Iceland has managed its large fishing industry in a sustainable and profitable way. The foundations of this success are setting Total Allowable Catches (TACs) based on scientific recommendations of what is biologically sustainable and the Individual Transferable Quota (ITQ) system, which gives each holder the right to catch a certain of the TAC in various species. The efficiency of this system could be under threat from potential policy responses to the perceived unfairness of quotas having initially been given away and by Iceland’s possible accession to the EU. However, there is nothing the government can do now to undo the unfairness of the initial allocation. Nevertheless, it could be attractive to increase the special fisheries resource rent tax as it is likely to be a more efficient tax than most others, although the increase should not be so great as to damage the fisheries management system. The resource rent could also be increased by reducing TACs from the current, biologically sustainable level to the level that maximizes rent. Provided that Iceland is able to negotiate to maintain the authority to set TACs and to keep the ITQ system, joining the EU, and hence the Common Fisheries Policy (CFP), should not reduce the efficiency of the Icelandic fisheries management system.