The Tradable Permits Approach to Protecting the Commons: What Have We Learned?

40 Pages Posted: 11 Jun 2002

See all articles by Tom Tietenberg

Tom Tietenberg

Colby College - Department of Economics

Date Written: June 2002

Abstract

This essay reviews the implementation experience with three main applications of tradable permit systems: air pollution control, water supply and fisheries management. Opening with a brief summary of the theory behind these programs and both the economic and environmental consequences anticipated by this theory, it proceeds with a description of the common elements these programs share and the design questions posed by the approach. These include the setting of the limit on access, the initial allocation of rights, transferability rules (both among participants and across time) as well as procedures for monitoring and enforcement. It continues by examining how these design questions have been answered by these three applications and how the answers have been influenced by changing technology, increased familiarity with the system and a desire to respond to some of the controversies surrounding the use of these approaches. The hard evidence on the economic and environmental consequences of adopting these approaches is juxtaposed with the expectations created by the economic theory of tradable permits. The final section draws together some tentative lessons that can be drawn from this experience.

Keywords: Emissions Trading, Individual Tradable Quotas, Water Rights, Pollution Control Policy, Economic Incentives, Tradable Permits

JEL Classification: Q22, Q25, Q28

Suggested Citation

Tietenberg, Tom, The Tradable Permits Approach to Protecting the Commons: What Have We Learned? (June 2002). Available at SSRN: https://ssrn.com/abstract=315500 or http://dx.doi.org/10.2139/ssrn.315500

Tom Tietenberg (Contact Author)

Colby College - Department of Economics ( email )

5242 Mayflower Hill Drive
Waterville, ME 04901
United States
207-660-6322 (Phone)

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