Optimizing the scale of markets for water quality trading
Abstract
Applying market approaches to environmental regulations requires establishing a spatial
scale for trading. Spatially large markets usually increase opportunities for abatement
cost savings but increase the potential for pollution damages (hot spots), vice versa
for spatially small markets. We develop a coupled hydrologic-economic modeling approach
for application to point source emissions trading by a large number of sources and
apply this approach to the wastewater treatment plants (WWTPs) within the watershed
of the second largest estuary in the U.S. We consider two different administrative
structures that govern the trade of emission permits: one-for-one trading (the number
of permits required for each unit of emission is the same for every WWTP) and trading
ratios (the number of permits required for each unit of emissions varies across WWTP).
Results show that water quality regulators should allow trading to occur at the river
basin scale as an appropriate first-step policy, as is being done in a limited number
of cases via compliance associations. Larger spatial scales may be needed under conditions
of increased abatement costs. The optimal scale of the market is generally the same
regardless of whether one-for-one trading or trading ratios are employed.
Type
Journal articlePermalink
https://hdl.handle.net/10161/9151Published Version (Please cite this version)
10.1002/2014WR015395Publication Info
Doyle, Martin W; Patterson, Lauren A; Chen, Yanyou; Schnier, Kurt E; & Yates, Andrew
J (2014). Optimizing the scale of markets for water quality trading. Water Resources Research. 10.1002/2014WR015395. Retrieved from https://hdl.handle.net/10161/9151.This is constructed from limited available data and may be imprecise. To cite this
article, please review & use the official citation provided by the journal.
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Martin Doyle
Professor in the Environmental Sciences and Policy Division
Martin Doyle is a Professor at Duke University focused on the science and policy of
rivers and water in the US. His work ranges from fluid mechanics and sediment transport
to infrastructure finance and federal water policy. His first book, The Source (WW
Norton, February, 2018), is a history of America’s rivers. His second book, Streams
of Revenue (MIT Press, 2021) is an analysis of ecosystem markets. In addition to his
role as a professor, D
Lauren Patterson
Affiliate
Lauren Patterson joined Duke's Nicholas Institute for Environmental Policy Solutions
as a policy associate in October 2013. Her research focuses on changes in average
streamflow, floods, and droughts due to climate and human impacts. She has also worked
on water utility financing, water transfers between utilities, and drought probabilities.
Lauren has an affinity for data analysis and visualization.
Before joining the Nicholas Institute, she contracted at RTI International
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