No abstract

The problem of noncompliance and enforcement in transferable discharge permit (TDP) markets has not received much attention. This paper examines the consequences of noncompliance for a TDP market given fairly general assumptions about the characteristics of the enforcement policy in place. The analysis reveals that when firms are noncompliant TDP markets retain their efficiency property only under some fairly stringent conditions. The effect of noncompliance on the equilibrium permit price raises some important questions about the ability of a TDP market to achieve, and remain in, equilibrium when firms are noncompliant.

No abstract

In programs for trading pollution abatement between point and nonpoint sources, the trading ratio specifies the rate at which nonpoint source abatement can be substituted for point source abatement. The appropriate value of this ratio is unclear because of qualitative differences between the two classes of sources. To identify the optimal trading ratio, we develop and analyze a model of point/nonpoint trading. We find the optimal trading ratio depends on the relative costs of enforcing point versus nonpoint reductions and on the uncertainty associated with nonpoint loadings. The uncertainty does not imply a lower bound for the optimal trading ratio.

No abstract