Tradable permits in principle and practice

Penn State Environmental Law Review

Volumn 14, Issue 2, 2006, Pages 251-281

  Tietenberg, Tom ^a  

^a NONE

Author keywords

[No Author keywords available]

Indexed keywords

ATMOSPHERIC POLLUTION; ENVIRONMENTAL LEGISLATION; POLLUTION CONTROL; WATER SUPPLY;

BENELUX; EURASIA; EUROPE; NETHERLANDS; NORTH AMERICA; UNITED STATES; WESTERN EUROPE;

EID: 33746269106     PISSN: 15463427     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Review

References (141)

1. Org. for Econ. Cooperation & Dev. (OECD), Implementing Domestic Tradable Permits for Environmental Protection (1999).
2. David Harrison Jr., Ex Post Evaluation of the RECLAIM Emissions Trading Programmes for the Los Angeles Air Basin, in Tradable Permits: Policy Evaluation, Design and Reform 45 (OECD ed., 2004).
3. 2 Cap and Trade in Denmark, Address at the Proceedings of the Org. for Econ. Cooperation & Dev. Workshop on Ex post Evaluation of Tradable Permits: Methodological and Policy Issues (Jan. 21-22, 2003).
4. For more information on this institution, see http:// www.chicagoclimatex.com/.
5. Leonard Shabman, Compensation for the Impacts of Wetland Fill: The US Experience with Credit Sales, in Tradable Permits: Policy Evaluation, Design and Reform 155 (OECD ed., 2004).
6. Ada Wossink, The Dutch Nutrient Quota System: Past Experience and Lessons for the Future, in Tradable Permits: Policy Evaluation, Design and Reform 99 (OECD ed., 2004).
7. Leigh Raymond, Resources for the Future, Private Rights in Public Resources: Equity and Property Allocation in Market-Based Environmental Policy (2003).
8. For a previous survey that also examines tradable permit systems across resource settings, see Bonnie G. Colby, Cap and Trade Challenges: A Tale of Three Markets, 76 Land Econ. 638 (2000).
9. Gary D. Libecap, Contracting for Property Rights (1990).
10. Nat'l Research Council Comm. to Review Individual Fishing Quotas, Sharing the Fish: Toward a National Policy on Fishing Quotas (1999).
11. Thomas H. Tietenberg, Introduction, in Emissions Trading Programs Volume I: Implementation and Evolution xi-xxvii (Thomas H. Tietenberg ed., 2001).
12. Tomasz Zylicz, Obstacles to Implementing Tradable Pollution Permits: the Case of Poland, in Implementing Domestic Tradable Permits for Environmaental Protection 147 (OECD ed., 1999).
13. Bernd Scharer, Tradable Emission Permits in German Clean Air Policy: Considerations on the Efficiency of Environmental Policy Instruments, in Pollution for Sale: Emissions Trading and Joint Implementation 141 (Steve Sorrel & Jim Skea eds., 1999).
14. Steve Sorrell, Why Sulfur Trading Failed in the UK, in Pollution for Sale: Emissions Tradinga and Joint Implementation 170 (Steve Sorrel & Jim Skea eds., 1999).
15. Robert W. Hahn & Gordon L. Hester, Marketable Permits: Lessons from Theory and Practice, 16 Ecology L.Q. 361 (1989).
16. Raymond, supra note 7.
17. Shabman, supra note 5.
18. Regional Clean Air Incentives Market.
19. W.P. Davidse, Lessons from Twenty Years of Experience with Property Rights in the Dutch fishery, in The Definition and Allocation of Use Rights in European Fisheries: Proceedings of the Second Workshop Held in Brest, France, 5-7 May 1999 at 153 (Ctr. For the Econ. & Mgmt. of Aquatic Res, ed., 1999).
20. Nat'l Research Council Comm. to Review Individual Fishing Quotas, Sharing the Fish: Toward a National Policy on Fishing Quotas (1999).
21. Noncompliance not only makes it more difficult to reach stated goals, it sometimes makes it more difficult to know whether the goals are being met. In fisheries, for example, stock assessments sometimes depend on the size and composition of the catch. If the composition of the landed harvest is unrepresentative of the actual harvest due to illegal discards, this can bias the stock assessment and the total allowable catch that depends upon it. Not only would true mortality rates be much higher than apparent mortality rates, but the age and size distribution of landed catch would be different from the size distribution of the initial harvest (prior to discards). This is known in fisheries as "data fouling."
22. Prior to 1988, the expected positive effects of ITQs did not materialize in the Dutch cutter fisheries due to inadequate enforcement. Fleet capacity increased further, the race for fish continued, and the quotas had to be supplemented by input controls such as a limit on days at sea. Nat'l Research Council Comm. to Review Individual Fishing Quotas, Sharing the Fish: Toward a National Policy on Fishing Quotas (1999).
23. Pederson, supra note 3.
24. Barry D. Nussbaum, Phasing Down Lead in Gasoline in the U.S.: Mandates, Incentives, Trading and Banking, in Climate Change: Designing a Tradeable Permit System 21 (OECD ed., 1992).
25. Robert W. Hahn & Al M. McGartland, The Political Economy of Instrument Choice: An Examination of the U. S. Role in Implementing the Montreal Protocol, 83 Nw. U. L. Rev. 592 (1989).
26. 2 Trading and Banking, 33 Envtl. Sci. & Tech. 3489 (1999).
27. Harrison, supra note 2.
28. Patricia Bernal & Bernardo Aliaga, ITQ's in Chilean fisheries, in The Definition and Allocation of Use Rights in European Fisheries: Prooceedings of the Second Workshop Held in Brest, France, 5-7 May 1999 (Ctr. For the Econ. & Mgmt. of Aquatic Res. ed., 1999).
29. Birgir Runolfsson, ITQs in Icelandic Fisheries: a Rights-based Approach to Fisheries Management, in The Definition and Allcation of Use Rights in European Fisheries: Proceedings of the Second Workshop Held in Brest, France, 5-7 May 1999 at 164 (Ctr. For the Econ. & Mgmt. of Aquatic Res. ed., 1999).
30. OECD, Towards Sustainable Fisheries: Economic Aspects of the Management of Living Marine Resources (1997).
31. Michael D. Young, Learning from the Market: Ex post Water Entitlement and Allocation Trading Assessment Experience in Australia, in Tradable Permits: Policy Evaluation, Design and Reform 135 (OECD ed., 2004).
32. Shabman, supra note 5.
33. 2 Abatement: How Much Emission Reduction do they Justify?, 16 Ecological EcoN. 13 (1996).
34. OECD, Towards Sustainable Fisheries: Economic Aspects of the Management of Living Marine Resources (1997);
35. Nat'l Research Council Comm. to Review Individual Fishing Quotas, Sharing the Fish: Toward a National Policy on Fishing Quotas (1999).
36. Nat'l Research Council Comm. to Review Individual Fishing Quotas, Sharing the Fish: Toward a National Policy on Fishing Quotas (1999).
37. 2 Cap-and-Trade Programme, in Tradable Permits: Policy Evaluation, Design and Reform 71 (OECD ed., 2004);
38. Harrison, supra note 2;
39. Hahn & Hester, supra note 14;
40. Thomas H. Tietenberg, Economic Instruments for Environmental Regulation, 6 Oxford Rev. Econ. Pol'y 17 (1990).
41. Yonng, supra note 30;
42. K. William Easter et al., Water Markets: Transactions Costs and Institutional Options, in Markets for Water: Potential and Performance 1 (K. William Easter et al., eds., 1998).
43. Nat'l Research Council Comm. to Review Individual Fishing Quotas, Sharing the Fish: Toward a National Policy on Fishing Quotas (1999).
44. OECD, Towards Sustainable Fisheries: Economic Aspects of the Management of Living Marine Resources (1997).
45. Eli Berman & Linda T. Bui, Environmental Regulation and Labor Demand: Evidence from the South Coast Air Basin, 79 J. Pub. Econ. 265 (2001);
46. Eban Goodstein, Jobs and the Environment - an Overview, 20 Envtl. Mgmt. 313 (1996).
47. Nat'l Research Council Comm. to Review Individaul Fishing Quotas, Sharing the Fish: Toward a National Policy on Fishing Quotas (1999).
48. Bonnie J. McCay et al., Labor and the Labor Process in a Limited Entry Fishery, 6 Marine Resource Econ. 311 (1989);
49. Bonnie J. McCay & Carolyn F. Creed, Social Structure and Debates on Fisheries Management in the Mid-Atlantic Surf Clam Fishery, 13 Ocean & Shoreline Mgmt. 199 (1990).
50. Scott C. Matulich et al., Toward a More Complete Model of Individual Transferable Fishing Quotas: Implications of Incorporating the Processing Sector, 31 J. Envtl. Econ. & Mgmt. 112 (1996);
51. Scott C. Matulich & Murat Sever, Reconsidering the Initial Allocation of ITQs: the Search for a Pareto-Safe Allocation Between Fishing and Processing Sectors, 75 Land Econ. 203 (1999).
52. Nat'l Research Council Comm. to Review Individual Fishing Quotas, Sharing the Fish: Toward a National Policy on Fishing Quotas (1999).
53. Gisli Palsson, The Virtual Aquarium: Commodity Fiction and Cod Fishing, 24 Ecological Econ. 275 (1998).
54. Nat'l Research Council Comm. to Review Individual Fishing Qoutas, Sharing the Fish: Toward a National Policy on Fishing Qoutas (1999).
55. Olivia Hartridge, The UK Emissions Trading Scheme: a Progress Report, Address at the Proceedings of the Org. for Econ. Cooperation & Dev. Workshop on Ex post Evaluation of Tradable Permits: Methodological and Policy Issues (Jan. 21-22, 2003);
56. Brian McLean, Ex Post Evaluation of the US Sulphur Allowance Programme, Address at the Proceedings of the Org. for Econ. Cooperation & Dev. Workshop on Ex Post Evaluation of Tradable Permits: Methodological and Policy Issues (Jan. 21-22, 2003).
57. U.S. Envtl. Prot. Agency (EPA), An Evaluation of the South Coast Air Quality Management District's Regional Clean Air Incentives Market - Lessons in Environmental Markets and Innovation (2002).
58. Id.
59. Suzi Kerr & David Maré, Transaction Costs and Tradable Permit Markets: The United States Lead Phasedown (1999) (unpublished manuscript, available at http://www.motu.org.nz/abstracts/ transaction_costs.htm).
60. Ellerman, supra note 35.
61. Hartridge, supra note 46.
62. McLean, supra note 46.
63. Id.;
64. Harrison, supra note 2.
65. EPA, supra note 47.
66. Pederson, supra note 3;
67. Juan-Pablo Montero, Permits, Standards, and Technology Innovation, 44 J. Envtl. Econ. & Mgmt. 23 (2002);
68. Hartridge, supra note 46.
69. Thomas H. Tietenberg, Resources for the Future, Emissions Trading: An Exercise in Reforming Pollution Policy (1985).
70. 2 Emission Entitlements, 8 Int'l Envtl. Aff. 267 (1996);
71. Henning Rentz, Joint Implementation and the Question Of 'Additionality - A Proposal For A Pragmatic Approach To Identify Possible Joint Implementation Projects, 26 Energy Pol'y 275 (1998);
72. Catrinus J. Jepma, The EU Emissions Trading Scheme (ETS): How linked to JI/CDM?, 3 Climate Pol'y 89 (2003).
73. Ellerman, supra note 35.
74. Hartridge, supra note 46.
75. Leonard Shabman et al., Trading Programs for Environmental Management: Reflections on the Air and Water Experiences, 4 Envtl. Prac. 153 (2002).
76. Nicolas Spulber & Asghar Sabbaghi, Economics of Water Resources: From Regulation to Privitization (1993);
77. Lee G. Anderson, Privatizing Open Access Fisheries: Individual Transferable Quotas, in The Handbook of Environmental Economics (D. W. Bromley ed. 1995).
78. Steven Kelman, What Price Incentives? Economists and the Environment (1981).
79. Bonnie J. McCay, Oyster Wars and the Public Trust: Property, Law and Ecology in New Jersey History (1998).
80. One prominent exception is the New Zealand ITQ system. It grants full property rights in perpetuity. Nat'l Research Council Comm. to Review Individual Fishing Quotas, Sharing the Fish: Toward a National Policy on Fishing Quotas (1999).
81. 42 U.S.C. § 7651b(f)(2005).
82. C. S. Hollings, Adaptive Environmental Assessment and Management (1978).
83. Michael D. Young, The Design of Fishing-right Systems - the NSW Experience, 31 Ecological Econ. 305 (1999);
84. Young, supra note 30.
85. R. Andrew Muller, Emissions Trading with Shares and Coupons - A Laboratory Experiment, 15 Energy J. 185 (1994).
86. In the western U.S., the number of rights expected to be fulfilled in any given year is determined by snowpack measurements and satellite monitoring of streamflows. Charles W. Howe & Dwight R. Lee, Priority Pollution Rights: Adapting Pollution Control to a Variable Environment, 59 Land Econ. 141 (1983);
87. Marie L. Livingston, Institutional Requisites for Efficient Water Markets, in Markets of Water: Potential and Performance 19 (K. William Easter et al., eds., 1998).
88. Livingston, supra note 69.
89. RECLAIM participants experienced a very large unanticipated demand for power that could only be accommodated by older, more polluting plants. Permit prices soared in a way that was never anticipated. Harrison, supra note 2. RECLAIM participants experienced a very large unanticipated demand for power that could only be accommodated by older, more polluting plants. Permit prices soared in a way that was never anticipated
90. In the Australian water case excessive withdrawal would trigger substantial increases in salinity. Young, supra note 30. In the Australian water case excessive withdrawal would trigger substantial increases in salinity
91. In the New Zealand fisheries case, a lack of understanding of the biology of the orange roughy led to a cap that permitted unsustainable harvests. Suzi Kerr, Evaluation of the Cost Effectiveness of the New Zealand Individual Transferable Quota Fisheries Market, in Tradable Permits: Policy Evaluation, Design and Reform 121 (OECD ed., 2004).
92. Marc J. Roberts & Michael Spence, Effluent Charges and Licenses Under Uncertainty, 5 J. Pub. Econ. 193 (1976);
93. Harrison, supra note 2;
94. William Pizer, Resources for the Future, Chossing Price Or Quantity Controls For Greenhouse Gases (Climate Issues Brief 17, 1999).
95. Harrison, supra note 2.
96. Raymond, supra note 7.
97. Lawrence H. Goulder, The Cost-Effectiveness of Alternative Instruments for Environmental Protection in a Second-Best Setting, 72 J. Pub. Econ. 329 (1999).
98. Gert T. Svendsen, Interest Groups Prefer Emission Trading: A New Perspective, 101 Pub. Choice 109 (1999);
99. Raymond, supra note 7.
100. 2 Abatement Policies: What Does it Cost?, in Behavioral & Distributional Effects of Environmental Policy (2000).
101. The "new source bias" is, of course, not unique to tradable permit systems. It applies to any system of regulation that imposes more stringent requirements on new sources than existing ones. Michael T. Maloney & Gordon L. Brady, Capital Turnover and Marketable Property Rights, 31 J.L. & Econ. 203 (1998);
102. Randy A. Nelson et al., Differential Environmental Regulation: Effects On Electric Utility Capital Turnover and Emissions, 75 Rev. Econ. & Stat. 368 (1993).
103. Harald Bergland et al., Rent Seeking and the Regulation of a Natural Resource, 16 Marine Resource Econ. 219 (2001).
104. Raymond, supra note 7.
105. Id.
106. Wossink, supra note 6.
107. Harrison, supra note 2.
108. Michael G. J. Den Elzen & Andre P. G. deMoor, Analyzing the Kyoto Protocol under the Marrakesh Accords: Economic Efficiency and Environmental Effectiveness, 43 Ecological Econ. 141 (2002).
109. Juan-Pablo Montero, Voluntary Compliance with Market-Based Environmental Policy: Evidence from the U.S. Acid Rain Program, 107 J. Pol. Econ. 998 (1999);
110. Juan-Pablo Montero, A Market-Based Environmental Policy Experiment in Chile (Ctr. For Energy & Envtl. Policy Research, Working Paper MIT-CEEPR 2000-005, August 2000).
111. Robert W. Hahn, Market Power and Transferable Property Rights, 99 Q. J. Econ. 753 (1984);
112. Lee G. Anderson, A Note on Market Power in ITQ Fisheries, 21 J. Envtl. Econ. & Mgmt. 291 (1991);
113. Henry Van Egteren & Marian Weber, Marketable Permits, Market Power and Cheating, 30 J. Envtl. Econ. & Mgmt. 161 (1996).
114. Walter S. Misiolek & Harold W. Elder, Exclusionary Manipulation of Markets for Pollution Rights, 16 J. Envtl. Econ. & Mgmt. 156 (1989);
115. E. S. Sartzetakis, Raising Rivals' Costs Strategies via Emission Permits Markets, 12 Rev. Indus. Org. 751 (1997).
116. Gisli Palsson & Agnar Helgason, Figuring Fish and Measuring Men: The Individual Transferable Quota System in Icelandic Cod Fishery, 28 Ocean & Coastal Mgmt. 117 (1995).
117. Adesoji Adelaja et al., Market Power, Industrial Organization and Tradeable Quotas, 13 Rev. Indus. Org. 589 (1998).
118. Palsson, supra note 44.
119. Nat'l Research Council Comm. to Review Individual Fishing Qoutas, Sharing the Fish: Toward a National Policy on Fishing Qoutas (1999).
120. Id.
121. This set aside has not been used because sufficient allowances have been available through normal channels. That doesn't necessarily mean the set-aside was not useful, however, because it may have alleviated concerns that could have otherwise blocked the implementation of the program.
122. 2 Auction: Analysis and Generalization, 21 Energy Econ. 403 (1999).
123. Nat'l Research Council Comm. to Review Individual Fishing Quotas, Sharing the Fish: Toward a National Policy on Fishing Quotas (1999).
124. Jay J. C. Ginter, The Alaska Community Development Quota Fisheries Management Program, 28 Ocean & Coastal Mgmt. 147 (1995).
125. J. H. Annala, New Zealand's ITQ System: Have the First Eight Years Been a Success or a Failure?, 6 Rev. Fish Biology & Fisheries 43 (1996).
126. Nat'l Research Council Comm. to Review Individual Fishing Quotas, Sharing the Fish: Toward a National Policy on Fishing Quotas (1999).
127. Thomas H. Tietenberg, Tradeable Permits for Pollution Control When Emission Location Matters: What Have We Learned?, 5 Envtl. & Resource Econ. 95 (1995).
128. See Harrison, supra note 2;
129. Wossink, supra note 6.
130. Ellerman, supra note 35.
131. Jonathan D, Rubin, A Model Of Intertemporal Emission Trading, Banking, and Borrowing, 31 J. Envtl. Econ. & Mgmt. 269 (1996);
132. Catherine Kling & Jonathan Rubin, Bankable Permits for the Control of Environmental Pollution, 64 J. Pub. Econ. 99 (1997).
133. Ellerman, supra note 35.
134. Harrison, supra note 2.
135. Pederson, supra note 3.
136. Elinor Ostrom et al., The Drama of the Commons (2002).
137. Svendsen & Christensen, supra note 96.
138. Nat'l Research Council Comm. to Review Individual Fishing Quotas, Sharing the Fish: Toward a National Policy on Fishing Qoutas (1999).
139. Young, supra note 67.
140. Thomas H. Tietenberg, Ethical Influences on the Evolution of the U.S. Tradeable Permit Approach to Pollution Control, 24 Ecological Econ. 241 (1998);
141. Raymond, supra note 7.