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Water quality trading on the Minnesota River: Lessons learned from the Jordan Trading Program

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  • Zajicek, Michael Nathan

Abstract

Water quality permit trading in an attractive option lower the costs of pollution cleanup in lakes and rivers, and while similar programs for air pollution have been successful, most attempts at Water Quality Trading have failed. The Jordan Trading Program, based on the Minnesota River, is one of the few exceptions. This paper examines the program to discover how the program succeeds where others have failed. The Jordan Trading has averaged 17 trades a year, and with some assumptions has resulted in cost savings. The river is modeled using a Farrow et. al. (2005) model to show that savings are theoretically possible, even if the program does not act in the same fashion. It was found that while cost savings occur, the facilities in the program are not profit maximizers due to their status as government wastewater treatment facilities, and thus the maximum potential cost savings are not achieve. The program has still been successful, and several suggestions are made for future water quality trading programs.

Suggested Citation

  • Zajicek, Michael Nathan, 2013. "Water quality trading on the Minnesota River: Lessons learned from the Jordan Trading Program," Master's Theses and Plan B Papers 162278, University of Minnesota, Department of Applied Economics.
  • Handle: RePEc:ags:umapmt:162278
    DOI: 10.22004/ag.econ.162278
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    References listed on IDEAS

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    1. R. Scott Farrow & Martin T. Schultz & Pinar Celikkol & George L. Van Houtven, 2005. "Pollution Trading in Water Quality Limited Areas: Use of Benefits Assessment and Cost-Effective Trading Ratios," Land Economics, University of Wisconsin Press, vol. 81(2).
    2. Hung, Ming-Feng & Shaw, Daigee, 2005. "A trading-ratio system for trading water pollution discharge permits," Journal of Environmental Economics and Management, Elsevier, vol. 49(1), pages 83-102, January.
    3. Cynthia Morgan & Ann Wolverton, 2005. "Water Quality Trading in the United States," NCEE Working Paper Series 200507, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Jun 2005.
    4. Nicholas Z. Muller & Robert Mendelsohn, 2009. "Efficient Pollution Regulation: Getting the Prices Right," American Economic Review, American Economic Association, vol. 99(5), pages 1714-1739, December.
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