A Pollution Offset System for Trading Non-Point Source Water Pollution Permits
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- Prabodanie, R.A.R., Raffensperger, J.F. & Milke, M.W. Environ Resource Econ (2010) 45: 499. doi:10.1007/s10640-009-9325-1
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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.
KeywordsNitrate Non-point sources Linear program Trading Water pollution permits
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