Proposed Smart Market Design for Sediment Discharge
Publication: Journal of Water Resources Planning and Management
Volume 139, Issue 1
Abstract
Sediment discharge from erosion, urban runoff, and construction can cause environmental degradation. Governments try to regulate sediment, but the regulatory approach is costly to land owners. In principle, a market-based system could reduce costs, but the associated transaction costs are far too high, because market participants must find trading partners, negotiate, and seek government approval. This paper proposes a smart market design with an associated market clearing model for sediment discharge. Market participants offer and bid for tradable discharge allowances to a central auctioneer. The allowances correspond to kilograms of sediment discharge per year, as estimated by an erosion model. The auctioneer then uses a linear program to price and allocate sediment allowances in a given catchment. Participants do not trade bilaterally, but rather through a central pool, reducing transaction costs. The market design uses the relevant hydrological data, quantifies environmental effects explicitly, and gives price signals based on the environmental features. Additionally, the initial rights could be scaled back or up when catchment is over-allocated or under-allocated to keep a market operating with revenue neutrality. The smart market is simulated for two catchments in Auckland, New Zealand.
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Acknowledgments
This work was supported by Auckland Regional Council. We thank NIWA (Hamilton) for running GLEAMS and providing simulation results for the catchment, and Dr. Shane Dye from the department of management, University of Canterbury, New Zealand, for his comments and suggestions in the document.
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Information & Authors
Information
Published In
Journal of Water Resources Planning and Management
Volume 139 • Issue 1 • January 2013
Pages: 96 - 108
Copyright
© 2013 American Society of Civil Engineers.
History
Received: May 8, 2011
Accepted: Jan 5, 2012
Published online: Jan 7, 2012
Published in print: Jan 1, 2013
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