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Point/Nonpoint Effluent Trading with Spatial Heterogeneity
Author(s) -
Lankoski Jussi,
Lichtenberg Erik,
Ollikainen Markku
Publication year - 2008
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/j.1467-8276.2008.01172.x
Subject(s) - nonpoint source pollution , effluent , watershed , earnings , point (geometry) , incentive , spatial heterogeneity , pollutant , environmental science , water quality , natural resource economics , water resource management , business , economics , microeconomics , environmental engineering , computer science , ecology , finance , mathematics , geometry , machine learning , biology
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.