Energy subsidies and sustainable development

The EU fisheries sector is firmly part of the global fisheries crisis. In Europe more than 80 percent of known resources are over-fished, while overseas EU fleets have done more than their share to bring commercial productivity of the oceans to an all-time low. About three quarters of the world’s major fisheries, such as Atlantic Cod or Bluefin Tuna, are overexploited, fully exploited, or recovering from depletion. According to European Commission estimations, the European fleet operates with about 40percent overcapacity. In other words, there are too many vessels chasing too few fish.

European subsidies have played a major role in contributing to this overcapacity, and it is clear that subsidy reforms are needed to reduce fleets capacity and, in turn, to promote stock recovery and a more sustainable fisheries sector.

While some analysts estimate that the European Fisheries sector receives almost 2.5 billion Euros of aid per year (Sumalia and Pauli 2006), no one really knows the exact figure of fisheries subsidies. This is mainly due to the wide range of financial instruments used to support the sector, including grants, fuel subsidies, contributions to social security and fuel tax exemptions. In addition, there are agreements with non-European countries, under which the EU secures access for the European fleets to African and Asian waters in exchange for financial compensation.

The European Fisheries Fund

The most significant source of aid in the EU is the European Fisheries Fund (EFF). Approved in June 2006, it provides approximately 3.8 billion Euros of aid in the period 2007-2013. Like its predecessor, the so-called Financial instrument for Fisheries Guidance (FIFG), which ended in 2006, the EFF is supposed to play a dual role:

• adding value to the fisheries sector by helping to adjust the structures of the production sector,

• maintaining and contributing to cohesion amongst European regions whose economy is highly dependent on fishing.

Compared to the FIFG, the EFF puts much more emphasis on sustainability, environmental protection, preservation of natural resources and quality of life of fishing communities. Moreover aid for construction of new vessels is ruled out. Despite this, while the EFF is an improvement over the FIFG, it still includes measures which are likely to increase the EU fishing capacity and therefore increase pressure on already overexploited fish stocks.

The most crucial concern is the potential for fleet modernisation, in particular the replacement of engines. Already the mid-term FIFG evaluation in 2003 indicated that providing public aid for the reduction of the fleet, while supporting at the same time fleet modernisation, would lead to negative impacts on natural resources due to the higher efficiency of vessels. Moreover, as long as there are serious shortcomings in national control and enforcement systems, the under-declaration of engine power remains a widespread problem.

A 2003 WWF study on the Spanish fleet operating in the Mediterranean demonstrated that 80 percent of the engines supported by EU aid exceeded the legal engine power limit. On average, real engine power was over 2.5 times higher than declared. As a result, modernisation of engines – even under the legal condition to not increase engine power – will ultimately lead to a substantial increase in the European fleet’s fishing capacity.

On the other hand, the EFF has an enormous potential to help regenerate severely depleted fish stocks. Funding can be used for a wide range of activities, such as the proper implementation of the EU Habitats Directive and the so-called “Natura 2000” network of protected areas, or the certification of fish products caught using environmental friendly methods. As none of the measures in the EFF is compulsory, it is up to each country to choose national priorities and measures which will be funded. Unfortunately, so far, limited funds were allocated to environmental measures. While the chance for a new era of subsidies is open, the danger is that usual patterns will lead to further over-exploitation of already declining resources.

Having more detailed information about the aid flows is crucial to better gauge the impacts and the effectiveness of the European Fisheries Subsidies regime. Transparency is highly needed. As of January 2008, for the first time, beneficiaries of EU funds, together with amounts allocated to their operations, will have to be disclosed by Member States. This information is essential in order to evaluate the impacts of EFF expenditure and help prepare a more effective financial instrument for the future.

Towards sustainability

The link between the current fisheries crisis and EU subsidies is broadly accepted by governments, as reflected in commitments made at the 2002 World Summit on Sustainable Development in Johannesburg and discussions within the World Trade Organization Doha Round of negotiations. Consequently, it is crucial for the EU to target aid for the transition to a well-managed, socially and environmentally sustainable fisheries sector.

In 2008, there are at least two legislative initiatives from the EU Commission that could at least ensure that subsidies are not supporting illegal fishing activities: Within the context of the proposed regulation to prevent, deter and eliminate illegal, unreported and unregulated fishing EU Member States could agree to exclude vessels and operators engaged in IUU from benefiting from public aid and to make sure that prior-received funding has to be paid back. In fact, WWF has found evidence that vessels convicted for illegal, unreported or unregulated fishing have been lining up to collect EU subsidies. Also, as part of the revision of the control and monitoring regulation, which is expected in October 2008, the Commission could be given the right to withhold structural aid from Member States that do not adequately enforce the Common Fisheries Policy.

In the medium and long run, however, the European subsidy regime needs a massive overhaul to ensure the long-term sustainability of the natural resource on which the industry depends and the livelihoods of the people engaged in it. In particular, the next financing instrument should at least:

• Exclude the most harmful subsidies, such as aid for engine replacement;

• Target aid to adapting EU fleet’s capacity to existing resources;

• Provide more support to areas of common concern, such as monitoring and enforcement instead of supporting individual operators; and

• Involve environmental organisations in the programming process, at least to the same degree as other EU funds.

In addition, it is crucial that other environmentally harmful subsidies be abolished. For instance, all European Member States provide to the fishing sector tax exceptions on fuel.

To sum up: It is general knowledge that once subsidies are given, they are difficult to withdraw or to change. Vested interests and misguided politicians resist real change, and harmful subsidies continue to flow. However, under current conditions scientists project the collapse of all species of wild seafood by 2050. Fish stocks and the marine ecosystem – and with them, the economic health of the European fishing industry - will only recover if the next financing instrument ensures that the EU fishing capacity is brought down to levels in line with sustainable management of fish resources.

Links and Resources

Global Subsidies Initiative’s Literature Database on Fisheries Subsidies
The International Institute for Sustainable Development’s Global Subsidies Initiative has compiled a comprehensive list of studies that examine subsidies to the fisheries sector. Users can locate studies by countries covered, by year, and by subsidy type. The fisheries database is part of a series which also include literature on subsidies to agriculture, energy, services and transport.

World Wildlife Fund: Fisheries Subsidies
The World Wildlife Fund has been one of the leading campaigners in support of sustainable fishing practices. Reports and studies by the WWF have looked at a range of issues related to fishing subsidies, including negotiations at the World Trade Organisation, and policy recommendations for the EU’s Common Fisheries Fund.

University of British Columbia’s Fisheries Economics Research Unit
A report from the Fisheries Economics Research Unit at the University of British Columbia’s Fisheries Centre estimates that bottom trawl fleets operating in the high seas receive an average of $ 152 million dollars a year, consitituting15 percent of the total landed value of the fleet. The report, “Catching More Bait: A Bottom-up Re-estimation of Global Fisheries Subsidies”, compiles a database of fisheries subsidies for 144 maritime countries spanning 1995 to 2005.