The Transitional Gains Trap in Grandfathered Individual Transferable Quota Fisheries

Trade in grandfathered individual transferable quota has been argued to inevitably lead to a Transitional Gains Trap whereby government reallocation of quota that was initially gifted becomes politically impossible once the original beneficiaries have been succeeded by fishers who paid for their quota and would unfairly become loss-making. However, no formal model or quantitative analysis of the trap exists in the literature. This paper takes a first step in filling this gap, proposing a simple model and quantitative indicator which reflects not only the potential loss faced by individual fishers arising from reallocation of purchased quota but also the offsetting effect on these fishers of accumulated profits due to the initial grandfathered allocations and subsequent investment in quota. Illustrative calculations for Iceland´s individual transferable quota system yield an indicator value of 29% by 2016, suggesting that the trap may be limited and therefore a weak political constraint, although the results vary considerably by species and are particularly sensitive to assumptions. Finally, it is shown that the indicator may decrease over time, implying that the trap may not necessarily be a long-term political barrier to reform