Matching Traders in a Pollution Market: The Case of Cub River, Utah
AbstractThis paper applies two recently developed trading algorithms to a water quality trading (WQT) market located in the Cub River sub-basin of Utah; a market that includes both point and nonpoint sources. The algorithms account for three complications that naturally arise in WQT markets: (1) combinatorial matching of traders, (2) trader heterogeneity, and (3) discreteness in abatement technology. The algorithms enable a full characterization of the market’s performance by distinguishing a specific pattern of trade among market participants, which in turn results in as detailed a reduced- cost trading benchmark as possible for the basin. Contrary to the commonly held belief that relatively high point-source abatement costs necessitate nonpoint-source abatement effort, we find that in a WQT market where each source is required to reduce its pollution loadings it may be cheaper for point sources to sell abatement credits to nonpoint sources.
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Bibliographic InfoPaper provided by Utah State University, Department of Economics in its series Working Papers with number 2009-08.
Length: 30 pages
Date of creation: 01 Aug 2009
Date of revision:
advancement algorithm; retreat algorithm; water quality trading;
Find related papers by JEL classification:
- Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land
- Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
- Q19 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Other
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