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

Date

2005-05-01

Department

Program

Citation of Original Publication

Farrow, Scott et al.; Pollution Trading in Water Quality Limited Areas: Use of Benefits Assessment and Cost-Effective Trading Ratios; Land Economics, 81, 2, pages 191-205, 1 May, 2005; https://doi.org/10.3368/le.81.2.191

Rights

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Public Domain Mark 1.0
This work was written as part of one of the author's official duties as an Employee of the United States Government and is therefore a work of the United States Government. In accordance with 17 U.S.C. 105, no copyright protection is available for such works under U.S. Law.

Subjects

Abstract

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 cost-effective outcome. The design is applied to combined sewer overflow management in the Upper Ohio River 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. (JEL Q53)