Individual Transfer Quota (Itq): What It Is, How It Works

What Is an Individual Transfer Quota (ITQ)?

An Individual Transfer Quota (ITQ) is a quota imposed on individuals or firms by a governing body that limits the production of a good or service. If the holder of a quota does not produce the maximum amount as set out by the quota, they may transfer the remaining portion to another party.

Understanding Individual Transfer Quota (ITQ)

ITQs are used to limit the output of a good or service. For example, due to an import agreement with another country, a government may want to impose an ITQ on domestic wheat farmers. By imposing an ITQ on each farmer, the government can limit the total production of wheat.

ITQs are most commonly used in the fishing industry. In this example, an ITQ is a permit to harvest a certain amount of fish per species each year. A quota is granted to fishermen based on catch sizes in previous years. Quota holders are given catch limits based on the sustainability of the fish species.

In some cases, the permits have become more valuable than fishing. Fishermen who haven't been in the business for generations don't get a quota and thus must buy them from holders. In Canada, fishermen complain that quota holders keep raising prices to the point where it's unprofitable to fish.

Non-profit group Ecotrust Canada notes: "ITQs have promoted absentee ownership and quota leasing. Once vessel owners are gifted their initial quota, many subsequently retire or cease to be active fishermen. Instead of fishing, these 'armchair fishermen' earn income from the proceeds of quota lease fees."

In an opinion piece for The Tyee, authors Evelyn Pinkerton, Kim Olsen, Joy Thorkelson and Art Davidson noted that halibut ITQs leased for $7 to $9 per pound in 2015, when the landed price was $8.25 to $9.50 per pound. That meant quota owners took over 85% of the landed value, leaving fishermen razor-thin profit margins to pay crew, vessel operation, and monitoring costs.

In Iceland and New Zealand, which have had the longest-established ITQ systems, researchers report quota lease fees account for about 70% of the value of the catch, and small boats were forced out of the fishery by monitoring costs.

ITQs can be traded, re-granted, re-auctioned, or held in perpetuity. This can result in Quota Consolidation, which is heavily criticized.

For example, it is estimated that eight companies control 80% of New Zealand's fisheries through quota acquisition, four companies control 77% of one Alaska crab fishery, and 7% of shareholders control 60% of the US Gulf Red Snapper quota. The consolidation results in job loss, reduced wages, and decreased entry opportunities into the fishery.

None of this is to say that ITQs have not moved toward the goal of more sustainable fisheries.