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Point/Nonpoint Effluent Trading with Spatial Heterogeneity

Author

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  • Jussi Lankoski
  • Erik Lichtenberg
  • Markku Ollikainen

Abstract

Potential earnings from permits sales may provide an incentive for farmers to accept water quality regulation. We derive optimal adjustments of point/nonpoint effluent trading ratios for heterogeneity in marginal environmental damage and degradation/retention of the pollutant across locations in a watershed. A simulation based on data from the Kymi River Valley, Finland, indicates that farmers are the greatest suppliers of permits, as expected, but that gains from trading vary substantially. Some farmers may become net buyers of permits and thus net losers from regulation. The benefits of effluent trading are distributed unevenly among point sources as well. Copyright 2008, Oxford University Press.

Suggested Citation

  • Jussi Lankoski & Erik Lichtenberg & Markku Ollikainen, 2008. "Point/Nonpoint Effluent Trading with Spatial Heterogeneity," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(4), pages 1044-1058.
    • Handle: RePEc:oup:ajagec:v:90:y:2008:i:4:p:1044-1058
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    File URL: http://hdl.handle.net/10.1111/j.1467-8276.2008.01172.x
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    Citations

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    Cited by:

    1. Lankoski, Jussi & Ollikainen, Markku, 2011. "Biofuel policies and the environment: Do climate benefits warrant increased production from biofuel feedstocks?," Ecological Economics, Elsevier, vol. 70(4), pages 676-687, February.
    2. Viaggi, Davide & Raggi, Meri & Gomez y Paloma, Sergio, 2011. "Farm-household investment behaviour and the CAP decoupling: Methodological issues in assessing policy impacts," Journal of Policy Modeling, Elsevier, vol. 33(1), pages 127-145, January.
    3. Fleming, Patrick & Lichtenberg, Erik & Newburn, David, 2018. "Water Quality Trading Program Design with Heterogeneous Behavioral Responses," 2018 Annual Meeting, August 5-7, Washington, D.C. 274429, Agricultural and Applied Economics Association.
    4. Mani Rouhi Rad & Taro Mieno & Nicholas Brozović, 2022. "The Role of Search Frictions and Trading Ratios in Tradable Permit Markets," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 82(1), pages 101-132, May.
    5. Valcu, Adriana Mihaela, 2013. "Agricultural nonpoint source pollution and water quality trading: empirical analysis under imperfect cost information and measurement error," ISU General Staff Papers 201301010800004451, Iowa State University, Department of Economics.
    6. James Shortle & Richard D. Horan, 2017. "Nutrient Pollution: A Wicked Challenge for Economic Instruments," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 3(02), pages 1-39, April.
    7. Kailin Kroetz & James N. Sanchirico & Daniel K. Lew, 2015. "Efficiency Costs of Social Objectives in Tradable Permit Programs," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 2(3), pages 339-366.
    8. Kuwayama, Yusuke & Brozović, Nicholas, 2013. "The regulation of a spatially heterogeneous externality: Tradable groundwater permits to protect streams," Journal of Environmental Economics and Management, Elsevier, vol. 66(2), pages 364-382.
    9. Sami Hautakangas & Markku Ollikainen, 2019. "Nutrient Trading Between Wastewater Treatment Plants in the Baltic Sea Region," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(2), pages 533-556, June.
    10. Nuppenau, Ernst-August, 2015. "Management of Ecosystem Services with a Focus on Biodiversity: Financing and Paying Services at Spatial Level in Landscapes," 150th Seminar, October 22-23, 2015, Edinburgh, Scotland 212653, European Association of Agricultural Economists.
    11. Catherine L. Kling, 2011. "Economic Incentives to Improve Water Quality in Agricultural Landscapes: Some New Variations on Old Ideas," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(2), pages 297-309.
    12. Hansen, Line Block & Termansen, Mette & Hasler, Berit, 2017. "Effectiveness Of Markets In Nitrogen Abatement: A Danish Case Study," 2017 International Congress, August 28-September 1, 2017, Parma, Italy 260887, European Association of Agricultural Economists.
    13. James Shortle & Richard D. Horan, 2013. "Policy Instruments for Water Quality Protection," Annual Review of Resource Economics, Annual Reviews, vol. 5(1), pages 111-138, June.

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