Benchmarking an optimal pattern of pollution trading: The case of Cub River,Utah |
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| Affiliation: | 1. Department of Applied Economics, 3530 Old Main Hill, Utah State University, Logan, UT 84322-3530, United States;2. Department of Economics, 458 Mergenthaler Hall, John Hopkins University, 3400 N. Charles St. Baltimore, MD 21218, United States;1. Department of Internal Medicine 1, Shimane University Faculty of Medicine, Izumo 693-8501, Japan;2. Department of Physiology and Regenerative Medicine, Kinki University Faculty of Medicine, Osaka 589-8511, Japan;1. Shih Hsin University, Taipei, Taiwan;2. National Chengchi University, Taipei, Taiwan;3. Soochow University, Taipei, Taiwan;1. College of Management and Economics, Tianjin University, Tianjin 300072, China;2. China Center for Social Computing and Analytics, Tianjin University, Tianjin 300072, China;3. CNRS, Centre d''Economie de la Sorbonne, Université Paris 1 Panthéon-Sorbonne, 106-112 Boulevard de l''Hôpital, Paris, France;1. Applied Economics & Management Research Group, University of Seville, Spain;2. Escuela Técnica Superior de Ingenieros Industriales, Universidad Castilla-La Mancha, Spain |
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| Abstract: | This paper employs a recently developed, dynamic trading algorithm to establish a benchmark pattern of trade for a potential water quality trading (WQT) market in the Cub River sub-basin of Utah; a market that would ultimately include both point and nonpoint sources. The algorithm accounts for three complications that naturally arise in trading scenarios: (1) combinatorial matching of traders, (2) trader heterogeneity, and (3) discreteness in abatement technology. The algorithm establishes as detailed a reduced-cost benchmark as possible for the sub-basin by distinguishing a specific pattern of trade among would-be market participants. As such, the algorithm provides a benchmark against which an actual pollution market's performance could conceivably be compared. We find that a benchmarked trading pattern for a potential Cub River WQT market – where each source, point or nonpoint, would be required to reduce its pollution loadings – may entail some point sources selling abatement credits to nonpoint sources. |
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