estimated as a separate fishery. For fisheries in which multiple species are landed from different stocks, capacity can be measured in terms of one output level while holding other output levels constant. In both cases, overcapacity for any specific species can be measured relative to the LTPY for that species of fish.

The shortcoming of this approach is that the least abundant fish species could determine the capacity level for the fishery, resulting in insufficient capacity to harvest the more abundant species. If the total cost of production and the price of output is known, the MEY can be determined and used as a target to estimate the optimal capacity level needed in the fishery. This could be used to develop species-specific target levels to maximize net benefits from harvesting from the multiple stocks or species.

Similarly, in the case of multiple fishing fleets harvesting from a single stock as in the case of a multi-gear fishery, capacity measures for each gear type can be made relative to the LTPY from the fishery. Total capacity for the fishing fleet can be determined by aggregating the estimates for each gear type. In the case of multiple fleets exploiting multiple species or stocks of fish, aggregate capacity levels can be determined by aggregating the capacity estimates for each individual stock and gear type combination. However, managing overcapacity in this situation can be problematic since fishermen can usually switch between gear types fairly easily. If information exists to determine the optimal fishing fleet configuration, fishery managers can target vessels for removal to achieve their management objectives.

3.3 Indicators and measures of excess and overcapacity

Both qualitative and quantitative indicators of capacity exist and can be employed to determine the level of capacity in a fishery. While excess capacity may be of less importance than overcapacity to fishery managers, the ability to distinguish between the level of excess and overcapacity to determine appropriate management actions is still necessary.

Several quantitative techniques exist that are available for measuring excess capacity even with limited information, but estimation of overcapacity generally requires detailed information on the fisheries that may not be readily available, including information on the target level of capacity. As a result, subjective measures and qualitative indicators of overcapacity levels may provide useful information to managers who manage fisheries as open access or regulated open access resources.

3.3.1 Quantitative measures of excess and overcapacity

Quantitative measures of excess and overcapacity provide an indication of the extent of the problem, and by implication, the potential reduction in capacity that may be necessary to achieve the longer term objectives of management.

Key quantitative indicators are measures of the current and potential fishing effort produced by the current fleet, and the current and potential catch that could be taken by the current fleet. The immediate difference between these measures (i.e. current and potential) provides an indication of the short term quantity of excess capacity. Similarly, the ratio potential effort or catch to current effort of catch provides an indicator of the relative level of excess capacity.

Quantitative measures of overcapacity require the definition of the target level of capacity (effort, catch or boat numbers). Again, a measure of overcapacity is given as either the difference or ratio of the potential level to the target level. This is more complex to derive as the target level of capacity is usually based on different stock conditions than currently exist, so the potential catch needs to be re-estimated taking this into consideration (see Figure 2).

Given the complexity in estimating potential catch, several techniques have been developed to assist in the quantitative measure of excess and overcapacity. These include data envelopment analysis (DEA), stochastic production frontiers (SPF), and peak-to-peak (PTP) analysis.[11] These are output based measures that estimate levels of capacity utilization in terms of the ratio of current to potential output, from which can be derived estimates of excess capacity. These techniques have been applied to excess capacity in many industries around the world. For example, Garcia and Newton (1997) used the peak-to-peak approach to measure capacity levels in global fisheries.

Overcapacity measures that utilized DEA have been developed to measure overcapacity levels in fisheries relative to a biological target level of yield (Kirkley et al., 2002) or to an economic target level of yield such as MEY.

Bioeconomic models have also been used to estimate input-based measures of overcapacity (in particular, measures of overcapitalization). Using such models, the fleet size and configuration that best conforms to the objectives of management can be estimated. This can be compared with current fleet sizes and configurations to derive an estimate of the level of overcapitalization.[12] The development of bioeconomic models for this purpose requires detailed information on biological and economic relationships in the fishery, and the results are often sensitive to changes in assumptions regarding these relationships. Further work is required in this area to develop robust models for estimation of overcapacity.

Each of the methods outlined above has both strengths and weaknesses, and the choice of the appropriate method will vary depending on the nature of the fishery, the data available, and the intended use of the capacity measure.

3.3.2 Subjective measures of excess and overcapacity

The use of rapid appraisal techniques and expert knowledge has been used to derive estimates of a wide range of measures when data are not available. These are based on the subjective assessment of individuals who are in a position to provide an informed judgement. This might involve fisheries scientists who have been associated with the fishery for several years, or may involve key industry members who are able to provide information on how the fishery has changed over time.

For example, fishers may be able to provide a picture of how the fishery looked, say, 10 years ago, and how it has changed since then. They may also be able to provide an indication of current capacity utilization by comparing their current activity levels to previous levels.

Subjective measures are most appropriately applied to single species or simple fisheries when information is lacking. However, in some cases, subjective measures may be the only way to derive estimates of overcapacity for more complex fisheries. For example, in the case of a fishery comprised of several fleets harvesting several species, where information on the stocks is either unknown or highly uncertain, such that formal models neither exist nor can be developed.

As with any subjective judgement, the information is subject to bias. However, collecting information from a range of individuals, or the use of semi-formal techniques (e.g. the Delphi technique) may result in consistent trends in the information being detected. In the absence of any other information, the use of subjective expert judgement should not be discounted, although the results should be used with caution.

3.3.3 Qualitative indicators of overcapacity

Qualitative assessments of overcapacity can be based on verifiable indicators, which themselves are based on scientific methods. The fundamental rationale of this approach is to apply common yardsticks to all fisheries, and minimize the role of subjective judgement. At the same time, it is recognized that the judgement, individual knowledge, and experience of the analysts will necessarily play an important role. The indicators approach has important advantages: it makes maximum use of existing information and it incorporates biological, management, and fleet-specific data.

Qualitative capacity indicators can be developed from bioeconomic theory based on existing conditions in or characteristics of a fishery. It should be noted from the outset that some commonly proposed indicators have been omitted for practical reasons. For example, a “good governance” indicator is hard to assess with precision. Purely economic indicators, like profitability, would be particularly insightful, but the current situation of insufficient data on firm operating costs prevents their use. However, other indicators based on the status of the stocks or management-related tests can be used in conjunction with theoretical knowledge of a fishery to assess capacity levels.

Clearly, no one indicator can be sufficient to make a determination of overcapacity in a fishery. A combination of indicators utilizing time trend information is needed to determine qualitative capacity levels in fisheries.

Biological status of the fishery

In many countries, regular stock assessments are undertaken for key species. These assessments generally aim to estimate the stock abundance and level of fishing mortality over recent years, and often predict yields and biomass in the short term based on assumptions about continuing levels of fishing effort. Based on these assessments, advice is often given to fisheries managers about either target catch levels or effort levels, depending on the management system in place. In many cases, the stocks are classified as either overfished, fully utilized or underutilized based on a set of biological reference points.[13]

If the species in a directed fishery are overfished, overcapacity almost certainly exists since overfishing and overcapacity are both symptoms of the same underlying management problem. Further, a fishery that is characterized as fully utilized or that may be approaching a condition of being overfished is also likely to exhibit overcapacity since fewer inputs in the production process could be used to provide the same level of harvest.

The biological status of a fish stock is a reasonable and useful indicator of overcapacity, but must be applied in a careful and qualified manner. The analyst, in using this indicator for the determination of the existence of overcapacity in a fishery, must ensure that the fishing fleet is such a sufficient contributor to this overfished condition that overcapacity does in fact exist. For example, adverse environmental conditions may result in stocks temporarily falling to low levels. In such a case, there may exist excess capacity in the fleet in the short term, but assuming environmental conditions return to normal, then overcapacity may not exist.

Second, this indicator may apply somewhat differently to non-targeted and multi-species fisheries. The general observations noted above relate to directed fisheries. However, many multiple species fisheries include a mix of overfished, fully utilized and developing fisheries. Incidental harvests in a fishery directed at another overfished and/or fully utilized species may or may not indicate overcapacity for the incidentally caught species. Where species are caught together, it is inevitable that the status of the individual stocks will vary, with some being overexploited and others possibly underexploited. The optimal capacity in this case depends on the total mix of activity, not just the status of the individual stocks. In these cases, the individual analyst in each region has to determine capacity levels on a case-by-case basis.

Harvest/target catch ratio

The ratio of harvest levels to target catch (e.g. quota levels) is another management-related indicator of overcapacity. Most managed fisheries operate under harvest guidelines that usually relate to a target catch level - either explicitly through the use of an aggregate quota control or implicitly through effort limitations. Overcapacity may be thought to exist if a harvest level exceeds the target catch on a regular basis. Under this indicator, it is assumed that the target, or optimal, level of capacity is the level that is necessary to harvest the target catch in a single species fishery during a fishing season.

It should be noted that this is not a perfect measure of overcapacity. First, effective enforcement and monitoring of the harvest levels could close the fishery before the target catch is exceeded. In such a case the harvest level would not exceed the target and no apparent overcapacity would be observed. Second, this indicator does not work well in multispecies fisheries, especially if aggregate quotas are imposed. In such cases, discarding of any overquota catch would disguise the apparent overcapacity.

A third difficulty arises if the fishery has been overfished, as the harvest level may be below the target level, especially if the target level is set high for social reasons. As this is likely to be the case in many fisheries in which overcapacity exists, the measure may be misleading as ratios of less than one may also indicate overcapacity. Nevertheless, under most circumstances, a harvest-to-target catch ratio that exceeds one on a regular basis indicates at least the potential for overcapacity to exist.

TAC/season length

Another indicator of overcapacity is the “race for fish” in which fishers harvest the TAC before the end of the fishing season. The ratio of the total allowable catch level to the season length may be used as a qualitative indicator of overcapacity. If the season length declines progressively for a number of years, that may be an indicator of overcapacity. This indicator is not a perfect test of overcapacity for the same reasons as the harvest-to-target catch relationship. However, an increase over time of this ratio could indicate the potential for overcapacity in a fishery.

Conflict

Controversies surrounding the setting of the TAC and its sub-allocation among user groups may also indicate overcapacity in a fishery. Typically, disputes occur between commercial fishers using different gear types or residing in different areas, and/or between commercial and recreational fishermen.

Evidence that the determination and sub-allocation of TACs are accompanied by a meaningful level of political controversy suggests that there may be a potential for the existence of overcapacity in that fishery. Obviously, this is a rough indicator of overcapacity for the simple reason that it is difficult to evaluate objectively the seriousness and intensity of such differences.

Latent permits

Another qualitative indicator of overcapacity is the trend in unused or latent permits. These are permits (or licences) issued to fishers that have either never been used to harvest fish, or have been used previously but are currently inactive.

Applying this definition of latent permits, it follows that the ratio of active permits to total permits (active and latent) may be used as an indicator of overcapacity. A relatively large number of latent permits, or a low ratio of active to total permits, would indicate the potential for overcapacity in a fishery. Further, as this ratio declines the likelihood that overcapacity exists in the fishery probably increases.

This is not a perfect measure of overcapacity since speculators who never intend to harvest fish may hold a permit in the hope of benefiting by selling or leasing the permit if they are made transferable. In addition, fishery managers may decide to purchase or cancel inactive permits. Nevertheless, a relatively low and declining ratio of active to total permits may, under certain conditions, indicate overcapacity in a fishery.

Catch per unit of effort

A decline over time in catch per unit of effort (CPUE) implies overfishing and, potentially, overcapacity.

However, the CPUE indicator of overcapacity must be used with care. Fluctuating TACs under a constant fishing mortality management strategy could mask this effect. The CPUE could remain constant or improve even with overcapacity in the fishery as the TAC increases with recovery of the stock. In addition, CPUE trends could remain constant or increase for schooling species even though overall stock abundance is declining.

In general, in fisheries where TACs and harvest levels are fairly constant, a declining trend in CPUE over time probably indicates overcapacity.

Value per unit of effort

Related to the above, value per unit of effort (VPUE) will decrease as the quantity of fish caught decreases, potentially indicating overcapacity.

However, there are several circumstances where VPUE may decline although catch rates remain relatively constant. For example, an increased proportion of juvenile fish in the catch, which generally attract a lower price on the market due to their smaller size, will result in lower revenue per trip even if total catch weight remains relatively constant. This would be an indicator that the stocks are being overfished and hence excess capacity is likely to exist.

Similarly, changes in the species mix will also affect the VPUE. To the extent that targeting is possible, fishers will attempt to target the most valuable species first (i.e. those with the highest price per kilogram). A fall in VPUE would indicate that these species had been depleted, and that effort had been diverted to the less valuable species.

VPUE is potentially a useful indicator for highly mixed fisheries where recording catch of each species is impractical, but recording the total value of sales is feasible.

Other measures

Other measures that may indicate overcapacity include declining profitability and increased age of the fleet. The former requires information on both revenue and fishing costs. Declining VPUE in some ways reflects declining profitability provided costs are also not changing.

An increased average age of the fleet is an indication of lack of new investment into the fishery. This again is likely to be a reflection of lower levels of profitability than can be achieved elsewhere, and hence is an indicator of overcapitalization.

3.3.4 Use of indicators for assessing capacity

While these indicators have limitations, they reveal whether overcapacity exists in fisheries. Qualitative indicators show if overcapacity exists at a point in time, but do not indicate the magnitude of the problem or the direction of change. In addition, the expertise of the analyst can influence the application of these indicators.

Again, no one indicator would be sufficient to make a determination of overcapacity in a fishery. A combination of indicators is needed to determine qualitative capacity levels. Inevitably, given the indicators’ inherent lack of technical precision, different experts may apply them differently.


[11] Details on how these measures are estimated are presented in Kirkley and Squires (1999) and in Vol II (Pascoe et al., 2004). Examples of applications using these techniques are also presented in Pascoe and Greboval (2003).
[12] An example of the application of a bioeconomic model for the estimation of overcapitalization is presented in Pascoe et al. (2004).
[13] For example, in the United States, the annual report to Congress entitled "Status of Fisheries of the United States," prepared by the National Marine Fisheries Service, identifies fisheries that (1) are overfished, (2) are approaching a condition of being overfished, and (3) are subject to overfishing. Similarly, stocks in European fisheries are classified as either severely overexploited, overexploited or fully utilized by the International Commission for the Exploitation of the Sea (ICES).

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