Optimizing the scale of markets for water quality trading
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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.
Published Version (Please cite this version)10.1002/2014WR015395
Publication InfoDoyle, 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.
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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. In addition to his role as a professor, Doyle has had several stints in government: in 2015-2016, he moved to the Department of Interior, whe
Senior Policy Associate
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
Alphabetical list of authors with Scholars@Duke profiles.