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Journal of Economic Perspectives: Vol. 27 No. 1 (Winter 2013)


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Moving Pollution Trading from Air to Water: Potential, Problems, and Prognosis

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Fisher-Vanden, Karen, and Sheila Olmstead. 2013. "Moving Pollution Trading from Air to Water: Potential, Problems, and Prognosis." Journal of Economic Perspectives, 27(1): 147-72.

DOI: 10.1257/jep.27.1.147


This paper seeks to assess the current status of water quality trading and to identify possible problems and solutions. Water pollution permit trading programs have rarely been comprehensively described and analyzed in the peer-reviewed literature. Including active programs and completed or otherwise inactive programs, we identify approximately three dozen initiatives. We describe six criteria for successful pollution trading programs and consider how these apply to standard water quality problems, as compared to air quality. We then highlight some important issues to be resolved if current water quality trading programs are to function as the "leading edge" of a new frontier in cost-effective pollution permit trading in the United States.

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Fisher-Vanden, Karen (PA State U)
Olmstead, Sheila (Resources for the Future, Washington, DC)

JEL Classifications

K32: Environmental, Health, and Safety Law
Q25: Renewable Resources and Conservation: Water
Q53: Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
Q58: Environmental Economics: Government Policy


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