Point/Nonpoint Effluent Trading with Spatial Heterogeneity

Posted: 3 Sep 2008

See all articles by Jussi Lankoski

Jussi Lankoski

Agrifood Research Finland

Erik Lichtenberg

University of Maryland - College of Agriculture & Natural Resources

Markku Ollikainen

University of Helsinki - Department of Political and Economic Studies

Date Written: 2008-03

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.

Suggested Citation

Lankoski, Jussi and Lichtenberg, Erik and Ollikainen, Markku, Point/Nonpoint Effluent Trading with Spatial Heterogeneity (2008-03). American Journal of Agricultural Economics, Vol. 90, Issue 4, pp. 1044-1058, November 2008. Available at SSRN: https://ssrn.com/abstract=1263063 or http://dx.doi.org/10.1111/j.1467-8276.2008.01172.x

Jussi Lankoski

Agrifood Research Finland

Helsinki
Finland

Erik Lichtenberg (Contact Author)

University of Maryland - College of Agriculture & Natural Resources ( email )

0108 Symons Hall
University of Maryland
College Park, MD 20742-5551
United States

Markku Ollikainen

University of Helsinki - Department of Political and Economic Studies ( email )

P.O. Box 54
FIN-00014 Helsinki
Finland

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