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Composite market design for a Transferable Discharge Permit (TDP) system

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  • Dennis Collentine

Abstract

There has been a great deal of interest in addressing water quality issues through the use of Transferable Discharge Permit (TDP) systems. Unfortunately, the attempts to start up permit markets that are able to exploit abatement cost differences between sources have not met with the success expected. Two of the reasons for the lack of success have been the problem of transaction costs and in the case of non-point sources (NPS), undefined property rights. The composite market design is a proposal for a TDP system that specifically includes agricultural non-point source (NPS) discharges and addresses both property rights and transaction cost problems. The composite market consists of three interrelated markets each serving a particular function. The two primary markets are coordinated through price information that makes it possible for a catchment-based authority to issue (sell) permits based on the marginal cost of abatement. When the composite market is mature, the total number of permits issued corresponds to a cap on discharges allowed in the catchment. The structure of the composite market allows this system to be phased in over time with existing institutions and limited demands on financing.

Suggested Citation

  • Dennis Collentine, 2006. "Composite market design for a Transferable Discharge Permit (TDP) system," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 49(6), pages 929-946.
    • Handle: RePEc:taf:jenpmg:v:49:y:2006:i:6:p:929-946
    DOI: 10.1080/09640560600947055
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    Cited by:

    1. A. Antoci & S. Borghesi & M. Sodini, 2017. "Water Resource Use and Competition in an Evolutionary Model," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 31(8), pages 2523-2543, June.
    2. Syezlin Hasan & Line Block Hansen & James C. R. Smart & Berit Hasler & Mette Termansen, 2022. "Tradeable Nitrogen Abatement Practices for Diffuse Agricultural Emissions: A ‘Smart Market’ Approach," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 82(1), pages 29-63, May.

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