Environmental and Resource Economics

, Volume 45, Issue 4, pp 499–515 | Cite as

A Pollution Offset System for Trading Non-Point Source Water Pollution Permits

  • R. A. Ranga Prabodanie
  • John F. Raffensperger
  • Mark W. Milke


Water pollution from non-point sources is a global environmental concern. Economists propose tradable permit systems as a solution, but they are difficult to implement due to the nature of non-point sources. We present a pollution offset system for trading non-point source water pollution permits. Conventional pollution offset systems suffer from thin markets and transaction costs. In this paper, we show how to overcome these problems with a centrally managed common-pool market. We define permits as allowable nitrate loading to a groundwater aquifer. This trading system utilizes estimates of potential nitrate leaching from land uses, a set of transport coefficients generated from a simulation of nitrate transport in groundwater, an online trading system, and a linear program to clear the market. We illustrate the concept using a hypothetical case study.


Nitrate Non-point sources Linear program Trading Water pollution permits 


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Copyright information

© Springer Science+Business Media B.V. 2009

Authors and Affiliations

  • R. A. Ranga Prabodanie
    • 1
  • John F. Raffensperger
    • 1
  • Mark W. Milke
    • 2
  1. 1.Department of ManagementUniversity of CanterburyChristchurchNew Zealand
  2. 2.Department of Civil and Natural Resources EngineeringUniversity of CanterburyChristchurchNew Zealand

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