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Market power and double-dipping in nutrient trading markets

Author

Listed:
  • Gren, Ing-Marie

    (Department of Economics, Swedish University of Agricultural Sciences)

  • Elofsson, Katarina

    (Department of Economics, Swedish University of Agricultural Sciences)

Abstract

Heavy loads of nutrients, i.e. nitrogen and phosphorus, cause severe damages in many waters in the world. This paper develops a model for nutrient trading markets for a sea damaged by both nitrogen and phosphorus and faces a dominant polluter of one or both nutrients. The existence of abatement measures with simultaneous impacts on both nutrients raises the need for double-dipping in both markets. It is shown that double-dipping decreases overall abatement costs for reaching predetermined targets, and reduces efficiency losses of market power, in particular when the same agent exercises market power in both markets. An empirical application to the intergovernmental agreement on reducing nutrient loads to the eutrophied Baltic Sea in North-East Europe demonstrates cost savings of approximately 25% from introduction of double-dipping, and that efficiency losses from market power of one dominant country, Poland, can be reduced by 10%.

Suggested Citation

  • Gren, Ing-Marie & Elofsson, Katarina, 2013. "Market power and double-dipping in nutrient trading markets," Working Paper Series 2013:2, Swedish University of Agricultural Sciences, Department Economics.
    • Handle: RePEc:hhs:slueko:2013_002
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    File URL: http://pub.epsilon.slu.se/9472/
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    Cited by:

    1. Sami Hautakangas & Markku Ollikainen, 2019. "Nutrient Trading Between Wastewater Treatment Plants in the Baltic Sea Region," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(2), pages 533-556, June.

    More about this item

    Keywords

    nutrient trading; market power; double-dipping; eutrophication; Baltic Sea;
    All these keywords.

    JEL classification:

    • L19 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Other
    • 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

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