Water Quality Trading: Legal Analysis for Georgia Watersheds

Water quality trading is a policy tool that could improve the cost effectiveness of achieving environmental goals, but it is not currently used in the state of Georgia. This paper seeks to evaluate the applicability of water quality trading in Georgia watersheds with a specific focus on legal issues. This paper reviews Georgia law and regulations to evaluate barriers to and support for water quality trading. It also reviews water quality trading policies from other states and explores the value of adopting a state water quality trading policy in Georgia. The paper concludes that while existing law provides implicit authority to implement water quality trading in Georgia, inadequate regulatory pressure in most Georgia watersheds and possible legal challenges could be significant impediments to implementing water quality trading in the state at this time. The paper also suggests that successful pilot trades should precede the development of statewide water quality trading policy. Working Paper Number 2005-002

Trading efficiency in water quality markets

A crucial factor in the success of any water quality trading market is its ability to cost-effectively reallocate nutrient allowances from initial holders to those users who find them most valuable; the market's trading efficiency. We explore causes of and solutions to trading inefficiency by assessing the impact on participant transaction costs and the tradeoffs that occur as a result of policy design decisions. Differing impacts of baseline-credit and cap-and-trade markets, the impact of trading rules and monitoring regimes are discussed in this endeavour. Possible solutions of increased information flows and regulatory certainty are also discussed. We then apply this framework to three existing water quality trading schemes; two from the US, and one from New Zealand. We use this experience to extract general recommendations for policy makers looking to maximise trading efficiency when designing future water quality trading markets.Nutrient trading, trading efficiency, water quality markets, transaction costs, Community/Rural/Urban Development, Environmental Economics and Policy, Health Economics and Policy, International Relations/Trade,

An Evaluation of Water Quality Trading for Georgia Watersheds

Water quality trading is a policy tool that could improve the cost effectiveness of achieving environmental goals, but it is not currently used in the state of Georgia. This research seeks to evaluate the applicability of water quality trading in Georgia watersheds. This report provides an update on the status of current research on water quality trading conducted through a collaboration of the Georgia Water Policy and Planning Center, the Georgia State University Andrew Young School of Public Policy, and the University of Georgia Warnell School of Forest Resources. Working Paper Number 2005-00

Strategic Choice of Domestic Environmental Policy Instrument and International Emissions Trading Scheme in an Open Economy with Imperfect Competition

This paper presents a model of imperfect international competition. Within this framework, the optimal choice of national environmental policy instrument and international emissions trading scheme is discussed. The choice of national instrument is restricted to absolute and relative standards, which form the basis for permit and credit trading respectively. It is shown that relatives standards and credit trading lead to higher output than emission ceilings and permit trading. I find that governments want to increase production beyond the level reached with emission ceilings and therefore prefer relative standards. Furthermore, international emissions trading is only optimal when the country imports emission quotas, and in several cases, governments will choose not to allow international emissions trading.environmental policy, emissions trading, credit trading, international trade, imperfect competition, strategic behavior, Environmental Economics and Policy, F12, L51, Q25, Q28,

Water Quality Trading and Agricultural Nonpoint Source Pollution: An Analysis of the Effectiveness and Fairness of EPA's Policy on Water Quality Trading

Water quality problems continue to plague our nation, even though Congress passed the Clean Water Act (CWA) to "restore and maintain the chemical, physical, and biological integrity of the Nation's waters"1 more than three decades ago. During the past thirty years, the dominant sources of water pollution have changed, requiring us to seek new approaches for cleaning up our waters. Water quality trading has been heralded as an approach that can integrate market mechanisms into the effort of cleaning up our water. This Article examines the Environmental Protection Agency's (EPA) policy on water quality trading and the prospects for water quality trading to help improve water quality.Part II briefly describes our water quality problems and causes. Part III examines the theoretical basis for trading and the EPA's Water Quality Trading Policy. Part IV discusses the potential impact of total maximum daily loads (TMDLs) on water quality trading, and Part V analyzes potential problems that water quality trading programs confront. Part VI addresses distributional and efficiency concerns that arise when considering trading and agricultural nonpoint source pollution. Part VII then examines issues relating to water quality trading and state laws before reaching conclusions and recommendations in Part VIII

Implementing greenhouse gas trading in Europe: lessons from economic literature and international experiences

The European Commission (2001a) has recently presented a directive proposal to the European Parliament and Council in order to implement a greenhouse gas emission trading scheme. If this proposal survives the policy process, it will create the most ambitious trading system ever implemented. However the legislative process is an opportunity for various interest groups to amend envi-ronmental policies which, as a result, generally deviate further from what eco-nomic literature proposes. A close look at implemented emission trading schemes, stressing their discrepancies with economic literature requests, is thus useful to increase the chances of forthcoming emission trading schemes to go through the political process. We thus review ten emission trading systems, that are either implemented or at an advanced stage of the policy process. We draw attention to major points to be aware of when designing an emission trading system: sectoral and spatial coverage, permits allocation, temporal flexibility, trading organisation, moni-toring, enforcement, compliance, and the harmonisation vs. subsidiarity issue. The aim is to evaluate how far experiences in emission trading move away from theory and why. We then provide some lessons and recommendations on how to implement a greenhouse gas emission trading program in Europe. We identify some pros of the Commission proposal (spatial and sectoral coverage, temporal flexibility, trading organisation, compliance rules), some potential drawbacks (allocation rules, monitoring and enforcement) and items on which further guidance is needed (monitoring and allocation rules). Lastly, the European Commission should devote prominent attention to the U.S. NOX Ozone Transport Commis-sion budget program, as the only example of integration between the federal and state levels.Emission trading, climate change policy, policy-making and implementation

Strategic Choice of International Emissions Trading Scheme in an Open Economy with Perfect Competition

Emissions trading can be organized in several ways. In particular, private emissions trading can be organized as permit trading, or as credit trading. The schemes have a different impact on output with credit trading leading to a higher output level than permit trading. This paper analyzes what the optimal choice of emissions trading scheme is in a model with international trade and perfect competition in the product and emission quota market. Furthermore, I discuss whether it is optimal for the country to allow its firms to trade emissions internationally. The paper shows that countries want to use these schemes in different circumstances, depending on whether they import or export the good. Furthermore, it is shown that in several cases, countries maximize their welfare by not allowing international emissions trading.environmental policy, emissions trading, credit trading, international trade, perfect competition, strategic behavior, Environmental Economics and Policy, F10, L51, Q25, Q28,

Combining emissions trading and emissions taxes in a multi-objective world

The combination of emissions trading and emissions taxes is usually rejected as redundant or inefficient. This conclusion is based on the restrictive assumption that both policies are exclusively meant to control pollution. However, particularly taxes may pursue a variety of other policy objectives as well, such as raising fiscal revenues or promoting equity. Multiple objectives may justify multiple policies. In this case, welfare losses with respect to pollution control may be traded off by benefits from attaining other policy objectives. Consequently, pragmatic policy recommendations have to be based on an in-depth understanding of interactions in the policy mix. This article makes three contributions that are relevant in this respect. (1) The most important factors distorting pollution abatement under the policy mix are identified. This insight is required to estimate the actual extent of inefficiency in controlling pollution, and to compare it with benefits of attaining other objectives of the tax. (2) The policy mix is not only compared to the unrealistic ideal of an efficient single emissions trading scheme but also to a suboptimal heterogeneous emissions tax. It is shown that if the tax is required to address multiple policy objectives, the implementation of an emissions trading scheme in addition may in fact increase the efficiency of pollution control. (3) It is demonstrated that welfare losses can be minimized within a policy mix by modifying emissions trading design. --policy mix,emissions trading,emissions tax,efficiency

Government Policy in Monetary Economies

I study how the specific details of a micro founded monetary economy affect the determination of government policy. I consider three variants of the Lagos-Wright monetary framework: a benchmark were all markets are competitive; a case which allows for financial intermediaries; and a case with trading frictions. Although intitutions/frictions are shown to have a significant structural impact in the determination of policy, the calibrated artificial economies are observationally equivalent in steady state. The policy response to aggregate shocks is qualitatively similar in the variants considered. However, there are significant quantitative differences in the response of government policy to productivity shocks, mainly due to the idiosyncratic behavior of money demand. The variants with no trading frictions display the best fit to U.S. post-war data.government policy; lack of commitment; financial intermediation; trading frictions; micro founded models of money