The effect of baselines on performance based water quality trading programs
Date
2015
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Publisher
University of Delaware
Abstract
Nonpoint source pollution has become a problem in the United States and around the World. The Clean Water Act of 1972 does not regulate nonpoint polluters, but it does regulate point source polluters. As nonpoint source pollution has worsened and become more visible many different economic approaches have been tested to reduce pollution levels. One approach is nonpoint to point trading. This research focuses on nonpoint to point water quality trading in the Chesapeake Bay, and specifically the baseline level set to meet in order to qualify to trade. This research will argue and show that performance set baselines perform better than practice set baselines. This will be shown using theoretical models as well as collecting empirical data through Maryland's water quality trading website. Contrary to previous research, this research will show that high load or "dirty" farms will participate in the trading market if there is a performance baseline not a practice baseline, also some high load fields will perform better in the market than low load fields. The performance baseline improves the efficiency of the market, as well as increases participation, and brings down the cost of credits sold on the market.