Examining the effects of ecological and political boundaries on the potential for water quality trading
Keiser, David Andrew
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Water quality trading as a means to improve water quality has become a popular instrument considered by environmental policy makers. Although the U.S. Environmental Protection Agency lists more than forty current trading programs in the U.S., only a few active markets exist. The literature identifies several hurdles to trading, overcoming which requires a deeper understanding of the interaction between local environmental, legal, and economic conditions. Particular challenges include thin markets, uncertainty related to the course and fate of nutrient flows, varying degrees of political support, and high transaction costs. These hindrances often arise from and contribute to the confinement of trading to tight ecological and political boundaries. This research explores the effect of these boundaries on the potential for trading for two southeastern reservoirs. Results show that tight ecological and political boundaries have a negative effect on the potential for trading in Lake Allatoona, GA and Weiss Lake, AL respectively.