DEFINITION of Individual Transfer Quota - ITQ

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 entity does not produce the maximum amount as set out by the quota, they may transfer the remaining portion of the quota to another party.

BREAKING DOWN Individual Transfer Quota - ITQ

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

How ITQs Work

ITQs are most commonly employed by the fishing industry. An ITQ is a permit to harvest a certain amount of fish per species each year.  A quota is granted to fishermen based on previous years' catches, and quota holders are given catch limits based on the sustainability of the fish species and can harvest throughout the year.

The permits in some cases, however, have become more valuable than fish. 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.

"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," notes Ecotrust Canda. "Working fishermen are increasingly becoming 'tenants' who pay exorbitant rents to landlords, or 'sealords,' who own the quota. The lucrative leasing has, in turn, driven up the price of purchasing quota, making ownership prohibitively expensive for many fishermen."

In 2015, an op-ed in the noted that halibut ITQs leased for $7-9/lb when the landed price was $8.25-9.50/lb. That meant quota owners took over 85 per cent of the landed value, leaving fishermen razor thin 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 per cent of the value of the catch, and small boats forced out of the fishery by monitoring costs. 

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