May 30, 1996
Beyond Quotas: Private Property Solutions to Overfishing and Habitat Degradation
Presentation to Managing a Wasting Resource: Would Quotas Solve the Problems Facing the West Coast Salmon Fishery?
May 30-31, 1996
Good afternoon. I’m going to take the liberty of straying a bit from the title of my talk. “Beyond Quotas: Private Property Solutions to Overfishing” sounded like the perfect topic. Perfect, that is, until I spoke with Don Leal. I learned that he and Terry would be discussing the ways in which property rights have reduced fishing pressures. So I thought that I should focus on another threat to B.C.’s salmon—the threat of habitat destruction.
In my written paper I address both overfishing and damage to habitat. I describe a century of government mismanagement, and suggest that those holding secure rights in salmon would do a better job of both conserving stocks and enhancing their habitat. Exclusive, transferable property rights, I explain, encourage sustainable behaviour. The stronger the rights, the stronger the incentives to preserve the resource. To illustrate the advantages of strong property rights, I cite some of the examples you’ve already heard today. I also describe New Brunswick’s very encouraging experiences with rights in salmon. If you’re interested in property rights, I’d urge you to take a look at the paper. That said, let me concentrate now on one aspect of it—private property solutions to habitat degradation.
Damage to habitat has undoubtedly contributed to the decline of salmon. There’s no shortage of debate about the significance of that contribution. It’s not easily quantified: Environmental damage may occur over decades, with many years lapsing between activities and their cumulative effects. Not surprisingly, industry tends to play down the problem. And predictably, many fishermen emphasize it. In his 1982 report on the Pacific fisheries, commissioner Peter Pearse noted the controversy. He determined that while overfishing was the main cause of stock declines, habitat erosion was nonetheless a grave problem. Pearse issued a clear warning: “Unless the quality and productivity of the aquatic habitat is maintained,” he cautioned, “even the best of stock management will be to no avail.”
People generally agree that habitat damage has done more harm to biodiversity than to total numbers. Declining diversity is a serious problem in B.C. The province’s streams have supported hundreds, if not thousands, of genetically distinct populations. But more and more fish now come from fewer and fewer streams. The last decades have witnessed the weakening and extinction of many stocks. The Strait of Georgia has lost approximately one-third of its stocks. Biologist Carl Walters attributes 20 to 30 per cent of stock losses to habitat damage.
Countless activities have degraded salmon habitat. Logging and the construction of logging roads have caused landslides that have smothered stream beds with sediment. Even a study prepared for B.C. forestry companies concluded that logging has reduced both the number of species and the abundance of fish. Hydro dams have also degraded habitat, by changing water flows and temperatures. Of course they’ve also blocked access to habitat. Organic wastes from pulp mills and sewage systems have reduced oxygen in salmon waters. Toxins in mill and sewage effluents have also harmed fish. Certain toxins cause stress and disease, or interfere with reproduction, growth, migration, and feeding. These effects, in turn, increase the vulnerability of salmon to predators.
So why doesn’t somebody do something? Why doesn’t somebody stop this destruction? The problem is that no one has both the incentives and the tools to protect habitat. Those who have the authority to stop pollution won’t. And those who have the incentives to stop pollution can’t. Both the federal and the provincial governments could curb activities that harm fish and their habitat. But they’ve demonstrated over the years that they’re disinclined to do so. Powerful polluters have long had the ear of government regulators. Governments often benefit politically from polluters’ promises of development and jobs. Activities that destroy fish habitat offer visible, short-term gains that will help ensure governments’ reelection. And so they license (and subsidize) polluters. And they refuse to implement, or to enforce, strict regulations. A 1978 study found that 80 per cent of the discharges into the Fraser estuary exceeded permitted limits for quality or quantity. And no wonder. The previous year, the province had opposed a stronger fisheries law on the grounds that it might jeopardize its “close cooperation” with resource-based industries. This attitude also typifies federal regulators. In 1989 one bureaucrat complained that the fisheries department allowed “friendly” corporations immunity from prosecution. He warned that a continuation of this policy would result in a wholesale loss of fish habitat.
Sometimes, direct financial conflicts of interest prevent governments from getting tough with polluters. Enforcing regulations against sewage pollution would be expensive for the provincial government. It finances between 25 and 75 per cent of the capital cost of upgrading facilities. That may go a long way in explaining why the government so rarely convicts sewage treatment plants that fail to comply with provincial laws.
Governments that face these kinds of political and financial conflicts have good reason to dither. In Carl Walter’s words, bureaucrats “are rewarded not for effective action, but for making every problem disappear into an endless tangle of task force meetings and reviews.” Few bureaucrats suffer the consequences of inaction. Almost none are personally accountable for the harm they allow. Indeed, instead of being reprimanded, they continue to enjoy professional rewards. In short, inaction is in their self-interest.
Fishermen themselves have a clearer interest in protecting fish and their habitat. Their livelihoods depend on healthy stocks. But under the current regime, fishermen are virtually powerless. Normally, victims of pollution have recourse to the courts. They can choose between two legal approaches. One relies on statute law: If the polluter has violated a statute, victims can launch a prosecution. The other legal avenue is through the common law: If the polluter has violated their property rights, victims can file a civil suit. Unfortunately, B.C.’s fishermen can’t do either very effectively.
In theory, fishermen should be able to use the federal Fisheries Act to protect fish and their habitat. The act sounds like an amazingly powerful tool to fight pollution. It forbids the destruction of fish habitat. It also makes it illegal to deposit a deleterious substance of any type in water frequented by fish. It encourages citizens to launch prosecutions. If they win, they get half of the fine. And the fines can be quite hefty—up to $1 million a day.
But B.C. fishermen have learned that private prosecutions under the Fisheries Act aren’t so easy. Three years ago, the United Fishermen and Allied Workers Union teamed up with an environmental group to launch a prosecution. It accused the Greater Vancouver Regional District of dumping raw sewage into Burrard Inlet. But it wasn’t allowed to carry its case through the courts on its own. The province intervened. The B.C. government’s policy is to take over cases from private complainants. It wants to ensure that the prosecutions that proceed are in the so-called “public interest.” Apparently, the public interest doesn’t include cleaning up Burrard Inlet. For in 1995, the Crown’s special prosecutor dropped the charges against GVRD. He explained that the provincial and local governments had an unwritten agreement to allow the discharge of raw sewage. As long as the Crown can take over (and then stay) private prosecutions, fishermen can’t rely on statutes to clean up fish habitat.
Nor can most fishermen launch civil (or common law) actions against polluters. In this, they’re unlike many other victims of pollution. Often, when an industry or a municipality pollutes, it harms someone’s property. Its pollution may trespass on a neighbour’s land. Or it may constitute a nuisance. If so, the neighbour can take the polluter to court. He may get an injunction against the pollution. And he may get compensation. But it’s much harder for fishermen. That’s because they don’t have clear rights to fish or fish habitat. If a polluter damages fish habitat, or harms fish, so what? Whose property has it harmed? Whose rights has it violated? On what grounds could a fisherman sue?
Courts have established that fishermen normally have no grounds to sue polluters. Back in 1927, a Newfoundland cod merchant named McRae sued a whaling company. The company had built an oil and guano factory nearby. McRae complained that the factory committed three separate nuisances. First, the smoke from it drifted over his property and contaminated his drinking water pond. Second, its sickening odours prevented him from enjoying his property. And third, the grease, oil, fat, and pieces of whale carcasses that floated on the water made it impossible for him to carry on his fishing business.
The judge hearing the case noted that McRae was complaining of two distinct kinds of nuisance—private and public. If a nuisance interferes with a private right, an individual may take action against it. The factory’s air pollution and its odours fell into the category of private nuisance. The judge agreed that they violated McRae’s property rights. He issued an injunction against them.
The water pollution, however, was a different matter. The judge explained that the pollution didn’t interfere with a private right. It interfered with fishing, a right common to all the public. If a public right is violated, it’s the Attorney General (acting on behalf of the public) that must sue. In order for an individual to have a public nuisance claim, he must demonstrate that he has suffered “special” damages: His damages must be different in both kind and degree from others. The judge determined that the damage McRae suffered was no different from that suffered by other fishermen. McRae therefore had no cause of action. And so the judge refused to ban the water pollution.
A New Brunswick court issued a similar ruling in 1934. In that case, a smelt fisherman named Fillion claimed damages from a paper mill. He complained that the mill’s effluents fouled and tore his nets, and prevented nearby waters from freezing properly. This, he said, had spoiled his fishing two years in a row. The court, however, noted that Fillion had no title to the fishery. Yes, he had a fishing licence. But the licence didn’t assign any particular territory to him. It didn’t confer on him any exclusive property right. Fillion had suffered the same interference as other fishermen. The court dismissed his claim.
In 1970, commercial fishermen in Newfoundland lost another case for the same reason. Several fishermen sued a phosphorus company. They accused it of discharging poisons into Placentia Bay. Its wastes, they said, polluted the water, poisoned the fish, and destroyed their commercial value. In response, the company argued that the fishermen had no legal cause of action—that they had no grounds to sue for private nuisance. The court agreed. The fishermen held rights in common with other citizens. The company didn’t violate their rights to any greater degree than it violated those of others. The pollution was therefore a nuisance committed against the public. Consequently, the fishermen couldn’t bring a private action. The pollution would continue.
Some of you may remember the last time the courts looked at these issues. It was just a few years ago, here in B.C. In 1988, crabs in Howe Sound were found to be contaminated with dioxin. The federal government closed the commercial crab fishery. Three years later, a crab fisherman named Gagnier sued the owners of two pulp mills that discharged their effluents into the sound. He claimed that the mills were responsible for the pollution, and thus for the economic losses he sustained when the fishery was closed. Gagnier sued on a number of grounds, including public nuisance.
I recently spoke with the lawyer who represented Gagnier. He said that his key challenge was to deal with the 1970 decision in favour of the phosphorus polluter in Newfoundland. He either had to defeat that case or to distinguish Gagnier’s case from it. He had to prove that the pulp mills’ harm to the crab fishery was not just a public nuisance—that Gagnier had suffered “special” damages. One of the things that set Gagnier apart from other fishermen was his licence. The lawyer argued that commercial fishing licences (especially area licences) do confer property rights to fish. Apparently three weeks of the trial were devoted to this question.
Unfortunately, the court sidestepped the issue. It acknowledged that it was important, but it declined to deal with it. Instead, it focussed exclusively on Gagnier’s credibility. The court decided that it couldn’t believe Gagnier’s claim that he had suffered any damages. So it dismissed the case. We never did get to find out what the court thought of the argument that some forms of licences might indeed confer property rights on their holders.
The above cases illustrate a powerful argument for establishing property rights in B.C.’s salmon: Without such rights, fishermen can’t fight pollution that harms fish or destroys habitat. On the other hand, once armed with strong rights, fishermen have both the authority and the tools to protect their resources from pollution. They no longer need to rely on governments to protect their interests: They can take matters into their own hands and sue those who violate their rights. There’ve been hundreds of such cases. They’re more common in England than in Canada. And they generally pertain to inland (rather than ocean) fisheries. That’s simply a reflection of the fact that in England, virtually all inland fisheries are privately owned. And private owners sue those who, by polluting or obstructing lakes or rivers, harm their assets.
In England, many who own (or lease) threatened fisheries have been helped by the Anglers’ Co-operative Association, or the ACA. The ACA finances common law court cases. It helps fisheries owners obtain injunctions to clean up rivers. And it helps them get compensation for losses. It has brought some 2,000 actions in the last 50 years; it has lost only two.
In its early years, the ACA won cases against a paper mill, steel and iron companies, a chemical company, a power station, polluting farmers, and numerous local governments that fouled rivers with sewage. In the 1990s, its targets have included a sewage treatment plant, a company wanting to withdraw water from a stream, and the owner of a fish farm who allowed rainbow trout to escape into a river inhabited by brown trout. The ACA has fought pollution occurring far away from the owners’ fishing areas. Pollution in an estuary may prevent salmon from migrating upstream to spawn. Courts have ruled that such pollution creates a material obstruction to the free passage of fish, and thus violates the rights of fisheries owners.
We don’t have nearly as many Canadian examples of fishermen going to court to protect fish or habitat. That’s because in Canada, fisheries ownership is much rarer than in Europe. And our property rights have been further eroded. There are some privately held fisheries in Eastern Canada, especially in New Brunswick. In fact, 45 per cent of that province’s salmon rivers are in private hands. As would be expected, some of those private owners have turned to the courts to protect their assets.
One early case was launched by a sports fishing organization. It owned a number of lots along the Nepisiquit River, where its members fished for salmon and trout. In 1912, an iron company discoloured the river’s waters while grinding up and washing its ore. The fishermen went to court, claiming that the pollution injured spawning grounds and practically destroyed their fishing privileges. The court found that the iron company had violated the fishermen’s riparian rights, which entitled them to undiminished and unpolluted water. It issued an injunction against further pollution.
In 1963, New Brunswick riparians again sued for damage to their fisheries. Three hydro dams built in the 1950s and ’60s virtually destroyed the salmon runs in the St. John River system. The Tobique Salmon Club held rights along a tributary of the St. John. When the power commission built its dams, the club sued it. It settled the case for $400,000, which it used to purchase a fishing camp on another river.
Lest you imagine an unmanageable tangle of litigation resulting from the assignment of property rights to salmon, let me mention here that I don’t think it’ll happen. Strong property rights have a preventative effect. Britain’s Angler’s Co-operative Association has found that the credible threat of a lawsuit serves as a real deterrent to polluters. When approached by the ACA, a number of corporations and local governments have decided against building facilities that would pollute or obstruct rivers. And polluters have frequently corrected existing problems in order to avoid lawsuits.
I should also mention that even armed with the strongest rights, fishermen won’t always choose to prevent harmful developments or to eliminate pollution. Sometimes it’ll be cheaper for an industry to compensate its victims than to clean up its act. As long as fishermen have the power to shut down polluters, they can make meaningful choices between defending their property and accepting compensation. They’re in a strong bargaining position. They may insist that the pollution stop. Alternatively, they and the polluter might reach a compromise. The polluter might install abatement equipment or change its operations. Or the polluter might make it worth the fishermen’s while to leave the business. The important thing is that the resulting bargains would be arrived at freely and fairly. They would reflect the values and circumstances of all directly involved parties.
I’ve been talking about the legal powers that property rights confer on their holders. Of course they do more than that. Strong property rights also give their holders powerful incentives to protect fish and their habitat. Under the current regime, fishermen do have some such incentives. Their livelihood and way of life depend on healthy fisheries. But their investments in fisheries are limited by the extent to which they’ll reap the rewards. Even if fishermen had the power to protect fish and their habitat—they don’t, but even if they did—they would assume the costs of doing so only if they knew that they’d also enjoy the benefits.
The stronger the fishermen’s rights, the more likely they are to profit from investments in monitoring, in habitat protection, and in restoration. Property rights internalize the benefits of such investments. As the resources grow, and catches increase, the value of the rights rises.
We see this happening in New Brunswick. There, the highest valued use of salmon rights is generally sports fishing. Healthy salmon rivers attract anglers willing to pay hefty fees. Lodges charge several hundred dollars a day for accommodation and fishing. Some charge over $900 a day. Good salmon pools are valuable real estate, fetching millions of dollars on the market. Clearly, the owners of New Brunswick’s fisheries have strong economic incentives to preserve and enhance their assets.
Property rights, then, both enable and encourage fishermen to conserve stocks and preserve their habitat. It’s quite clear to me that in order to save B.C.’s salmon, we need strong property rights. The form they should take is less obvious to me. Rather than recommending a specific form, I’d like to suggest a few principles.
Several features characterize strong property rights regimes. The strongest rights are exclusive: Their holders can prevent others from using the resource. Rights, of course, are only as exclusive as they are enforceable. So enforceability is essential. The strongest rights are also transferable: This enables efficient managers to buy out bad managers, ensuring that rights end up in the hands of those who can make the best use of them. And property rights should be perpetual: Permanent rights encourage management decisions that ensure long-term productivity rather than short-term gain.
Furthermore, under the strongest property rights regimes, decision making is fully devolved. Whenever possible, decisions about fisheries should be in the hands of fishermen themselves. Fishermen are often better informed than remote governments. They have detailed knowledge of the ecosystems they work in. And of course, if they have exclusive, transferable, perpetual rights to the resource, it is they who will benefit or suffer from any decisions made. So they have incentives to decide wisely.
The degree to which quota systems display the above characteristics is not entirely clear. Quotas are still relatively new. As far as I know, they’re untested in the courts. And they vary widely. Some forms of quotas clearly don’t convey secure property rights. Just look at the recent dispute over crab quotas on the East Coast. The government decided it could simply take 20 per cent of the quota from one group of fishermen and give it to another. Or look at the enterprise allocation (EA) system. When the government assigned EAs to East Coast trawlers in the 1980s, it allocated specific amounts of fish to individual companies. That sounds like a quota system. But the EAs weren’t permanent, or fully transferable. They weren’t secure: If their holders didn’t use them they’d lose them. And their holders couldn’t make their own decisions about boat size.
Quota holders in New Zealand also complain of insecurity. In that country’s abalone fishery, political control over quotas has created uncertainty and prompted wasteful lobbying. In the words of one New Zealander, “The spectre of too many fishermen chasing too few fish has been removed by the Individual Transferable Quota system only to be replaced by special interest groups fishing politically on land for a share of the resource. The spectre now is of government carving and recarving a pie whose worth is diminishing steadily in proportion to the time and effort spent squabbling over who is to get what. . . . Political allocation makes property rights insecure which in turn discourages investment.”
Another weakness of most quota systems is that decision making isn’t fully devolved. Quota holders generally remain outside of management. The government continues to set the total allowable catch and to assume responsibility for habitat protection. I can’t see how governments, under a quota system, acquire new incentives or abilities to manage responsibly. They remain susceptible to political pressures. And the costs of any unwise decisions continue to fall not on themselves but on the people who have a stake in the fishery.
Most quotas, then, don’t display all of the characteristics of strong property rights. They’re vastly superior to weaker forms of rights. And they can be fine-tuned to eliminate some of the shortcomings I’ve mentioned. But to the extent that they remain insecure, or allow insufficient control over the resource, quotas won’t provide their holders with the incentives or the tools to manage fish and their habitat sustainably.
To maximize those incentives, we must go beyond quotas. We must develop a system of exclusive, transferable, and permanent property rights in salmon—a system of self-managed ownership. Self-managed ownership removes decisions about catches and habitat from the political arena. Rights holders, or the associations representing them, set catch limits, monitor fishing activity, enforce regulations, and exclude interlopers. As I explained earlier, armed with defendable property rights, owners protect habitat from pollution or other degradation. And under such a system, those who wish to acquire rights don’t waste resources lobbying government: They simply purchase rights from others in market transactions—transactions that leave buyer and seller better off.
I don’t know what form ownership should take. Individuals, communities, associations, or firms could own specific stocks. They could own fishing areas, or fish habitat. Judging from experience elsewhere, an endless number of configurations are possible. There’s no good reason not to experiment with several. As long as they confer secure rights, and as long as they get governments out of the business of managing our fisheries, they should have an excellent chance of success.