As the destruction of natural ecosystems continues at an unprecedented rate, the financial risks stemming from biodiversity loss are becoming increasingly significant for investors and companies. To dive deeper, GLG recently invited Ragnar Arnason, a GLG Network Member and Professor of Fisheries Economics & Marine Resources at the University of Iceland, to discuss one of the industries entangled in climate change discussions — the fishing industry. Arnason spoke with GLG’s Sam Stopps and provided his take on the current state of the industry, its role in declining ocean biodiversity, and whether new regulations might be able to reverse the course. This article is a condensed and edited version of their conversation.

Could you explain the term “ocean sustainability” and the metrics we use to measure it?

There is a clear lack of definition of ocean sustainability, for good reason, but this leads to muddled discussion, which doesn’t always lead to the most beneficial policies. This problem is compounded by a great deal of private preferences and value judgments masquerading as science.

Sustainability is not an easy concept to grasp and is often misunderstood and/or misused. When we talk about a renewable natural resource — a fish stock, for instance — this resource can usually be sustained and kept relatively stable over a wide range of biomass levels. Some of these sustainable levels are more beneficial than others, but we are not always able to pinpoint these levels. Moreover, sustainable levels usually fluctuate over time, so it is sometimes difficult to establish whether a given biomass level is sustainable or not. If a natural resource is nonrenewable, like mineral resources, no positive level of extraction is sustainable — the services these resources yield must decrease over time.

The only useful definition of sustainability is in the context of how a resource serves human beings. For example, how long can the ocean sustain its services to humans? How to develop a usable measure of this concept of sustainability is another matter, however. The multidimensional nature of ocean resources complicates this task greatly. Oceans teem with millions of animal and plant species, which interact in complicated ways, leading to complex and often prolonged dynamic cycles. When you consider the complexity of the marine ecosystem, you realize how difficult it is to determine the sustainability of its constituent parts.

When it comes to sustainability, you can’t just consider the state of the ocean at any given time, but how it might evolve, which brings in more unanswered questions surrounding the ecological links between species and their habitats.

Can you discuss global fish stocks and how the marine ecosystem has been impacted in recent decades, particularly by commercial fishing?

Broadly speaking, most commercially exploited fish stocks have been reduced by 75% to 80% of their pre-exploitation levels and are at about 35% to 40% of what would be economically optimal. According to recent estimates by the World Bank (“Sunken Billions” study), economically optimal global fish stock levels would be roughly 600 million metric tons, while current levels are only about 250 million metric tons. Thus, similar or even greater catches can be obtained sustainably with much less costly and environmentally damaging fishing effort.

While there has been a great reduction in commercial fish stocks, that doesn’t necessarily mean that current levels are not sustainable or even that the marine ecosystem has worsened. Other species of fish and other aquatic biota have increased in number to replace and exploit the niches created by the reduction in commercial fish stocks.

Despite this commercial overexploitation of fish stocks, we have seen some reversal in recent years. Overall, about 40% to 50% of global commercial fish stocks appear to have stopped declining, and some of them seem to be slowly improving in volume. This is mostly due to improved fisheries management, mainly in Europe, North America, and Latin America. However, fish stocks may still be declining in Asia and Africa, as noted in this September 2022 article by the University of British Columbia.

Of course, we also need to be mindful that fishing activity significantly impacts the ocean habitat, such as the coral reefs, and contributes to ocean pollution. Because of this, the optimal fishing effort should be even less than that which maximizes the net economic return from the fishing activity.

Can regulations, such as quotas, make the fishing sector more sustainable?

Appropriate controls on fishing activity would undoubtedly reduce the environmental or ecosystem impacts, but what kind of regulations does that entail?

Luckily, at least in the Western world, we have seen improvements in this regard. Commercial fishing activity has come under reasonably efficient and effective fisheries management, usually based on individual quotas, or individual transferable quotas, otherwise known as ITQs. These systems, combined with the appropriate setting of TACs (total allowable catches), have been theoretically shown to reduce fishing effort, generate a high degree of economic profitability, and restore fish stocks. These theoretical predictions have since been confirmed by the experience of ITQ systems in Europe, America, and Oceania. We have seen a substantial reduction in fishing effort, which means less ecosystem impact, followed by gradual regeneration of fish stocks.

Individual quotas are essentially portions of the overall total allowable catch (TAC) that fishing companies and individual fishing vessels are allowed to harvest. Fisheries authorities generally set the TACs based on an assessment of fish stock health. This system creates a strong incentive for quota holders to maintain a healthy marine ecosystem and keep fish stocks at a fairly high level to yield maximum economic benefits to the fishing activity. Indirectly, these ITQ rights create a foundation for the holders of these rights to collaborate on stewardship of the fish resources and collectively negotiate with other users of marine resources on the best possible joint use.

These individual quota systems have been operating for nearly 50 years in some countries and have become increasingly common around the world over the past two decades and seem to work very well to create economically and biologically sustainable fisheries.

How extensive is the current ocean plastic crisis, and is it possible to stop or reverse the spread?

This is a significant problem that has gained attention only in the last 10 to 15 years. Globally, the annual production of plastics is about 400 million metric tons, and it’s estimated that at least 10 million metric tons of plastics end up in the ocean annually. The European Union has estimated that plastics account for nearly 80% of all ocean litter, whether through sewage, rivers, or waterways, and the extent of this pollution is getting worse.

Over time, some of these plastics gradually break down into microplastics, and therein lies a serious marine ecosystem issue. When these microplastics, which are too small to be seen by the naked eye, are ingested by fish or other marine life, which often mistake them for food, these animals get sick, grow less, and even prematurely die. In this way, these species become part of the food chain. Thus begins the circulation of these microplastics from species to species, even to humans. At this point, we don’t know how big this problem is or will become, or what environmental or health risks will result.

Right now, the problem doesn’t seem serious, but it’s difficult to detect reduced fish growth rates on a large scale, and I’m unaware of any existing studies that do this. Hypothetically, a decrease of maybe 10% in the regenerative ability of fish stocks, equivalent to food supplies for 50 million people, would constitute a significant global nutritional shock.

The plastic pollution problem may be a long-lasting one. Even if we could halt the inflow of plastics into the ocean and elsewhere by various technical and regulatory means, we are still unsure how fast the overall plastic contamination would decline. It may take decades to disappear from the food chain. One might liken this to the accumulation of CO₂ in the atmosphere — the stock stays there long after we reduce the overall inflow, but it gradually declines over time.

So how do we reduce the inflow of plastics? One solution would be to reduce the production of plastics, but that requires replacing plastics with other materials, something we have already commenced doing in Western countries. Whether those alternatives are any better is another question. The idea of creating biodegradable plastics, which would degrade much quicker, may also be a good one.

Then, of course, the biggest impact would be made by preventing plastics from entering the oceans at all. While this is technically possible, it is very expensive, and we must wonder whether it is politically feasible. Much of the plastic is produced by large corporations that supply products worldwide. Are the biggest producers of these plastics willing to reduce their production? The easiest way to deal with marine plastic contamination might just lie in imposing restrictions on plastic production and distribution.

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About Ragnar Arnason

Professor Ragnar Arnason is a Professor Emeritus at the University of Iceland. He is an acknowledged expert in theoretical and practical fisheries economics and optimal marine resource utilization. He was the Chairman of the Institute of Economic Studies at the University of Iceland. Professor Arnason advises on fisheries management systems around the world and has been a visiting scholar at universities in the United States and Europe. He is the lead author of the World Bank report “Sunken Billions: The Economic Justification for Fisheries Reform” and “Sunken Billions Revisited: Progress and Challenges in Global Marine Fisheries.” These reports reviewed the decimation of global fish stocks and the accompanying damage to the marine ecosystem and wider ocean biodiversity.

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This article is adapted from the GLG Teleconference “Ocean Sustainability and Biodiversity.” If you would like access to the transcript for this event or would like to speak with experts like Ragnar Arnason or any of our approximately 1 million industry experts, contact us.

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Questions Asked During the Teleconference:

• So, Ragnar, to start today, can you provide a high-level overview of what we mean by ocean sustainability in your view and what metrics we use to measure this?
• If we move on to our next question, could you briefly discuss global fish stocks? And can you discuss, in your view at a high level, how global fish ecosystems have been impacted in recent decades, particularly by commercial fishing?
• I appreciate that you mentioned the impact on coral reefs. Is that something you can expand on a bit more globally? The changes to coral reefs, declines, or damages.
• In your view, can regulations such as quotas make the fishing sector more sustainable? Or is this not a viable option? Could you assess the issue of quotas?
• Could you briefly touch on if there is at all a backlash or pushback from the industry or by fishermen broadly, either in Europe or North America, to the idea of quotas? I don’t know if this is something that, while it works at a high level, individuals and the individual fishermen aren’t happy with it. Is that something you could share your views on?
• If we were trying to reduce potential damage to the oceans and pollution, do you believe that these regulations would have to be international to have a significant impact? And are international regulations for ocean protection even possible in your view?
• Can you touch on how important fishing is to global food markets? I appreciate that you mentioned a number of how many people it currently feeds, but are there any regions that rely solely on fishing for their primary source of food?
• If we move on to our last question of the day, can you comment on the current crisis of plastic in the ocean? In your view, how extensive is this issue, and is it reversible or possible to at least stop the spread of plastic pollution in the ocean?
• Do you have any closing remarks—anything we haven’t touched on that you think would be of interest to our audience today?