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In Japan, Sewerage Law was amended in 2005 and a modified approach was established by introducing the concept of transferable LRA (Load Reduction Assignment) for nitrogen and phosphorus in the basins of enclosed water bodies. The modified approach is supposed to play a role equivalent to water quality trading which has been adopted successfully in the U.S.. The computer simulation applied to 75 wastewater treatment plants in Tokyo Bay basin has revealed that total cost abatement rate by means of water quality trading throughout the basin is estimated to be 31%. Meanwhile the effluent charge system combined with subsidy is widely employed with great success in European countries. Through simplified mathematical models, the comparative features on equity and reflection of local conditions as well as on the equivalency between the two economic instruments are theoretically discussed. The mathematics for both the effluent charges and water quality trading suggests an equivalent cost-effectiveness in meeting a predetermined target. Water quality trading could be easily designed on the basis of the total sum of permits which is the predetermined target of the policy, while effluent charge system cannot be designed directly from the target. In contrast, effluent charge system is assumed to be superior to water quality trading in terms of equity and the reflection of local conditions.
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Document Type: Research Article

Publication date: 01 January 2007

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