@article{Cook:274845,
      recid = {274845},
      author = {Cook, Aaron and Shortle, James},
      title = {Intertemporal Trading Ratios for Nutrient Pollution  Control},
      address = {2018-06},
      number = {2108-2018-4556},
      pages = {20},
      year = {2018},
      abstract = {There is significant interest in the use of market  mechanisms for controlling nutrient pollution, one of the  most challenging threats to water quality in the United  States and elsewhere. This type of pollution often is  characterized by considerable lag times between discharge  from the pollution source and delivery to the impaired  waters. We investigate the implications of these lags for  efficient pollution reduction markets and compare two  alternative market designs: 1) forward markets where  participants trade pollution deliveries directly and 2) a  trading ratio system where they trade contemporaneous  discharges. While a system of first-best trade ratios is  complex in early periods, this system can produce the  optimal steady state loads using a simple trading rule. We  also find that while first-best trade ratios are greater than  one when there are lag disparities between trading  partners, second-best trade ratios under the same lag  disparities may be less than one when the overall cap on  discharges is set sufficiently small.},
      url = {http://ageconsearch.umn.edu/record/274845},
      doi = {https://doi.org/10.22004/ag.econ.274845},
}