The design of marketable permit schemes to control local and regional pollutants

In recent years, there has been a steady rise in the use of marketable permits in environmental regulation. They have been employed as tools to control both air and water pollution, and have been implemented on local, regional, and national scales. These trading regimes - based upon a single market in emission permits - do not control the distribution of emissions throughout the trading region or prevent the formation of “hot spots” of pollution. In this chapter, we propose a marketable permit scheme that is consistent with the attainment of ambient standards and that does not significantly interfere with the benefits of trading.