Buyback Subsidies, the Time Consistency Problem, and the ITQ Alternative

This paper deals with the time consistency problem associated with buyback schemes, arising from the fact that the schemes may be anticipated by vessel owners. After reviewing and elaborating upon the key results of our recently published article on buybacks and limited-entry programs, we discuss the consequences of combining buybacks with ITQ schemes, or the equivalent, instead of limited-entry programs. We conclude that substituting ITQ schemes for limited-entry programs cannot be relied upon to eliminate fully the time consistency problem. We suggest that what may be required is a management program that combines rights-based schemes with taxes.