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Point/Nonpoint Effluent Trading with Spatial Heterogeneity

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  • Jussi Lankoski
  • Erik Lichtenberg
  • Markku Ollikainen

Abstract

Potential earnings from permits sales may provide an incentive for farmers to accept water quality regulation. We derive optimal adjustments of point/nonpoint effluent trading ratios for heterogeneity in marginal environmental damage and degradation/retention of the pollutant across locations in a watershed. A simulation based on data from the Kymi River Valley, Finland, indicates that farmers are the greatest suppliers of permits, as expected, but that gains from trading vary substantially. Some farmers may become net buyers of permits and thus net losers from regulation. The benefits of effluent trading are distributed unevenly among point sources as well. Copyright 2008, Oxford University Press.

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File URL: http://hdl.handle.net/10.1111/j.1467-8276.2008.01172.x
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Bibliographic Info

Article provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.

Volume (Year): 90 (2008)
Issue (Month): 4 ()
Pages: 1044-1058

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Handle: RePEc:oup:ajagec:v:90:y:2008:i:4:p:1044-1058

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Cited by:
  1. James Shortle & Richard D. Horan, 2013. "Policy Instruments for Water Quality Protection," Annual Review of Resource Economics, Annual Reviews, vol. 5(1), pages 111-138, June.
  2. Catherine L. Kling, 2011. "Economic Incentives to Improve Water Quality in Agricultural Landscapes: Some New Variations on Old Ideas," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(2), pages 297-309.
  3. Lankoski, Jussi & Ollikainen, Markku, 2011. "Biofuel policies and the environment: Do climate benefits warrant increased production from biofuel feedstocks?," Ecological Economics, Elsevier, vol. 70(4), pages 676-687, February.
  4. Jussi Lankoski & Erik Lichtenberg & Markku Ollikainen, 2010. "Agri-Environmental Program Compliance in a Heterogeneous Landscape," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 47(1), pages 1-22, September.

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