Catálogo de publicaciones - libros

There are two major mechanisms currently use to manage water quality; a direct regulation (or command-and-control mechanism) and a market-based mechanism. Command-and-control type policy is predominant and preferred by regulators after the passage of the Clean Water Act (CWA) in 1972. Major point sources are controlled under command-and-control regulation. However, agriculture and other non-point sources have largely escaped direct regulation (Ribaudo 1999). Traditional command-and-control regulation does not appear to be able to meet the challenges of the water pollution problems that result from nonpoint source pollution. The failure to extend pollution controls to nonpoint sources increases the costs of water quality protection by precluding efficient allocation of control between point and nonpoint sources (Milliman 1982; Davies and Mazurek 1997; Freeman 2000).

Today, tradable permit systems are increasing in importance and acceptance by the regulators, and the regulated, to manage various environmental problems (Vig and Kraft 2000; Harrington et al. 2004; OECD 2004). After Coase proposed the basic foundation underlying tradable permits on external costs (Coase 1960), and the later development of the concept and use of marketable permit system elaborated by Crocker on controlling air pollution and Dales on regulating water use (Crocker 1966; Dales 1968), the theoretical reasons why trading of pollution rights should be superior to the direct regulation became well known (Stavins 2000; Ellerman 2003; Tietenberg 2004). Hahn et al and Tietenberg made a review and evaluation of several attempts to introduce market-based instruments into environmental regulation and were optimistic about the applications (Tietenberg 1985, 1990; Hahn and Hester 1989; Hahn 1989). In applying transferable permits to water problems, the earlier experiment conducted in the Fox River was studied by O’Neil et al. (1983). Water pollution trading may be referred to as effluent trading or water quality trading (WQT). Within the past decade, interest in investigating the application of tradable permits in water quality trading has increased.

After the first American effluent trading schemes arose in the 1980s; the development of effluent trading schemes has been increased, with the Fox River Program in 1981, the Lake Dillon Program in 1982 and the Tar-Pamlico River Basin Program in 1986. A small number of new effluent trading programs arose in the early to mid-nineties. It has only been within the past five-to-ten years that such programs have begun to increase. More recently, trading programs have increased in popularity under an increased (and explicit) regulatory flexibility on the part of the EPA, as laid out in the 1996 Effluent Trading in Watersheds Policy, the 2003 Water Quality Trading Policy. There are approximately 47 effluent trading programs in operation and in developmental stages in the US today (Morgan and Wolverton 2005).

Important factors affecting performance of current water quality trading in the US, including effects of each factor on trading activities in general, are presented in the previous chapter. This chapter aims to present the potential roles of trading based on experience with the current trading programs. The specific focus is on the performance from a number of selected trading programs which are active and successfully implemented. These programs are considered successful based on two objectives of the trading roles of as to whether or not they achieve a desired water quality cheaper (cost-effectiveness) and/or faster (in a desirable duration), listed in Table 4.1.

This chapter explains a general conclusion drawn from experience gained as a result of researching trading programs in the US; and provides an overview of the current conditions of the trading programs (based on information from the databases and literature reviews). Factors affecting the WQT program’s success and principles for designing WQT programs and suggested approaches for developing a trading program framework for WQT program implementation are described as well.