Market power and double-dipping in nutrient trading markets
AbstractHeavy loads of nutrients, i.e. nitrogen and phosphorus, cause severe damages in many waters in the world. This paper develops a model for nutrient trading markets for a sea damaged by both nitrogen and phosphorus and faces a dominant polluter of one or both nutrients. The existence of abatement measures with simultaneous impacts on both nutrients raises the need for double-dipping in both markets. It is shown that double-dipping decreases overall abatement costs for reaching predetermined targets, and reduces efficiency losses of market power, in particular when the same agent exercises market power in both markets. An empirical application to the intergovernmental agreement on reducing nutrient loads to the eutrophied Baltic Sea in North-East Europe demonstrates cost savings of approximately 25% from introduction of double-dipping, and that efficiency losses from market power of one dominant country, Poland, can be reduced by 10%.
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Bibliographic InfoPaper provided by Department Economics, Swedish University of Agricultural Sciences in its series Working Paper Series with number 2013:2.
Length: 31 pages
Date of creation: 27 Mar 2013
Date of revision:
Contact details of provider:
Postal: Department of Economics, Box 7013, Swedish University of Agricultural Sciences, SE-750 07 Uppsala, Sweden
Phone: 018-67 1724
Fax: 018-67 3502
Web page: http://www.slu.se/ekonomi
More information through EDIRC
nutrient trading; market power; double-dipping; eutrophication; Baltic Sea;
Find related papers by JEL classification:
- L19 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Other
- Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
- Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
This paper has been announced in the following NEP Reports:
- NEP-AGR-2013-04-06 (Agricultural Economics)
- NEP-ALL-2013-04-06 (All new papers)
- NEP-CWA-2013-04-06 (Central & Western Asia)
- NEP-IND-2013-04-06 (Industrial Organization)
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