Transferable Discharge Permits

Abstract

There are different approaches for dealing with water, air, and soil pollution, for example, the prescription of an emission or immission standard by environmental law or pollution reduction by economic instruments like transferable discharge permits (TDP). The idea of TDP is to control the pollution level in the environmental media by economic incentive setting (see, e.g., Tietenberg T, Lewis L (2014) Environmental & natural resource economics, global edition, 10th edn. Pearson Higher Education; for an introduction in economic theory). This requires the setting of a critical threshold level for pollution control – e.g., a safe minimum standard – and the breakup of this standard (“cap”) in permits that can be traded on a market.

The most prominent application of TDP in Europe is the trading of CO₂ emissions in selected sectors of the economy (EU-ETS; see, e.g., Ellerman D, Convery F, de Perthuis C (2010) Pricing carbon: the European Union emissions trading scheme. Cambridge University Press, Cambridge, UK/New York (also published in French: Le Prix du Carbone: Les enseignements du marché du carbone, London: Pearson, 2010); Endres and Ohl (Eur J Law Econ 19:17–39, 2005)). It can be seen as a flagship approach for a European-Union-wide harmonization of environmental laws and regulations for emission control by economic incentive setting.