Cost-Savings from Adapting Tradable Discharge Permits
Attributes
Medium: Water
Country: China
Analytical Framework(s): Market Price of Output
Study Date: 1997
Publication Date: 1998
Major Result(s)
| Resource/Environmental Good | CNY, per year (1997) |
|---|---|
| Cost-savings in using a tradable discharge permit system for water pollution | 2,412,300.00 |
Study Note: The proponents noted that this research was intended to help governments and industries accept the tradable discharge permit (TDP) system by illustrating the benefits from trading rather than giving an exact estimation of benefits.
Study Details
Summary: The tradable discharge permit (TDP) system was suggested as an alternative control measure for water pollution in the upper Nanpan river in Qujing City, Yuan province, China. The study provided information on and analysis of point/point source effluent trading, an explanation of the theory underlying the trading, an examination of international experiences to date, and an evaluation of the lessons learned. It was proposed that a point/point source trading system for chemical oxygen demand (COD) and 5-day biochemical oxygen demand (BOD5) discharge be used for the upper Nanpan river, having participants covering both existing and new point sources in a smaller trading zone (the vicinity of Xiping town and the urban center). Such a system was recommended with the main objective of achieving the total reduction targets at a lower total cost than the non-tradable system. Trading opportunities were identified by comparing unit costs across all reduction options of the potential participants. The potential benefit (direct reduction cost-savings), was the difference between the total cost if each discharger is required to achieve its permit limits by upgrading wastewater treatment facilities, and the total cost if trading is allowed to be an alternative for the dischargers to achieve their permit limits. Results indicated that municipal sources must be covered by the trading program.
Site Characteristics: The upper Nanpan river is heavily polluted. Its 122 km main stream is designated as water for industrial and agricultural use. However, the water quality is unsuitable for any use, because industrial discharges and municipal sources contribute significantly to the river's pollutant loads which are much higher than the total maximum loads allowable. The upper Nanpan river is a tributary of the Pearl river that merges with the South China Sea. It has a drainage of 2,486 km2. A mean annual rainfall of 811 mm is brought to the catchment by the monsoon, with 80% of the annual precipitation falling in the rainy season (May to October). River flow is highly variable every year and every season.
Comments: It was mentioned in the study that estimation of the benefits of any TDP system is difficult before the system is actually in place, and that results could be different if BOD data were used to estimate the cost-saving.