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Pollution Trading in Water Quality Limited Areas: Use of Benefits Assessment and Cost-Effective Trading Ratios

  • R. Scott Farrow
  • Martin T. Schultz
  • Pinar Celikkol
  • George L. Van Houtven

This paper proposes a water quality trading design that addresses common implementation problems. Trading ratios, which are calculated from damages integrated over each source’s spatial zone of influence, drive the system to a socially costeffective outcome. The design is applied to combined sewer overflow management in the Upper OhioRiver Basin, where trading ratios can vary significantly among trading partners. The analysis shows that significant compliance cost savings are possible without incurring a penalty in terms of social damages or overall water quality despite a higher level of discharge relative to the command and control option.

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File URL: http://le.uwpress.org/cgi/reprint/81/2/191
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Article provided by University of Wisconsin Press in its journal Land Economics.

Volume (Year): 81 (2005)
Issue (Month): 2 ()
Pages:

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Handle: RePEc:uwp:landec:v:81:y:2005:i:2:p191-205
Contact details of provider: Web page: http://le.uwpress.org/

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  1. Desvousges, William H. & Smith, V. Kerry & Fisher, Ann, 1987. "Option price estimates for water quality improvements: A contingent valuation study for the monongahela river," Journal of Environmental Economics and Management, Elsevier, vol. 14(3), pages 248-267, September.
  2. Atkinson, Scott E. & Tietenberg, T. H., 1982. "The empirical properties of two classes of designs for transferable discharge permit markets," Journal of Environmental Economics and Management, Elsevier, vol. 9(2), pages 101-121, June.
  3. Hahn, Robert W., 1989. "A new approach to the design of regulation in the presence of multiple objectives," Journal of Environmental Economics and Management, Elsevier, vol. 17(2), pages 195-211, September.
  4. Farrow, Scott, 1999. "The duality of taxes and tradable permits: A survey with applications in Central and Eastern Europe," Environment and Development Economics, Cambridge University Press, vol. 4(04), pages 519-535, October.
  5. Krupnick, Alan J. & Oates, Wallace E. & Van De Verg, Eric, 1983. "On marketable air-pollution permits: The case for a system of pollution offsets," Journal of Environmental Economics and Management, Elsevier, vol. 10(3), pages 233-247, September.
  6. Magat, Wesley A, et al, 2000. "An Iterative Choice Approach to Valuing Clean Lakes, Rivers, and Streams," Journal of Risk and Uncertainty, Springer, vol. 21(1), pages 7-43, July.
  7. Tietenberg, T. H., 1974. "Derived decision rules for pollution control in a general equilibrium space economy," Journal of Environmental Economics and Management, Elsevier, vol. 1(1), pages 3-16, May.
  8. Fernando Rodríguez, 2000. "On the Use of Exchange Rates as Trading Rules in a Bilateral System of Transferable Discharge Permits," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 15(4), pages 379-395, April.
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