IDEAS home Printed from https://ideas.repec.org/a/now/jirere/101.00000014.html
   My bibliography  Save this article

The Economics of Water Quality Trading

Author

Listed:
  • Shortle, James S.
  • Horan, Richard D.

Abstract

Textbook pollution permit trading markets are appealing due to simple market designs and their ability to solve allocation problems without firm-specific information. Neither of these features is true for water quality markets, which may explain why emerging programs in this area have with few exceptions not fulfilled the promise of trading. We review water quality trading programs, and examine market design by focusing on three tasks that must be addressed to cost-effectively achieve environmental targets: (i) defining the point and nonpoint commodities to be traded, (ii) defining rules governing exchanges of the commodities, and (iii) setting caps on the commodity supplies so as to achieve an environmental target. Our examination of the third task, the cap and its role in determining trading rules (e.g., trading ratios), is novel. We examine this task from both an ecological and an economic perspective, and obtain new insights about the challenges of designing water quality trading programs.

Suggested Citation

  • Shortle, James S. & Horan, Richard D., 2008. "The Economics of Water Quality Trading," International Review of Environmental and Resource Economics, now publishers, vol. 2(2), pages 101-133, October.
  • Handle: RePEc:now:jirere:101.00000014
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1561/101.00000014
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Frans P. Vries & Nick Hanley, 2016. "Incentive-Based Policy Design for Pollution Control and Biodiversity Conservation: A Review," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 63(4), pages 687-702, April.
    2. Suzi Kerr, 2013. "Managing Risks and Tradeoffs Using Water Markets," Working Papers 13_13, Motu Economic and Public Policy Research.
    3. Gren, Ing-Marie & Carlsson, Mattias & Elofsson, Katarina & Munnich, Miriam, 2012. "Stochastic carbon sinks for combating carbon dioxide emissions in the EU," Energy Economics, Elsevier, vol. 34(5), pages 1523-1531.
    4. Krutilla, Kerry & Alexeev, Alexander, 2014. "The Political Transaction Costs and Uncertainties of Establishing Environmental Rights," Ecological Economics, Elsevier, vol. 107(C), pages 299-309.
    5. Yeo, Boon-Ling & Anastasiadis, Simon & Kerr, Suzi & Browne, Oliver, 2012. "Synergies between Nutrient Trading Scheme and the New Zealand Greenhouse Gas (GHG) Emissions Trading Scheme (ETS) in the Lake Rotorua Catchment," 2012 Conference, August 31, 2012, Nelson, New Zealand 144270, New Zealand Agricultural and Resource Economics Society.
    6. McDonald, Hugh J. & Kennedy, Marianna & Ngawhika, Simon & Kerr, Suzi, 2010. "Trading efficiency in water quality markets," 2010 Conference, August 26-27, 2010, Nelson, New Zealand 96949, New Zealand Agricultural and Resource Economics Society.
    7. repec:ags:aareaj:260072 is not listed on IDEAS
    8. repec:bla:ecanth:v:4:y:2017:i:2:p:225-238 is not listed on IDEAS
    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.

    More about this item

    Keywords

    Permit trading; Environmental markets; Environmental policy design; Nonpoint source pollution; Stochastic emissions;

    JEL classification:

    • 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:now:jirere:101.00000014. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alet Heezemans). General contact details of provider: http://www.nowpublishers.com/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.