Optimizing the scale of markets for water quality trading

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2014

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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.

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10.1002/2014WR015395

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Doyle, Martin W, Lauren A Patterson, Yanyou Chen, Kurt E Schnier and Andrew J Yates (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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Scholars@Duke

Doyle

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, Doyle has had several stints in government: in 2015-2016, he moved to the Department of Interior, where he helped establish the Natural Resources Investment Center, an initiative of the Obama Administration to push forward private investment in water infrastructure, enable water marketing, and increase the use of markets and conservation banks for species conservation.  Prior to that, in 2009-2010, he was the inaugural Frederick J. Clarke Scholar at the US Army Corps of Engineers.  

He has received a Guggenheim Fellowship, an Early Career Award from the National Science Foundation, recognized as a Kavli Fellow for the Frontiers of Science from the National Academy of Sciences and selected to deliver the Gilbert White Lecture by the National Academy of Sciences.

Patterson

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 to provide geospatial and data analysis support in the development of ecological flow recommendations for North Carolina's Ecological Flow Advisory Board. Prior to her time at RTI, she worked at the Environmental Finance Center at the University of North Carolina, Chapel Hill, serving as a GIS and Financial Analyst focused on modeling future potential water transfers in North Carolina and developing sustainable finance strategies for the Upper Neuse watershed.

She has a Ph.D. in geography from the University of North Carolina, Chapel Hill.


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