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Market Power, Private Information, and the Optimal Scale of Pollution Permit Markets for North Carolina’s Neuse River
RFF Academic Seminar

Andrew Yates

Download the Paper (PDF)

We extend the analysis of optimal scale in pollution permit markets by allowing for both market power and private information. The effect of these considerations on optimal scale is determined by analyzing pollution of nitrogen from Waste Water Treatment Plants (WWTP) into North Carolina’s Neuse River System. An economic model of damages and abatement costs is integrated with a hydro-ecological model of nitrogen flow through the Neuse. We determine the optimal allocation number of trading zones and allocate the WWTP into these zones. For many combinations of parameters, both the market power and private information cases lead to lower total costs than competition. Under the most likely regulatory scenario, we find cost savings of 1.5 million dollars per year under the optimal market design relative to the typical 303 (d) regulation in which the WWTP are not allowed to trade.

Thursday, May 26, 2011
12 - 1:30 p.m.

Lunch will be provided

7th Floor Conference Center
1616 P St. NW
Washington, D.C. 20036

All seminars will be in the 7th Floor Conference Room at RFF, 1616 P Street NW.  Attendance is open, but involves pre-registration no later than two days prior to the event. For questions and to register to an event, please contact Daniel McDermott at (tel. 202-328-5174). Updates to our academic seminars schedule will be posted at

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