Case Study #2: Protecting Fisheries in Alaska (cont.)
The Solution: Cap and Trade

So a change was made. In 1995, the number of boats hunting halibut was limited and each boat was assigned a specific allowance: a fixed percentage of the total catch that it could take from the sea. If the crew wanted to catch more, they could purchase allowances from other boats. If they were prepared to catch less or leave the fishery entirely, they could sell their allowances. In the language of fishery management, a system of "Individual Transferable Fishing Quotas" (or ITQs) was put in place, but the essential change was this: a capped market was transformed into a cap-and-trade market.

The results of this change were immediate and astonishing. In the first year of cap and trade, the fishing season expanded from two days to 8 months. Allowed to work at a more reasonable pace, the crews stayed home during bad weather. No boats went down due to storms. Not a single life was lost. Ghost fishing and bycatch dropped significantly, reducing two environmental impacts. No longer forced to sell to a small number of buyers in a crowded market, fishing crews got a fairer price for their catch, and fresh halibut returned to restaurants and supermarkets.

These changes have not gone unnoticed. In December 1998, the National Academy of Sciences released a report praising ITQs for their role in reviving the halibut fishery off the Alaskan coast. Clearly, where a cap alone could not remedy the problem - cap and trade delivered positive, measurable results