Fisheries management using individual transferable quotas (ITQs) is on the political agenda in both Sweden and the EU. The management system is based on the catch quotas determined within the EU's common fisheries policy each year. In the ITQsystem, quotas are divided among fishing companies on a long term basis and gives the fisherman the right to use a given percentage of the Swedish part of the quota each year. Quotas can be traded within the fisheries sector, which is a significant difference from the current management regime. ITQs have proven to be an effective way to address overcapacity in fisheries and thus get a more efficient fleet that is in balance with the fish resource. However, quota trade in a situation where trawling is more efficient than e.g. gillnets might imply that the small-scale coastal fisheries will be bought out from the fishery. This is contrary to the political intentions. The report analyzes how the Swedish fleet structure and profitability will evolve in an ITQ system.

The analysis is based on an empirical model of the fishing industry (Swedish Resource Rent Model for the Commercial Fishery - SRRMCF). The study presents four scenarios based on different management actions to protect small-scale fisheries and different development scenarios of the eastern Baltic cod stock. Three main implications are to be drawn by introducing an ITQsystem:

1. The fishing fleet decreases by about 30 to 50 percent
2. Profitability increases so that the industry can provide competitive wages and contribute financially to fisheries management
3. The management can be designed so that small-scale fishing is not disadvantaged

The picture of the fisheries sector managed by ITQs is considerably more positive than the prevailing picture of fisheries today. In contrast to an industry with overcapacity and poor economic results, the fleet will be reduced and the remaining vessels will become profitable. One must bear in mind that the model results are snapshots of what a fully rationalized fleet would look like. However, international experiences indicate that the fleet can be expected to evolve in this direction. A fleet with a strong economic performance and in balance with its resource will facilitate the work to achieve an ecologically sustainable development of the marine environment.