Unwanted catches, quota systems and the EU Landing Obligation: An economic and econometric analysis

The EU Landing Obligation (LO) is inspired by an environmental concern. Bycatches cannot be thrown at sea anymore but brought to land because of many (ethical) and mostly environmental concerns. Discards, in fact, can generate negative impacts on the marine ecosystems and ecological equilibrium, given increased mortality in fish populations and impact on marine biodiversity. The LO has also implications for the organization of the fishery sector (that bears costs of re-organization). The more fishers stick to the rule the better environmental management is guaranteed. The LO generates a trade-off (and potential source of conflict) between fishery markets efficiency and marine environmental protection. The paper, therefore, explores under what conditions markets and environmental protection can "match". The paper takes an economic perspective and provides an economic analysis of (a proposed) discard quota system for regulating unwanted catches in the European fishery sector. Using a simple model, the study evaluates whether and how the regulation designs proper mechanisms that align incentives for different economic agents (e.g. fishers and environmental concerned regulators), which are characterized by different objective functions. The study also provides selected empirical analysis. Results show that fishers choice to comply (or not) with the regulation and the proposed discard quota system, is not only affected by the legal constraint/discard ban per se but also by (1) a set of market conditions that vary day by day and (2) the degree of credible incentive design and implementation of the regulation (and related degree of credible applicability of the fines). An important aspect for the efficient working of the quota system refers to the need to design a mechanism that is also based on experience and evidence. For instance, in the Sicilian case study examined here, the probability to illegally discard UWC varies according to the type of product that is caught. In this perspective, the proposed UWC quota trade has the highest probability to work the higher is the probability (for the fisher) to be fined, the higher are the UWC price and the quantity. On the contrary, the UWC quota trade has the lowest probability to work, the lower is the probability to be fined, the lower is the quantity of UWC and the higher is the price in illegal markets.