Phoenix Islands Protected Area — Reverse Fishing Licence Trust Fund

The Phoenix Islands Protected Area (PIPA) was formally established by Kiribati in 2008 (building on 2006 regulations), enlarged to cover 408,250 km² of ocean, and inscribed as a UNESCO World Heritage Site in 2010.

To finance it without simply forgoing revenue, Kiribati, Conservation International and the New England Aquarium designed a "reverse fishing licence" mechanism: a PIPA Conservation Trust endowment whose interest income would compensate the government for the foreign tuna-fleet licence fees it gave up as more of the area was closed to commercial fishing under a Conservation Contract. In 2015, Kiribati went further and declared PIPA a full no-take zone, at the time one of the largest fully protected marine areas on Earth.

But the financing mechanism never caught up with that ambition: by its 2014 second-phase target the Trust aimed to raise $13.5 million, and core management costs alone ran to roughly $550,000 a year, leaving little of the endowment's interest available as actual compensation. By 2021 the endowment had raised only about US$7 million. An independent panel found that demand for Kiribati's fishing licences had fallen 8% since the 2015 closure, translating into an estimated $60-140 million in lost purse-seine revenue and $5.9 million in lost long-line revenue through 2021 — for a country where fishing licences supply more than 70% of government revenue.

Citing this shortfall and the Trust's inability to deliver the promised compensation, the Government of Kiribati lifted PIPA's no-take closure in November 2021, shifting to a Marine Spatial Planning approach that again permits some commercial fishing. PIPA is best read as an honest cautionary case for ecosystem-service finance: a legally and institutionally sophisticated reverse-payment mechanism, endorsed by major conservation NGOs and a UNESCO listing, that nonetheless could not raise enough capital to match the real economic value it asked a small island state to forgo.