Optimal pollution trading without pollution reductions: a note

Jorge García, Matthew Heberling and Hale W. Thurston

Vniversitas Económica, 2010, vol. 0, issue 0, No 8292, 15 pages

Abstract: Many kinds of water pollution occur in pulses, e.g., agricultural and urban runoff. Ecosystems, such as wetlands, can serve to regulate these pulses and smooth pollution distributions over time. This smoothing reduces total environmental damages when the instantaneous" damage function is convex. This paper introduces a water quality trading model between a farm (a pulse-pollution source) and a firm (a more steady pollution source) where the object of exchange is the `temporary´ retention of runoff as opposed to total runoff reductions. The optimal trading ratio requires firm emissions to be offset by more than a proportional retention of the initial agricultural runoff pulse. The reason is twofold: a) emissions are steady over time and -in this sense- have relatively larger environmental impact, and b) certain kinds of runoff management cause otherwise inexistent delayed environmental damages. "

Keywords: water quality trading; flow pollution; wetlands; trading ratio (search for similar items in EconPapers)
JEL-codes: D21 Q53 Q58 (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:col:000416:008292

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