Subsidies make unsustainable fishing viable (June 2011)

Fuel aid is 31% of value of Irish fish landings. By Dara McHugh

On May 12, the European Parliament voted 369 to 203 in favour of the ceiling for de minimis aid to individual fishing companies being doubled. De minimis aid is aid which can be granted by national governments without breaching the general proscription on state aid. The increased ceiling could, if endorsed by the Commission, be used to help the industry cope with higher fuel prices.
This would be the second time that the de minimis ceiling has been raised; the Commission previously increased it by a scale of ten, from €3,000 to €30,000, in 2007.
The argument for increasing the size of potential aid payments is fairly clear: the industry relies heavily on subsidies and would likely go under without them. For those vessels that use mobile gear (trawling, dredging, etc), fuel amounts to approximately 60% of operating costs, so assistance allows fishing that would otherwise be unprofitable, to continue.
On the other hand, the industry’s problems do not stop at energy. The UN Food and Agriculture Organisation estimates 85% of fish stocks are over- or fully- exploited, while European stocks are believed to be more than 70% over-exploited. Fisheries are, it is clear, on an unsustainable path. It doesn’t make sense, then, to increase subsidies that exacerbate the excess.
The fundamental problem is over over-capacity; there is too much catching power and too few fish. A 2009 Green Paper on Common Fisheries Policy (CFP) Reform called fleet over-capacity “the fundamental problem” of the CFP, a view backed up by a recent report by the Chair of the World Trade Organisation (WTO) Negotiating Group on Rules.
This over-capacity is sustained by a poorly thought-out régime of subsidies. Both WTO and CFP reports focus on the role of subsidies, and particularly fuel subsidies, in maintaining over-capacity. Fishing vessels can avail of marked diesel, whose rate of excise is about 9% that of standard diesel; and since fuel is the biggest cost component, this support is crucial.
In Ireland, the fuel subsidy is, according to recent research by Smart Taxes Network, approximately 31% of the value of landings. These subsidies worsen over-fishing, as they enable destructive and energy-intensive fishing methods to continue when they would not otherwise be economically viable.
It doesn’t make sense for national or European subsidies to support the industry in destroying its own resource. Instead of responding to short-term economic demands, policy-makers should see subsidies as a tool for managing and protecting fish stocks and ecosystems.
Stock recovery plans are an obvious starting point for this approach. Irish Sea cod stocks, for instance, despite over 10 years of rebuilding programmes, are showing no sign of recovery. A major factor is that derogations, sought by the industry, allow trawling to continue in the sea for other, less threatened species such as Nephrops, the Norwegian lobster. This non-selective fishing inevitably brings cod by-catch and undermines its recovery. Consequently, the EU cut cod quotas in December last year and Commissioner Damanaki has even threatened the complete closure of the Irish Sea to fishing if the situation does not improve.
Ultimately, as long as non-selective fishing for other stocks continues in a recovery area, the threatened species will be caught and killed. Species-recovery requires that government direct subsidies to that end. Smart Taxes’ research proposes a simple mechanism for doing this: to disallow marked (subsidised) diesel to any vessel that is caught using towed gear in a recovery zone.
Fuel costs are so substantial, and the marked diesel support so significant, that this would be a strong incentive for compliance.
More broadly, instead of blind spending such as de minimis aid, subsidies should be used to help the industry reduce its capacity and adapt to biological reality.
Other useful measures would include aid for implementing selective methods in recovery areas, so that only healthy stocks are caught, leaving the threatened species untouched.
As the de minimis vote showed, the fishing industry is threatened by insolvency. Biological sustainability is being accorded lower priority than economic survival.
The role of Government and European support is to ensure that the two imperatives overlap.

Dara McHugh works for Smart Taxes