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Economics and Environmental Markets: Lessons from Water-Quality Trading

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  • Shortle, James

Abstract

Water-quality trading is an area of active development in environmental markets. Unlike iconic national-scale air-emission trading programs, water-quality trading programs address local or regional water quality and are largely the result of innovations in water-pollution regulation by state or substate authorities rather than by national agencies. This article examines lessons from these innovations about the “real world†meaning of trading and its mechanisms, the economic merits of alternative institutional designs, utilization of economic research in program development, and research needed to improve the success of environmental markets for water quality.

Suggested Citation

  • Shortle, James, 2013. "Economics and Environmental Markets: Lessons from Water-Quality Trading," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 42(1), April.
  • Handle: RePEc:ags:arerjl:148400
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    File URL: http://purl.umn.edu/148400
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    References listed on IDEAS

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    1. Leonard Shabman & Kurt Stephenson & William Shobe, 2002. "Trading Programs for Environmental Management: Reflections on the Air and Water Experiences," Working Papers 2002-01, Center for Economic and Policy Studies.
    2. Nguyen, N.P. & Shortle, J.S. & Reed, P.M. & Nguyen, T.T., 2013. "Water quality trading with asymmetric information, uncertainty and transaction costs: A stochastic agent-based simulation," Resource and Energy Economics, Elsevier, vol. 35(1), pages 60-90.
    3. Ghosh, Gaurav & Shortle, James, 2012. "Managing Pollution Risk through Emissions Trading," FCN Working Papers 1/2012, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    4. Horan, Richard D. & Shortle, James S. & Abler, David G., 2004. "The Coordination and Design of Point-Nonpoint Trading Programs and Agri-Environmental Policies," Agricultural and Resource Economics Review, Cambridge University Press, vol. 33(01), pages 61-78, April.
    5. Richard D. Horan & James S. Shortle, 2005. "When Two Wrongs Make a Right: Second-Best Point-Nonpoint Trading Ratios," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(2), pages 340-352.
    6. Sheila M. Olmstead, 2010. "The Economics of Water Quality," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 4(1), pages 44-62, Winter.
    7. Arun S. Malik & David Letson & Stephen R. Crutchfield, 1993. "Point/Nonpoint Source Trading of Pollution Abatement: Choosing the Right Trading Ratio," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 75(4), pages 959-967.
    8. Hanna L. Breetz & Karen Fisher-Vanden & Hannah Jacobs & Claire Schary, 2005. "Trust and Communication: Mechanisms for Increasing Farmers’ Participation in Water Quality Trading," Land Economics, University of Wisconsin Press, vol. 81(2).
    9. Richard D. Horan, 2001. "Differences in Social and Public Risk Perceptions and Conflicting Impacts on Point/Nonpoint Trading Ratios," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(4), pages 934-941.
    10. Ribaudo, Marc & Horan, Richard D. & Smith, Mark E., 1999. "Economics of Water Quality Protection from Nonpoint Sources: Theory and Practice," Agricultural Economics Reports 33913, United States Department of Agriculture, Economic Research Service.
    11. King, Dennis M., 2005. "Crunch Time for Water Quality Trading," Choices, Agricultural and Applied Economics Association, vol. 20(1).
    12. Kurt Stephenson & Patricia Norris & Leonard Shabman, 1998. "Watershed-Based Effluent Trading: The Nonpoint Source Challenge," Contemporary Economic Policy, Western Economic Association International, vol. 16(4), pages 412-421, October.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Valcu, Adriana & Rabotyagov, Sergey S. & Kling, Catherine L., 2013. "Flexible Practice-Based Approaches For Controlling Multiple Agricultural Nonpoint-Source Water Pollution," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150450, Agricultural and Applied Economics Association.
    2. repec:bla:ecanth:v:4:y:2017:i:2:p:225-238 is not listed on IDEAS
    3. Bauer, Dana Marie & Johnston, Robert J., 2013. "Foreword: The Economics of Rural and Agricultural Ecosystem Services: Purism versus Practicality," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 42(1), April.
    4. Zhong, Hua & Hu, Wuyang, 2015. "Farmers’ Willingness to Engage in Best Management Practices: an Application of Multiple Imputation," 2015 Annual Meeting, January 31-February 3, 2015, Atlanta, Georgia 196962, Southern Agricultural Economics Association.
    5. repec:wsi:wepxxx:v:03:y:2017:i:02:n:s2382624x17710047 is not listed on IDEAS
    6. Ribaudo, Marc & Savage, Jeffrey & Aillery, Marcel P., 2014. "An Economic Assessment of Policy Options To Reduce Agricultural Pollutants in the Chesapeake Bay," Economic Research Report 171880, United States Department of Agriculture, Economic Research Service.
    7. Valcu, Adriana Mihaela, 2013. "Agricultural nonpoint source pollution and water quality trading: empirical analysis under imperfect cost information and measurement error," ISU General Staff Papers 201301010800004451, Iowa State University, Department of Economics.
    8. Messer, Kent D. & Duke, Joshua M. & Lynch, Lori & Li, Tongzhe, 2017. "When Does Public Information Undermine the Efficiency of Reverse Auctions for the Purchase of Ecosystem Services?," Ecological Economics, Elsevier, vol. 134(C), pages 212-226.
    9. 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.
    10. Stephenson, Kurt & Shabman, Leonard, 2015. "Nutrient Assimilation Services for Water Quality Credit Trading Programs," Discussion Papers dp-15-33, Resources For the Future.
    11. repec:wsi:wepxxx:v:03:y:2017:i:02:n:s2382624x16500338 is not listed on IDEAS

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