Whatever the allocation, efficiency and environmental quality is not compromised, only the distributional implications are different. Therefore, those who criticize pollution permits as a right to pollute are correct only in the case where the polluters are given the permit for free. If the polluter has paid a market price for the permit, the criticism could only be that the “price” of the permit is “too low,” or the supply of permits is “too large,” which is the equivalent to saying a higher level environmental quality is desired.
Establishing a system of emission permits has relatively high management costs: (a) it requires proper definition of airshed (trading permits across airsheds would create hot spots), which in turn requires knowledge of the sources and of the movement of pollutants under the local atmospheric conditions; (b) monitoring of ambient air quality in the airshed (or water quality in the watershed) and the relationship between emissions and ambient quality; (c) capacity to monitor or randomly inspect individual emission sources to ensure that the emissions limit specified in the permit is observed; and (d) a system of approving and recording credits, offsets, and trades among permit holders. Depending on the type of pollutant and the content of the permit, management requirements could be significantly reduced. For example, in the case of a global pollutant such as CO 2 , there is no need to define the airshed since it makes no difference where in the world CO 2 is emitted or controlled. In the case of local pollutants, systems of self-reporting, auditing, and random inspection with sanctions for violations may suffice to replace a formal system of approving and recording credits, offsets, and trades. Incentives for self-enforcement and group policing can be introduced to minimize monitoring
and enforcement costs.
Tradeable emission permits are nothing but tradeable emission quotas, a concept that has wide applicability beyond air and water pollution and greenhouse gases. Consider the example of a mobile (or fugacious) resource such as an offshore fishery suffering from overfishing. Property rights cannot be assigned but a total allowable catch or aggregate catch quota can be set (at say the maximum sustainable economic yield) and allocated to existing fishermen in some equitable way (e.g., according to average historical catches). Potential entrants can be accommodated by reserving quotas for them or through the purchase of quotas from retiring fishermen. If trading is allowed, the individual tradeable quotas would gravitate towards the most efficient fishermen, ensuring that the allowable total catch is caught at the minimum possible cost. Thus overfishing is eliminated, the fishing resource is protected, economic efficiency is achieved (i.e., fishery rents are maximized), and fishermen who choose to leave the fishery, making all this possible, are fully compensated. New Zealand has successfully used this system to manage its marine fishery (see Chapter 4).
Space limitations do not allow discussion of all the available instruments in the category of market creation. Two more examples of instruments should suffice. A number of countries with substantial tourist industries are facing a serious problem of expansion and haphazard development of their most popular resorts. In fact, the more attractive a resort is the more likely it is to be degraded by overdevelopment.
Experience shows that zoning and building regulations have been ineffective in many parts of the world to regulate development and to maintain the quality of the tourist product (especially in coastal areas). Examples range from Southern Europe (e.g., Spain) to Southeast Asia (e.g., Thailand) to the Caribbean (e.g. Barbados). Some countries (e.g., Cyprus) were forced to introduce moratoriums on all by Apps Hat Mini" style="border: none !important; display: inline-block !important; text-indent: 0px !important; float: none !important; font-weight: bold !important; height: auto !important; margin: 0px !important; min-height: 0px !important; min-width: 0px !important; padding: 0px !important; text-transform: uppercase !important; text-decoration: underline !important; vertical-align: baseline !important; width: auto !important; background: transparent !important;">hotel and other tourism-related development for several years. The moratoriums were later swept by the avalanche of accumulated applications, pressures for by Apps Hat Mini" style="border: none !important; display: inline-block !important; text-indent: 0px !important; float: none !important; font-weight: bold !important; height: auto !important; margin: 0px !important; min-height: 0px !important; min-width: 0px !important; padding: 0px !important; text-transform: uppercase !important; text-decoration: underline !important; vertical-align: baseline !important; width: auto !important; background: transparent !important;">hotel development, and a rush to build mostly poor quality establishments from fear that the moratorium might be reintroduced.
This is an example of a command and control intervention that has clearly backfired, causing the rate of construction to accelerate and its quality to decline, further downgrading the island's tourist product. Policy makers are searching for instruments that will help them control and guide the pace of new development in tourist centers in desirable areas and directions and to upgrade existing establishments, thereby improving environmental conditions and the quality of their tourist product.
Tradeable development quotas are such an instrument. The relevant authorities can set a maximum allowable development (or construction) quota, measured in, say, cubic meters of buildable space (or number of rooms) for each year, in each area or zone, consistent with their objectives to limit development and improve quality. The aggregate quota in each area can then be allocated according to some equitable (widely accepted) formula. Possible alternatives include auctioning to the highest bidder with the revenue going towards the upgrading of public places in the town (e.g., developing parks, improving roads, cleaning beaches, and reducing air and noise pollution). An alternative allocation is by proportion of land-ownership in the tourist zone. Under this arrangement each recipient of a quota would have the choice of using it in his/her own land, selling it to others or simply
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