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A Nutrient Quota Trading Scheme to Reduce the Eutrophication of the Baltic Sea

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Environmental policy is currently experiencing a general transition towards greater inclusion of flexible, market-based instruments. While one of the most salient manifestations of this trend, the creation of markets for tradable emissions quota, has been widely applied in the areas of air pollution and greenhouse gas regulation, it has yet to be introduced as a policy instrument for the management of watercourses. A great diversity of abatement costs for pollution of the Baltic Sea through nutrients that result in eutrophication suggests the introduction of a system of tradable quota as an attractive management tool. The following article provides a brief introduction to the challenge of nutrient accumulation in the Baltic Sea, and shows that the legislative framework currently governing its pollution does not categorically preclude the introduction of a nutrient trading scheme. A number of design issues would require clarification prior to the introduction of such a scheme, including the definition of the tradable commodity, the scope of participation, the initial allocation of quota, and monitoring and enforcement provisions. While the article concludes by affirming the fundamental viability of a nutrient trading scheme in the Baltic Sea Area, it identifies challenges in accommodating the trading scheme alongside existing emission limit values, state aid concerns, and the inclusion of states that are not Members of the European Union.

Affiliations: 1: GreenStream Networks Ltd., Helsinki, Finland; 2: University of Greifswald, Germany


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