Water quality trading systems : an integrated economic analysis of theoretical and practical approaches

Tradable pollution permits are in the centre of current interest. A central authority (usually a government agency) sets a limit or cap on the amount of a pollutant that can be emitted. Companies or other groups that emit the pollutant are given credits or allowances which represent the right to emit a specific amount. The total amount of credits cannot exceed the cap, limiting total emissions to that level. Companies that pollute beyond their allowances must buy credits from those who pollute less than their allowances or face heavy penalties. This transfer is referred to as a trade.

As it is assumed that market-based environmental instruments offer significant advantages over conventional approaches to pollution control there is a lot of creational activity in this domain recently.

In this thesis the application of water trading systems is analysed in order to identify its potential. It tries to fill the gap in the literature in several respects. A comprehensive analysis demonstrates the particularities of the application of permit trading systems to water, and to rivers, in particular. Ecological and economic criteria are redefined with respect to the specific characteristics of rivers. A comprehensive and standardised evaluation system allows a comparable examination of the trading systems. This study evaluates existing theoretical and practical approaches of water quality trading systems with respect to these same developed criteria. For the first time, an integrated, comprehensive and comparable analysis of different trading systems applies. Results of the evaluations are consolidated by linking theoretical and practical approaches.