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Effluent Trading to Improve Water Quality. What do we Know Today?

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  • S. Rousseau

Abstract

Watershed based trading or effluent trading, allows pollution sources to buy controls that will reduce the amount of a problem pollutant elsewhere in the watershed or drainage basin. By buying such controls, factories do not need to install abatement technologies to lower the discharge of that pollutant for their own plants. Parties involved in the trade want to either: (a) trade directly with each other; or (b) create a market of ‘credits’ that represent a specific amount of pollutant reduction. The intent of trading is to achieve an expected reduction of a particular pollutant at a lower cost. The challenge with trading is to allow for innovative, market-based reforms without compromising the existing safeguards in environmental protection. In this paper we provide an overview of the benefits and considerations associated with designing an effluent trading program. We end by formulating some policy recommendations.

Suggested Citation

  • S. Rousseau, 2005. "Effluent Trading to Improve Water Quality. What do we Know Today?," Review of Business and Economic Literature, KU Leuven, Faculty of Economics and Business (FEB), Review of Business and Economic Literature, vol. 0(2), pages 229-260.
    • Handle: RePEc:ete:revbec:20050203
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    1. Nadine Wittmann, 2014. "A Microeconomic Perspective on Water Resources Management: Analyzing the Effects on Optimal Land Rents Along a River Basin," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 28(5), pages 1309-1325, March.

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