Retrospective Evaluation of Scrapping and Temporary ... · Temporary cessation funding ... Sweden...

DG MARE

Lot 2: Retrospective and prospective evaluation on the common fisheries policy, excluding its international

dimension

Ref. No MARE/2011/01

Sweden Case Study Report

for

Retrospective Evaluation of Scrapping and Temporary Cessation Measures in

the EFF Specific contract no.4 – SI2. 639813

August 2013

Cessation Measures Evaluation – Sweden Case Study Report Page i

Project no: ZF1455_S03

Issue ref: V3

Date of issue: 25/10/13

Prepared by: KK/BR

Checked/Approved by: RC

Cessation Measures Evaluation – Sweden Case Study Report Page ii

Contents

1 Structure of the fisheries sector ....................................................................................................... 1 1.1 Structure of industry ................................................................................................................. 1 1.2 Management structure .............................................................................................................. 2 1.3 Interviews ................................................................................................................................. 2

2 History of fleet capacity and cessation measures in the MS ........................................................... 3 2.1 Trend in fleet capacity .............................................................................................................. 3 2.2 Permanent cessation funding ................................................................................................... 5 2.3 Temporary cessation funding ................................................................................................... 5

3 Results of stakeholder interviews .................................................................................................... 6 3.1 Strategy and approach ............................................................................................................. 6 3.2 Implementation and Administration .......................................................................................... 7 3.3 External factors ......................................................................................................................... 8 3.4 Impact and Effectiveness ......................................................................................................... 8

4 Results of vessel owner survey ..................................................................................................... 10 4.1 Vessel and vessel-owner information ..................................................................................... 10 4.2 Owners that scrapped their vessel(s) with support ................................................................. 10 4.3 Owners that scrapped their vessel(s) without support ............................................................ 11 4.4 Owners not scrapping any vessels ......................................................................................... 11 4.5 Owners engaging in temporary cessation with and without EU aid ........................................ 11

5 Discussion ..................................................................................................................................... 13 5.1 Relevance ............................................................................................................................... 13 5.2 Effectiveness .......................................................................................................................... 13 5.3 Efficiency ................................................................................................................................ 16 5.4 Coherence .............................................................................................................................. 17 5.5 Acceptability ........................................................................................................................... 18

6 Summary and conclusions ............................................................................................................ 19 6.1 Trends in fleet structure & capacity ........................................................................................ 19 6.2 Extent of cessation measures contribution ............................................................................. 19 6.3 Opinions on cessation measures ........................................................................................... 19 6.4 Vessel owner Survey findings ................................................................................................ 19 6.5 Evaluation conclusions ........................................................................................................... 19 6.6 Conclusions for the counterfactual analysis ........................................................................... 20 6.7 Recommendations .................................................................................................................. 20

Cessation Measures Evaluation – Sweden Case Study Report Page iii

Tables

Table 1 Summary of Swedish fishing industry size ............................................................................... 2 Table 2 List of interviewees ................................................................................................................... 2 Table 3 Permanent cessation funding in Sweden under EFF ............................................................... 5 Table 4Temporary cessation schemes in Sweden ................................................................................ 5

Figures

Figure 1 Swedish fleet evolution in tonnage (GT) and power (kW) in relation to ceilings 2003-2013 ... 4

Acronyms

ACOM Advisory Committee of ICES AER Annual Economic Report FAO Food and Agriculture Organisation of the United Nations RSPB Royal Society for the Protection of Birds

Cessation Measures Evaluation – Sweden Case Study Report Page 1

1 Structure of the fisheries sector

1.1 Structure of industry

The Swedish fishing fleet has been decreasing in size for several decades as overcapacity has gradually been addressed and outdated vessels removed from the market. This trend has continued to do so under the FIFG and EFF programme periods. By 2011 the fleet had decreased to 1,218 registered vessels with a commensurate decrease in employment (estimated). The sector has experienced similar falls in gross tonnage and total power, which dropped from 43.2 to 29.5 thousand tonnes and 212.2 to 169.5 thousand kW, respectively between 2008 and 2012.

Under the EFF, the Swedish government implemented two national scrapping schemes aimed at demersal cod trawlers in 2008 and 2009. According to the Swedish Board of Agriculture (Jordbruksverket, hereafter referred to as JV) and the Swedish Agency for Marine and Water Management (Havs och Vattenmyndigheten, hereafter referred to as HVM), the two scrapping campaigns contributed to a 26% reduction in gross tonnage and 19% reduction in kW in demersal trawling during that period.

Trawl is by far the most common gear type in the Swedish fleet. It accounted for about 139 thousand kW in 2012 Seines/ring nets account for 16 thousand kW, and nets and hook and line accounted for four thousand and one thousand kW respectively1.

Trawlers are divided into several segments according to vessel size, and distinctions are also made on whether the vessel pursues pelagic fishing, coastal fishing or demersal fishing and which species it fishes2. The Swedish fleet is very diverse, and interviewees at HVM stated that the fleet is increasingly implementing the use of selective tools (species specific fishing gear) with the help of public support.

The total landing of the Swedish fleet in 2011 was (in thousand tonnes) 172.7, down from 214.1 in 2008, a decrease of 19%. The biggest landings by the Swedish fleet in 2012 consisted of herring (73 thousand tonnes), sprat (55 thousand tonnes), cod (14 thousand tonnes), mackerel (4.5 thousand tonnes) and shrimp, crayfish, coalfish and vendace (1-1.5 thousand tonnes each)3.

The Swedish fleet primarily fishes in the Baltic Sea on the east coast and Kattegat and Skagerrak on the west coast. Sweden has quotas in the whole of the Baltic Sea, including along the coasts of the Baltic States and Poland. In the west, the Swedish fleet has the largest quotas in the waters shared with Denmark and southern Norway, but is also able to fish in the North Sea and the Norwegian Sea.

The current status of the Swedish fishing industry is summarised in the table below, based on figures provided in HVM’s most current annual report. As shown, the size of the fleet has clearly been reduced.

1 Data collected from Agency for Marine and Water Management statistics and database website. 2 Agency for Marine and Water Management Annual Report on the Swedish fishing fleet for EC, May 2012. 3 Agency for Marine and Water Management statistics and database website


Table 1 Summary of Swedish fishing industry size

2009 2010 2011

Fleet size at end of year

(no. of vessels) 1,408 1,358 1,218

(gross tonnage) 37,619 32,938 29,489

(kW) 193,013 178,037 168,316

1.2 Management structure

The main managing authority for the European Fisheries Fund historically was the National Board of Fisheries (Fiskeriverket, hereafter referred to as FV). However, it was shut down in July 2011, at which point its responsibilities were transferred to JV and HVM. In any case, all measures within the EFF dedicated to permanent or temporary cessation had come to a close before FV ceased their operations.

FV shared the administrative responsibility for handling the funding for permanent cessation with County Administrative Boards around the country. For temporary cessation measures they shared responsibility with the national fishermen’s unemployment fund, Fiskarnas Arbetsloshetskassa. However, the unemployment fund only administered the benefits, based on regulations drawn up by FV. From April 2012, the fishermen’s unemployment fund merged with Handelskassan, a national unemployment fund for people employed in various retail sectors, service sectors and commercial trade sectors (including fishing).

1.3 Interviews

Interviews were conducted with JV, and former FV employees, responsible for administering the EFF, whose positions have been migrated to HVM. Interviews were also conducted with the Country Administrative Board of Västra Götaland, whose jurisdiction covers by far the largest proportion of registered fishermen in Sweden, along with the Swedish National Fishermen’s Organisation (Sveriges Fiskares Riksforbund, SFR), the only organisation for professional fishermen in Sweden, which represents about 75% of the fleet. An interview was also carried out with the National Organisation for Fishing Retail and Trade (Fiskbranchens Riksforbund, FR).

Table 2 List of interviewees

Organisation type Organisation title

Managing authority

Swedish Agency for Marine and Water Management

Swedish Board of Agriculture

Swedish University of Agriculture Sciences

Industry SFR - Swedish National Organisation of Fishermen


association SFPO - Swedish Fishermens' Producers Association

FR - National Organisation of Fishing Retail and Trade

"Swedish Fish" Public Information Service

2 History of fleet capacity and cessation measures in the MS

2.1 Trend in fleet capacity

As presented in the table above, fleet capacity in Sweden has been in steady decline. The recent scrapping campaigns precipitated this, especially in terms of gross tonnage and kW, since they targeted large vessels in particular. As shown in the charts below, in terms of tonnage and power, the Swedish fleet capacity has fallen both in absolute terms and in relation to its power ceilings in the period to December 2012.


Figure 1 Swedish fleet evolution in tonnage (GT) and power (kW) in relation to ceilings 2003-2013


2.2 Permanent cessation funding

Two national scrapping campaigns were conducted over two years, 2009 and 2010. At the start of the EFF programme the funding for scrapping represented about 35% of the budget for Priority Area 1. Due to the costs for scrapping that were substantially higher than foreseen, EFF funding was redirected to permanent cessation from all other initiatives within this priority area4. Consequently, this amounted to about 44% of the budget up to the end of 2010, at which time scrapping funding was exhausted.

Table 3 Permanent cessation funding in Sweden under EFF

Gear Category No of vessels GT

EFF Granted (k€) €/vessel €/GT

Trawls 30 2,572 10,573 352,417 4,111 Total 30 2,572 10,573 352,417 4,111

Adjustment plan No of vessels GT

EFF Granted (k€)

EFF paid (k€)

National contr. (k€)

MS Share

Bottom trawlers in the Skagerrak, Kattegat and the North Sea 23 1,425 5,823 5,508 1,836 25% Cod in the Baltic Sea 7 1,147 4,750 4,071 2,390 37% Total 30 2,572 10,573 9,579 4,227 31% Proportion of fleet (at 2011) 2.2% 8.7%

Source: Article 40 data

2.3 Temporary cessation funding

Temporary cessation in Sweden consisted of a single campaign carried out in 2007-8.

Table 4Temporary cessation schemes in Sweden

Name Date No vessels aided

Total spend Objective

Funding for temporary cessation

2007-8 302 €1,891,062 (50%

Swedish match

funding)

Sustain employment by covering vessel costs while vessel is in port

(during periods when they were not prevented fishing because of

regulation); rent for space at docks, insurance costs, etc

4 Mid-Term Evaluation of EFF by Ramboll conducted for the National Board of Fisheries, June 2011


3 Results of stakeholder interviews

3.1 Strategy and approach

In order to have the greatest possible effect, scrapping was focused on the fleet segments that were landing the most fish. The Operational Programme’s stated goals were a 50% capacity reduction in demersal cod fishing, 30% reduction in the pelagic segment and 10% reduction in shrimp trawling. While cod was a priority, small scale cod fishing with passive gear was not prioritised, as the aim was to scrap the vessels with the most capacity.

Temporary cessation was also envisaged as potential tool for capacity reduction, with the logic being that it would lessen the intensity of fishing effort during specific periods when the vessels implicated would otherwise have the legal possibility to be fishing. It was also seen as an economic aid that would work in conjunction with permanent cessation. As one interviewee at HVM explained, it was hoped that the funding would help sustain employment for remaining fishermen while capacity elsewhere was removed with the two large scrapping campaigns. In the medium-term, the scrapping campaigns made temporary cessation un-necessary by aligning fleet capacity with available resources.

The Swedish Government gave FV the task of drafting the National Strategic Plan and the Operational Plan. The National Strategic Plan and the Operational Plan were drafted through a wide process of consultation with a range of stakeholders within Swedish government, private sector, third sector and academia.5 These stakeholders formed an EFF oversight committee whose input was sought when making decisions in the management of the EFF. All the interviewed stakeholders stated that the OP was able to incorporate their opinions in a logical and equitable fashion, a task that was rendered relatively simple due to their lack of disagreement on most issues.

In order to improve on the experience of the FIFG, for which Sweden experienced underspend, the OP was orientated more towards goals and objectives than demand. The idea was to put in place simpler application and administrative procedures, focus more on overcapacity and adjusting the fleet to available resources. Scrapping was one of the foremost priorities, and its objective was to reduce fleet capacity to a (more) sustainable level. As mentioned above, during the first half of the EFF programme period significant funding was reallocated to scrapping from other measures. This was due both to the unexpectedly high premiums demanded by vessel owners for scrapping and the weight placed on reducing fleet capacity.

Although one of the main hoped-for changes between the administration of FIFG and EFF funding was to simplify administrative procedures, it is worth noting that some stakeholders, particularly those representing industry, felt that the level of bureaucracy had actually increased. With relation to very small grants, one industry representative even stated that the amount of verifications and controls had reached an extent which discouraged vessel owners from applying for funding. In addition, a number of stakeholders were of the opinion that the EFF has not focused enough on the environment, education, dissemination of information and research.

Other interviewees were more positive about the EFF, remarking that it is better structured and has targeted its interventions more effectively than the FIFG. Stakeholders at both HVM and the County Administrative Board seconded this, reiterating that the EFF differed significantly from FIFG and stressing that the EFF took away the focus on building new vessels and modernising the fleet. This was regarded as a positive development, since these measures were inadvertently increasing fleet capacity. 5 The Swedish National Strategic Plan and the Operational Plan for EFF


3.2 Implementation and Administration

Permanent cessation

There were two scrapping campaigns carried out as part of the EFF programme, both during the first half of the funding period. While the objectives and procedures were similar, each campaign had slightly varying selection criteria and goals.

The first campaign, the Baltic Sea campaign, was initiated in 2008, and had the following eligibility criteria for applying:

• Demersal trawlers fishing for cod;

• The vessel was more than 10 years old;

• The vessel had been actively fishing during 2006-2007;

• The vessel had been assigned at least 75 fishing days each of the years.

The second scrapping campaign in 2009, the Western Sea Campaign, was focused on the west coast, specifically the seas of Skagerrak and Kattegat.

• Demersal trawlers, mostly fishing for cod, but also eel and shrimp;

• The vessel had to be more than 10 years old;

• Vessel was fishing at least 40% of its allocated fishing days;

• Vessel had a mesh 90mm or larger.

The application process involved bidding, followed by a period of negotiation. As a basis for the negotiations, the Board of Fisheries had calculated premiums, which varied slightly between the two campaigns.

For the Baltic Campaign, the premium was calculated based on the insurance value of the vessel. The amount of cod that the trawlers had caught during the two previous years was also considered when deciding which vessels to scrap. Of 29 applications, there were ten eligible vessels. Four accepted this, four declined and continued fishing and two managed to negotiate a higher premium.

For the Western Sea campaign, the insurance value was not used as fishermen would be able to increase this prior to entering negotiations in order to receive a greater amount of funding. Instead the premium was calculated by a specified sum per gross tonne, multiplied with the total gross tonnage, plus a specified sum per cod, landed 2007-2008. The sum per gross tonnage could be negotiated, but there was a set cap. Of 45 applications, there were 28 eligible vessels. 24 vessels were granted premiums, and 23 accepted. Through negotiation, three of these received the premium they had initially asked for.

For vessels which fit the criteria, the most effective, with the largest landings, were seen as priorities. A section of FV’s body of rules and provisions from April 2009 states that “the size of the premium is judged in relation to the extent of the vessels’ cod landings during 2007 and 2008, as well as the reduction of fishing capacity that the scrapping entails”.

The economic performance of a vessel was not an explicit criterion.

There is a series of forms to control scrapping and to verify that the vessel in question has had its license revoked:


• There is a form from the company which has scrapped the vessel (a specialised company in Denmark) which verifies the actual scrapping. The scrapping companies have been approved by FV

• Application to the Board for Transport, Transportsstyrelsen, for removal of the vessel from the national ship register (Fartygsregistret)

• A verification letter from Transportstyrelsen stating that the vessel has been removed from the register.

• A form confirming that the VMS has been returned to the supplier

Local managing authority, Lansstyrelsen, prepares a certificate and the allocated sum is paid to the vessel owner.

Temporary cessation

Temporary cessation measures were implemented in 2007 and 2008. Benefits were paid to the owners of registered vessels. It was not an income benefit, but instead a grant to cover costs incurred when a vessel is in port, i.e. insurance, rent for the dock, etc. The grant was only provided during days when the vessel was not prevented fishing because of regulation, i.e. beyond days with a fishing ban set out annually, or because of poor weather. Vessel owners had to provide log books of landings to prove that they would have been fishing.

The benefits were given to vessels which had been fishing cod at least one of the two years preceding the application. For the Baltic, a vessel owner could receive benefits for 44 days, and for Skagerrak and Kattegat for 25 days. According to interviews with HVM, everyone who applied was given a grant, and in fact the funding for temporary cessation was not completely used up.

Among the stakeholders interviewed, both government and industry, temporary cessation was commonly referred to as ‘artificial breathing’, because it has had the opposite effect of what it set out to do. It has helped to retain jobs in the sector, which was planned, but crucially it has also helped keep the capacity of the fleet high, thus perpetuating the Swedish fleet’s overcapacity. SFR are critical to these benefits and wish to see market driven changes without public intervention.

3.3 External factors

Impact of the fuel crisis

Sweden opted not to receive any aid through fuel packages offered during the crisis. All stakeholders agree that the economic crisis had a negligible effect on the fishing industry, if any at all.

3.4 Impact and Effectiveness

The scrapping scheme has not reached its objective of a 50% capacity reduction but has had a noticeable impact on fleet capacity. According to SFR, the effects are large enough to


have created an incentive for remaining trawlers to stay in the fishing sector, especially in the light of recently increasing cod stocks. Scrapping may also have had an indirect effect on stock increase. The increases are small, but in some areas the quotas for cod have been slightly increased.

However, according to SFR, the main stakeholders representing government authorities and industry agree that permanent and temporary cessation should be discontinued. All stakeholders agree that it is too costly and entails too much dead weight loss. Reasons for this include:

• Overly long administration procedures: stakeholders felt that the bidding and negotiation process was too long, due partly to the need to calculate premiums on a highly individualised basis, taking a large number of criteria into account and partly to the need to meet with political decision makers throughout the process. This process took up to a year, during which time vessels were still fishing, and the burden for managing authorities was considered too onerous.

• Some fishermen managed to raise their premiums during negotiations, which increased costs.

• HVM stated that revoking a large amount of vessel permits and fishing licenses has added a significant cost. On the effective vessels (which were targeted) the potential landings of fish (potential earnings) are large. The holder of these fishing licenses thus have expectations of high premiums, and compensating for large potential earnings becomes very costly.

• Authorities cannot provide a persuasive national economic argument to the government to justify the high public expenditure. In order to provide vessel owners with an incentive to scrap, premiums would by definition need to be higher than the value a vessel would fetch on the open market (which would in turn take into account factors such as the value of fish to be landed and future income). Otherwise, vessel owners have an incentive to keep their vessels active. However, exceeding the market value is considered unjustifiable by central government decision makers.

• It is very likely that a large majority of fishermen reinvest their premium, i.e. public money is paying for investment of more capital in the fishing sector, potentially inadvertently increasing capacity. HVM stated that this reinvestment is one of the largest problems with the scrapping scheme, whether it leads to the purchase of new vessels which are not subject to as rigid rules and regulations (e.g. a vessel below 10m length) or the modernisation of technology on another vessel. In effect, stakeholders considered such reinvestment to allow benefiting vessel owners to unfairly compete with those who finance their operations without public funding.

Stakeholders have suggested some improvements if there is to be another round of cessation schemes. There needs to be more efficient administrative systems, the period which the fishermen have to stay away from fishing should be increased from one year, and there should be a period during which they are not allowed to buy vessels. One should look into revoking the professional fisherman’s license, which is unique to Sweden, and currently cannot be removed because it is not regulated under EU law.


In the pelagic fleet there has been a 35% capacity reduction6. The reduction in the pelagic fleet is believed to be predominantly because of the introduction of Individually Transferrable Quotas in 2007. Scrapping has not had an effect on the pelagic fleet, even though 13 vessels of the targeted demersal trawlers (cod fleet) also had pelagic licenses.

It was noted during the interviews that Sweden is below its allowed cap on capacity, both in gross tonnage and kW, which have been set by the EU. However, the efficiency of fleet combined with low quotas means it still fishes its whole quota.

4 Results of vessel owner survey

4.1 Vessel and vessel-owner information

Full interviews were carried out with twelve of the envisaged 16 interviews for Swedish vessel owners, owing to due difficulties in reaching the comparison group.

Of the six vessel owners providing information on their age (all of whom had received scrapping support), three were between 63-72, two between 53-62 and one between 43-53. This was reflected in their current employment status: while one continued to work in the fish industry (but not on board) and one stated that he was unemployed, the other four were all retired.

In line with this, none of these six vessel owners still had any vessels. Among other respondents, two had one vessel each remaining while another had two vessels. In terms of corporate structure, the remaining vessel owners presided over very small businesses. Two of the vessel owners with remaining vessels had between 2-5 employees, while the other just had one. All businesses were set up as partnerships (three responses) or an individual not registered as an enterprise (one respondent).

Reflecting the structure of the fishing industry and scrapping programmes in Sweden, no vessel owners had scrapped more than one vessel over the last ten years.

4.2 Owners that scrapped their vessel(s) with support

Nearly all (six) of the vessel owners surveyed no longer had any vessels. During their last year of activity, all but one were structured as natural persons (one respondent), individual enterprises (three respondents) or partnerships (one respondent). The remaining owner had his vessel registered as part of a corporation. None of these respondents had suffered severe financial setbacks just prior to scrapping a vessel: three of them reported profit as greater than 10% of turnover, while the other three claimed to break even. Instead, the evidence shows that the scrapping support hastened retirement. While four of the six with no more vessels were currently retired, five of the six who answered the counterfactual question on what they would have done without scrapping support claimed that they would have continued fishing. Moreover, four of these felt they would have done so for over five years, while only one claimed he would have continued for a shorter period.

6 Data acquired from National Board of Fisheries by Ramboll for Mid-Term Evaluation of EFF conducted for the National Board of Fisheries, June 2011 & 2011 Annual Report on the EFF by Jordbruksverket.


Only one vessel owner reported both benefiting from scrapping support and still being in activity. This individual had a profit in 2012 of between 5-10% of turnover. Moreover, he claimed that his profit had increased since the scrapping scheme and partially attributed his improved fortunes to increased fishing opportunities. Presumably this related in part to competition that diminished as other owners scrapped their vessels.

This scenario was consistent with responses given to explain why owners scrapped their vessels. Four cited regulatory restrictions that limited their fishing opportunities, while three had reached retirement age. Only two respondents felt that fishing was no longer profitable enough to sustain their businesses.

As a policy tool to remove fishing effort from the Swedish market, it is unclear whether the scrapping scheme was effective. While six of the seven benefiting from funding had their fishing licenses removed, they also sold their quota, meaning that the scheme may not have had a significant effect on the amount of fish caught. Tellingly, the scrapping beneficiary with a remaining vessel reported that his average catch had increased.

As would be expected given the parameters of the Swedish scrapping scheme described above, beneficiaries all applied under schemes jointly focused on particular species, fleet segments and geographical areas. On the whole, the scheme seems to have been economically advantageous for vessel owners. Three felt the amount of aid was more than the market price the vessel could have fetched on the open market, two considered it about the same as the market price and only two valued their vessels at more than the amount of funding provided.

The administrative aspects of both applying for and receiving and accounting for scrapping funding were rated favourably. On a scale from one to five, with one being ‘very simple’, three owners rated both processes a 1, with the other responses scattered among 2s and 3s. No vessels owners expressed negative opinions of these processes,

4.3 Owners that scrapped their vessel(s) without support

No respondents had scrapped any vessels without support.

4.4 Owners not scrapping any vessels

Only two respondents had not scrapped any vessels. Of these, one was highly profitable in 2012 (with a profit of over 10% of turnover), while the other broke even. Interestingly, the highly profitable vessel had recently experienced an improvement in financial performance and attributed this to the scrapping scheme removing competition from the market. From a different angle but a similar logic, the vessel owner who had broken even had considered scrapping a vessel but decided to sell it instead.

4.5 Owners engaging in temporary cessation with and without EU aid

No respondents participated in the short-lived temporary cessation scheme in Sweden.



5 Discussion

5.1 Relevance

5.1.1 Are measures other than EU-funded cessation measures (e.g. the market, transferable quotas) capable of addressing overcapacity in the Swedish fishing fleet? If not, to what extent are they insufficient and why?

A range of stakeholders, including both the Swedish managing authorities and main fishermen’s representative, are of the view that individually transferable quotas (ITQs) are a more direct and efficient method for addressing overcapacity than scrapping schemes. Survey results tend to corroborate this from the perspective of efficiency, in that they indicate the scrapping scheme has not been particularly cost-effective. At the same time, it is difficult to compare the effectiveness of these two methods as practised in Sweden, since large-scale scrapping campaigns took place in parallel with the trend towards ITQs. However, managing authorities did point out that scrapping was quicker to implement than other measures would have been.

5.1.2 To what extent are the objectives of permanent and temporary cessation measures appropriate to address overcapacity in the Swedish fishing fleet?

The Swedish permanent scrapping scheme was very finely targeted in terms of species, geographical area and gear type. While both campaigns were directed at trawls (which make up the vast majority of the fishing fleet), one focused on smaller vessels in Skagerrak, Kattegat and the North Sea, while the other focused on large vessels in the Baltic. This closely aligned with the need for capacity reduction emphasised in the latest Annual Report from HVM on the status of the Swedish fishing fleet. The report looks at the ratio between actual fishing mortality and targeted fishing mortality across the range of gear types fishing in Sweden, and found it to be much higher for pelagic and bottom trawlers than for other gear types. It therefore seems appropriate to have targeted these types of vessels in particular.

Temporary cessation betrays a less clear relationship with overcapacity than scrapping does. The Swedish authorities only carried out one such campaign, in 2007-8, which benefited 302 vessel owners who had to stop fishing temporarily due to any of a number of factors, such as reaching the maximum number of allowed fishing days per year or adverse weather conditions. The funding essentially served as unemployment benefit. While there is arguably a social and economic rationale for such a campaign, the fact that vessel owners would not have been able to fish during those days implies that overcapacity was not addressed.

5.2 Effectiveness

5.2.1 To what extent have permanent cessation measures contributed to a reduction in the size of the Swedish fishing fleet?

In absolute terms, the two scrapping campaigns clearly reduced the size of the Swedish fishing fleet. Taken together, they accounted for the removal of 30 vessels and, according to HVM, a 26% reduction in gross tonnage and a 19% reduction in kW in the demersal trawling fleet. While HVM’s figures corroborate this claim, it must be noted that, as was pointed out earlier in this report, the size of the Swedish fishing fleet has been declining for the past


several decades. Assuming that this trend would have continued in the absence of the scheme, it is more pertinent to ask whether the scheme was designed in such a way as to accelerate this decline.

The available evidence? indicates this question can be answered in the affirmative. Figure one above charts the gross tonnage of the fleet, tracking a gradual decline that continued until a more precipitous drop that coincided with the scrapping scheme. Moreover, the survey results show that in the absence of the scrapping scheme most vessels owners would have continued fishing, in most cases for more than five years. In addition, since scrapping the vessel entailed withdrawal of each vessel’s fishing license, it can be assumed that recipients did not simply buy and start fishing with another vessel. This is especially true in the case of vessel owners accepting additional ‘retirement funding’, which many recipients of scrapping in Sweden did. As a condition of accepting this vessel owners also forfeited their individual licenses to fish. Though interviewees felt a (potentially high) proportion of scrapping funding was reinvested in the fisheries sector, in absolute terms it did, alongside other measures implemented in parallel, lead to a reduction in fleet size.

5.2.2 To what extent have permanent cessation measures led to a sustained reduction in Swedish fishing capacity (the overall catching capacity of the fleet)?

The prevailing view among the interviewees from the management authorities and producer organisations is that, though the scrapping schemes have not led to a 50% reduction in capacity as was originally envisaged, they have had a real impact on fishing capacity. However, while the figures produced by the HVM show clear trends in the right direction, in terms of fishing effort and landings, in addition to fleet size, it is difficult to disentangle the contribution of the scrapping scheme from those of the myriad other interventions aimed at making the Swedish fishing industry more sustainable. In any case, the Swedish fleet still manages to reach its total allowable catch with its diminished size.

In short, the scrapping campaigns must be considered within the wider range of measures implemented as part of the multi-annual management and recovery plans. These set rules for total allowable catches and in large part target the same stocks (cod) as the scrapping scheme. Indeed, the scrapping campaigns are one measure among others to address overcapacity and overfishing of these stocks. In addition to the two scrapping campaigns, during the period under study the Swedish managing authorities introduced, in line with EU cod recovery plans, a kW day system, which has been used to reduce effort among existing vessels, and an ITQ system for pelagic fishing which allows vessel owners to distribute among themselves the right to fish up to a maximum catch ceiling.

These measures have, in concert, clearly had impacts in the desired direction. As shown in the latest HVM report, between 2008 (prior to the scrapping scheme) and 2010, relationship between actual and targeting fishing mortality has become significantly more sustainable for precisely the cod vessels (pelagic and bottom trawlers) targeted by the scrapping scheme and other measures. While the scrapping scheme clearly played a role, it is also evident, based on interviews with a variety of stakeholders, that similar reductions in fishing mortality could have been achieved using other means. Where the scrapping scheme may have been particularly effective according to managing authorities, given the large number of active


vessels before they were carried out, was in contributing to a reduction in fishing effort in a socially acceptable way (i.e. without restricting fishing among existing vessels to the point where a significant proportion would have gone out of business).

However, and in part leading from this, it should also be mentioned that there is a commonly held view among stakeholders that many recipients reinvest their premium in the sector, potentially inadvertently increasing capacity. HVM stated that this reinvestment is one of the largest problems with the scrapping scheme, whether it leads to the purchase of new vessels which are not subject to as rigid rules and regulations (e.g. a vessel below 10m length) or the modernisation of technology on another vessel (which would increase its capacity). In effect, stakeholders considered such reinvestment to allow benefiting vessel owners to unfairly compete with those who finance their operations without public funding.

5.2.3 To what extent have permanent cessation measures contributed to the modernisation of the Swedish fishing fleet?

Since the scrapping schemes were only open to vessels more than ten years old, theoretically they would result in the relative modernisation of the fleet. However, stakeholders interviewed felt that the 10-year threshold was too low to produce the desired effect. Since nearly all active vessels would have qualified under this criterion, the extent to which the scrapping scheme would have led to modernisation of the fleet was considered small.

5.2.4 To what extent have temporary cessation measures led to temporary drops in fishing activity?

The impact of temporary cessation measures on the Swedish fishing fleet was considered primarily economic by both managing authorities and the main producer organisation. In other words, it seems to have provided an artificial means to sustain Swedish fishing capacity for the 302 vessels that took advantage of it. The funding, which is in addition to unemployment benefits paid by the state, has allowed fishermen to remain in the sector where they would otherwise have ceased fishing due to economic pressure.

5.2.5 To what extent have temporary cessation measures assisted vessel owners to adapt to emergencies and other shifting conditions?

Sweden did not use temporary cessation funding to help fishermen deal with fuel shocks or other emergencies. Instead, it used the funding to pay for their vessel expenses when under normal circumstances the vessel would have been fishing. However, there is a prevailing view among interviewees from both managing authorities and the producer organisation that temporary cessation artificially prevented the exit of vessels that would otherwise have stopped fishing or adapted their business models to shifting market conditions and resource constraints. Thus, rather than helping vessel owners adapt, temporary cessation was viewed as a crutch that accomplished precisely the opposite. Noteworthy is the fact that only one temporary cessation campaign was carried out in Sweden, after which the applicable funding was shifted to permanent cessation.


5.2.6 To what extent have temporary cessation measures contributed to the maintenance of jobs in the fishing sector?

As described above, there is little doubt that, in the short term, temporary cessation helped sustain jobs in the fishing sector. However, by sheltering vessel owners from shifting conditions in the sector, it may have inadvertently reduced its long-term sustainability.

5.2.7 Have the effects of permanent and (to a lesser extent) temporary cessation measures contributed to environmental, economic and social sustainability in the Swedish fishing sector?

The two scrapping schemes in Sweden have resulted, alongside other in a reduction of the size of the Swedish fleet and contributed to the acceptance of reductions in fishing effort and catch. These have led to improvements in fishing mortality that are helping cod stocks to recover in the Swedish waters concerned, thereby contributing to the environmental sustainability of the Swedish fishing fleet. However, stakeholders from both managing authorities and producer organisations have insisted on the sub-ideal nature of scrapping schemes in relation to more market-based approaches such as ITQs.

Leading from this, it can be inferred that reducing the fleet’s size, inter alia through scrapping measures has enhanced its economic and social sustainability. The effort reductions that have occurred during the period under study could not have done so without a substantial drop in the number of vessels, according to managing authorities. Such a drop could have been engendered using market forces by, say, reducing the maximum catch among existing vessels to an amount that would prevented a large number of vessels from breaking even. It stands to reason that the owners of such vessels would have sold or otherwise got rid of their vessels, thereby achieving a similar reduction in capacity. However, managing authorities felt this might have put strain on social welfare systems as vessel owners drew on unemployment benefits. In this way, the scrapping campaigns can be said to have provided a soft landing to vessels owners eventually needing to exit the sector.

Only one temporary cessation campaign was carried out in Sweden, and it does not appear to have had significant environmental impacts. In the short term, however, by sustaining beneficiaries during periods when they would have been unable to fish in any case, the measures may have allowed them to remain in the sector rather than exiting. This will have contributed to the economic and social sustainability of the Swedish fishing fleet but may also have had perverse consequences. Over the long term, stakeholders interviewed had concluded that temporary cessation measures may have indeed contributed to overcapacity in the long term by artificially allowing the concerned vessel owners to continue operating, and no further temporary cessation is planned in Sweden for this reason.

5.3 Efficiency

5.3.1 Have the effects of permanent and temporary cessation measures been achieved at a reasonable cost? Could similar effects be achieved in a more cost effective way?

In pure cost-effectiveness terms, the scrapping scheme was able to remove 30 vessels at a cost of EUR 352k per vessel, or just over EUR 4k per gross tonne. The prevailing view among managing authorities and producer organisations is that scrapping measures are not a cost-effective means for reducing fleet capacity or fishing effort. This view related to the substantial administrative resources required in order to allocate, disburse and control


funding, in addition to concerns that the premiums paid per vessel were too high. Moreover, the managing authorities pointed out that market-based approaches to reducing fishing effort do not entail large payments to vessel owners and are thus intrinsically make for cheaper interventions. Anecdotal evidence from the survey corroborates these views. For example, more respondents thought that the scrapping premium exceeded the market value of the vessel than the inverse (despite potentially feeling pressure to claim that the funding provided was appropriate).

Though inefficient, managing authorities pointed outthat scrapping was able to be implemented (thus removing a substantial amount of fishing capacity) in a relatively short space of time. Market-based tools, such as ITQs, could achieve similar results at considerably lower cost to the taxpayer, but they could, in the case of measures that were phased in gradually, take longer to achieve the desired results, or, in the case of measures implemented more quickly, result in social or economic.

Temporary cessation, since it was not perceived by stakeholders to have had a meaningful positive impact, must be assessed as not being cost-effective. Indeed, it was based on a similar assessment that the Swedish managing authorities have decided not to carry out any further temporary cessation campaigns.

5.3.2 Are the procedures, processes and rules of the cessation measures conducive to enabling Member States to fulfil their respective roles cost effectively?

The administrative burden of scrapping funding in Sweden was considered quite time-consuming for authorities and vessel owners alike, particularly in comparison with other ways of reducing fishing effort, such as ITQs. Despite this, most stakeholders, including vessel owners as well as management authorities, felt that the administrative procedures were relatively straightforward and implemented as efficiently as could have been expected given the need to administer a large amount of funding. The process by which fishing licenses were removed from scrapping beneficiaries kept dead weight loss at a minimum by ensuring that EU funding did not incentivise vessel owners to simply buy another vessel and continue fishing.

5.4 Coherence

5.4.1 To what extent do the cessation measures complement other initiatives at EU and national level? Are there any areas of duplication that could be avoided? Could similar initiatives be expected by the Member States or other actors without EU support?

During the course of the research stakeholders repeatedly pointed to market-based approaches, namely ITQs, which could replace scrapping measures as a means to reducing fishing capacity and (more importantly) fishing effort. Indeed, in parallel to the two scrapping campaigns the Swedish managing authorities began implementing such measures while deciding not to carry out any further scrapping campaigns. But the two types of scheme are not perfect substitutes, and can be conceptualised as complementary. In this sense, the scrapping campaign allowed the authorities to quickly remove a substantial proportion of vessels while avoiding detrimental economic and social impacts that may have been incurred had other means been used. That these negative impacts have not been incurred as a result of ITQs implemented since the last scrapping campaign in 2010 in part indicate, in the views of managing authorities, the partial success of the cessation funding. In other


words, scrapping funding allowed the Swedish fisheries sector to adjust its size to a more sustainable level, at which time reductions in fishing effort no longer necessarily entailed painful restructuring. Thus, it is evident that the scrapping measures were coherent and complementary with other policy tools.

5.5 Acceptability

5.5.1 What are managing authorities’ views of the current system for cessation measures in relation to other potential ways to reduce fishing capacity?

As repeated many times in this report, enthusiasm for permanent cessation measures has rapidly declined in recent years among both managing authorities and the main producer organisation. Instead, ITQs are favoured for their perceived efficiency and more direct impacts on fishing effort (rather than only fleet size). For this reason no further scrapping measures are planned in Sweden during the next round of EFF funding.

5.5.2 To what extent do vessel owners rely on the current level of funding for cessation measures and are there other interventions that could fulfil a similar role?

Given that the most recent scrapping campaign took place in 2010 and that no similar interventions are planned in the near future, the fishing industry is neither counting on nor relying on the continuation of them. Expectations among relevant stakeholders have been aligned with the redirection of policy towards ITQs instead. These in many ways substitute for cessation measures and are seen as a more market-based, potentially effective and efficient approach that would avoid many of the perverse consequences and dead weight loss associated with scrapping.


6 Summary and conclusions

6.1 Trends in fleet structure & capacity

• Fleet capacity in Sweden has been in steady decline for decades and during the period of study fell from 1,408 to 1,365 vessels, from 43.2 to 29.5 thousand tonnes and from 212.2 to 169.5 kW. This rate of decrease is substantially higher than in previous decades.

6.2 Extent of cessation measures contribution

• Permanent cessation measures resulted in the direct remove of 30 vessels from the Swedish fleet – 23 bottom trawlers and seven large cod trawlers. This amounted to a drop in 2,572 gross tonnes based on spend of about EUR 10.5m, or EUR 352k per vessel or EUR 4.1k per gross tonne removed.

6.3 Opinions on cessation measures

• Stakeholders from Swedish management authorities and producer organisations agreed that scrapping measures had resulted in reduced fleet capacity, but emphasised that they were inefficient compared with market-based approaches such as ITQs. Both groups were against future scrapping schemes and favoured ITQs.

• Vessel owners who received scrapping funding were generally favourable of the way the scheme was administered and felt they received a fair (or, indeed, advantageous) premium for their vessels.

• Temporary cessation was seen by all stakeholders interviewed as having potentially positive short-term impacts in terms of sustaining the fleet in economic terms. However, in the long term there was an underlying sentiment that temporary cessation could artificially prop up vessel owners that would otherwise have exited the market, thereby prolonging the time it would take for the industry to restructure and reach sustainable levels.

6.4 Vessel owner Survey findings

• Scrapping beneficiaries were generally nearing or at retirement age and either individual owners or part of very small businesses consisting of a small number of vessels.

• Rather than reaching vessel owners facing dire economic circumstances, most respondents had experienced healthy turnover in the year prior to scrapping. Instead, the funding seems to have accelerated retirement. This indicates that scrapping did reduce the size of the fleet above and beyond what would have occurred otherwise.

• Fishing licenses were generally removed as from vessels owners as a condition of accepting the funding.

• Administrative aspects of the scheme were rated favourably despite the amount of time needed to apply, receive and account for funding.

• No respondents had scrapped without support, indicating that vessel owners not receiving funding sell or continue using their vessels rather than scrapping them.

6.5 Evaluation conclusions

• Relevance: evidence indicates that, while there are other ways to reduce overcapacity and effort in the Swedish fleet, permanent cessation measures can contribute to the achievement of the scheme’s objectives, potentially in concert with other measures. Temporary cessation,


however, appears less well aligned to the objective of reducing capacity or making fishing in Sweden more sustainable.

• Effectiveness: the scrapping schemes did result in a drop in capacity that would not have occurred without active intervention (i.e. under market conditions alone). While other measures could have achieved similar reductions, managing authorities, though otherwise critical, felt that scrapping allowed this to occur in a socially acceptable way Temporary cessation may have helped sustain jobs in the short term, but long-term effects are less certain and may even have been counterproductive.

• Efficiency: scrapping was generally perceived as less cost-effective than market-based approaches to reducing capacity, such as ITQs. However, stakeholders considered it to have been implemented reasonably efficiently in terms of administration.

• Coherence: subsequent to the two scrapping campaigns in Sweden, the managing authorities began implementing an ITQ system which has now replaced scrapping schemes, of which no new campaigns are planned.

• Acceptability: managing authorities are in favour of ITQs in future and are not planning any future scrapping or temporary cessation measures to align fishing capacity with available resources. Given the lack of expectations for future scrapping, current vessel owners do not rely on such funding.

6.6 Conclusions for the counterfactual analysis

A key component of the study was to ascertain what would have happened in the absence of the permanent and temporary cessation funding. At the level of Sweden this is not possible at any level of statistical significance, given the size of the sample interviewed. However, the survey questions gave some indication as to how capacity and the situation for vessel owners would have evolved without the funding.

The survey findings imply that vessel owners receiving support exited the market earlier than they would have done otherwise. Five of the six who answered the counterfactual question on what they would have done without scrapping support claimed that they would have continued fishing. In four of the five cases they would have continued fishing for over five years. It thus seems that the amount of vessels decreased directly due to the scheme. However, quota was resold, meaning that the difference in the amount of fish caught is potentially zero or negligible and is difficult to assess conclusively. Moreover, four of the six respondents benefiting from the funding cited regulatory restrictions that were gradually limiting their fishing opportunities. Presumably, a continued diminution of their fishing rights might have led (some of) the vessel owners to stop fishing in less than five years. Economically, vessel owners can be assumed to have benefited from scrapping funding, since several vessel owners felt the premium provided was higher than the market value of the vessel in question.

6.7 Recommendations

6.7.1 Scrapping

The Swedish authorities have fully shifted to a system of ITQs for effort management and do not envisage further scrapping campaigns. While the evidence surrounding the effectiveness of the scrapping campaigns already carried out is not conclusive, it is clear that the major restructurings in the fleet that might benefit from scrapping have occurred. Therefore, it is recommended that the Swedish position of no further scrapping is supported.


6.7.2 Temporary cessation

As with scrapping, the Swedish authorities do not plan any further temporary cessation campaigns. The single campaign that was carried out was assessed by the authorities as ineffective and potentially counterproductive, since it may have prevented otherwise unprofitable vessels from exiting the market. The evaluation did not find any evidence to counter this claim, and therefore we recommend that the Swedish fleet not devote funds during the next period to temporary cessation.

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