Fishy Business: “Reeling In” and Analyzing the Impact of Climate Change on Groundfish Quota Prices

Abstract

The Northeast United States Multispecies Fishery (NMGF) implemented a catch-share program in 2010. This program, a modified Individual Transfer Quota (ITQ) system, uses self-organized fishermen groups known as sectors to allocate fishing quotas. However, there are transaction costs associated with inter-sector trades of these quotas, which act as barriers to trade and prevent efficient allocation. At the same time, climate change is causing NMGF stocks to relocate both farther north and into deeper waters to escape a variety of unfavorable environmental conditions. Utilizing panel data from 2010 to 2019, this study examines how climate change, in tandem with the aforementioned transaction costs, influenced prices in the NMGF quota market. This study expands on the econometric models used in previous literature to measure NMGF quota market efficacy. Results from the hurdle models and OLS model, respectively, suggest that sea surface heatwaves and the number of stormy days in a fishing year impacted quota prices. While these findings strongly suggest that climate change is influencing NMGF quota prices, they also underline the econometric complexity of discerning market efficiency, especially for an immature market like the NMGF quota market. As climate change continues to affect stocks, and transaction costs prevent efficient allocation, policymakers and regulators face the challenge of preparing the NMGF modified-ITQ system to mitigate potential environmentally induced collapses, ensuring its resilience in the face of climate change.