ITQs in Iceland: A Descriptive Account http://www.hi.is/~bthru/iceitq1.html 1 of 46 5/16/03 11:25 PM Evolution and Performance of the Icelandic ITQ System By Birgir Runolfsson and Ragnar Arnason, University of Iceland Introduction In recent years there has been a clear movement toward property rights based fisheries management systems around the world. This trend toward property rights in fisheries mirrors to a certain extent the corresponding development in the organisation of economic activity on land in earlier times. The spreading of the ITQ (individual transferable quota) fisheries systems may in fact be regarded as yet another stage in the historical expansion of property rights as a method of economic organisation. Economic history informs us that the extension of the private-property system has generally been motivated by the desire to increase economic efficiency (North 1981. In fact, the private property rights system is generally believed to be fundamental to the current high level of economic productivity on land (Hayek 1976, Buchanan 1975). Just as with property rights on land, the ITQ system may be expected to yield substantial economic benefits.1 Iceland and New Zealand have been the front-runners in this development, with others following suit. These countries were the first to introduce IQs (individual quotas) and ITQs (individual transferable quotas) in major ocean fisheries. In Iceland IQs were introduced in the herring fishery in 1975. In 1979 these quotas were made transferable creating a fully fledged ITQ system in that fishery. In New Zealand ITQs were introduced in 1982. Their experience seems, generally speaking, to have been favourable (Arnason 1992a, Arnason 1996b). The purpose here is to look at the ITQ system as it has developed in the Icelandic fisheries. IQs and subsequently ITQs were introduced in to other Icelandic fisheries during the 1980s. Since 1991 all major fisheries within the Icelandic economic exclusive zone have been subject to a uniform system of ITQs with only minor exceptions. A description of the current structure of the system will be presented as well as some evaluation of its performance. Also, the regional and community impacts of the ITQ system will be analyzed. The Icelandic Fisheries The Icelandic economy is heavily dependent on the fisheries. Fish-product export accounts for around 80% of the commodity exports in Iceland or 50% of the foreign exchange earnings. The fishing industry’s direct contribution to GDP is about 17%, but total contribution (direct and indirect) is estimated to be as high as 45% of GDP. In other words, without the fisheries Iceland’s GDP would be only about 60% of current GDP (Arnason 1995a:85-86). The fishing industry’s size relative to the whole economy means that any fisheries' policy has far reaching implications for the economy. The fishing industry is a major