TY - JOUR

T1 - Water quality trading markets

T2 - Integrating land and marine based measures under a smart market approach

AU - Filippelli, Raphael

AU - Termansen, Mette

AU - Hasan, Syezlin

AU - Hasler, Berit

AU - Hansen, Line

AU - Smart, James C.R.

N1 - Publisher Copyright: © 2022

PY - 2022

Y1 - 2022

N2 - Implementation of effective policy instruments to reduce emissions from non-point agricultural sources has been challenging. Mussel farming has the potential to mitigate diffuse nitrogen losses from agricultural production, and a Water Quality Trading Market (WQTM) between agricultural and mussel farmers could potentially be an efficient mechanism. We simulate a hypothetical WQTM in a catchment in northern Denmark using a relatively new approach referred to as a smart market for water quality. Building on previous work, we integrate mussel farmers as nitrogen permit sellers in a WQTM involving agricultural farmers and analyze the effect of the market on the cost of meeting water quality improvement targets. In addition, we set-up scenarios with decreasing levels of participation by agricultural farmers (−10%, −20% and − 30%). The results show a clear benefit from allowing trading between agricultural and mussel farmers, reducing the total costs by as much as 11.9%. Lower participation results in reductions in the benefits from trade. However, allowing mussel-based mitigation to supply N permits at modest cost can potentially partially circumvent the well-documented challenge that agricultural farmers are reluctant to act as N permit suppliers in WQTMs. The study illustrates the economic and environmental potential of integrating land- and marine-based farmers in a joint policy scheme to reduce nitrogen emissions to coastal and marine areas.

AB - Implementation of effective policy instruments to reduce emissions from non-point agricultural sources has been challenging. Mussel farming has the potential to mitigate diffuse nitrogen losses from agricultural production, and a Water Quality Trading Market (WQTM) between agricultural and mussel farmers could potentially be an efficient mechanism. We simulate a hypothetical WQTM in a catchment in northern Denmark using a relatively new approach referred to as a smart market for water quality. Building on previous work, we integrate mussel farmers as nitrogen permit sellers in a WQTM involving agricultural farmers and analyze the effect of the market on the cost of meeting water quality improvement targets. In addition, we set-up scenarios with decreasing levels of participation by agricultural farmers (−10%, −20% and − 30%). The results show a clear benefit from allowing trading between agricultural and mussel farmers, reducing the total costs by as much as 11.9%. Lower participation results in reductions in the benefits from trade. However, allowing mussel-based mitigation to supply N permits at modest cost can potentially partially circumvent the well-documented challenge that agricultural farmers are reluctant to act as N permit suppliers in WQTMs. The study illustrates the economic and environmental potential of integrating land- and marine-based farmers in a joint policy scheme to reduce nitrogen emissions to coastal and marine areas.

KW - Farmer participation

KW - Mussel farming

KW - Non-point pollution

KW - Water quality trading

U2 - 10.1016/j.ecolecon.2022.107549

DO - 10.1016/j.ecolecon.2022.107549

M3 - Journal article

AN - SCOPUS:85134807571

VL - 200

JO - Ecological Economics

JF - Ecological Economics

SN - 0921-8009

M1 - 107549

ER -