More equitable initial allocation, more abatement cost saving in using a trading ratio system for riverine water quality management

Abstract

Water quality management is essential for sustaining aquatic ecosystems and public health. Different approaches, such as trading ratio systems (TRS), offer economic incentives for reducing pollutant discharges and promote cost-effective compliance with water quality standards. This study evaluates the impact of equitable initial permit allocation on the willingness of dischargers to engage in trading and examines its effect on abatement cost savings within a TRS framework for riverine water quality management. The methodology combines a multi-objective optimization model with the Streeter-Phelps simulation to assess permit allocation and trading scenarios in the Sefidrood River. The model was calibrated and validated using 58 years of historical data, generating Pareto front curves for objective functions across three periods with progressively stricter water quality standards. According to the optimization results, equitable permit allocation significantly influenced trading behavior and cost efficiency. Equitable initial permit allocation led to significant reductions in total abatement costs: 58% in the first period, 62% in the second period, and 45% in the third period. These cost savings were achieved through increased trading participation, as evidenced by higher trading ratios and greater traded permit volumes across scenarios. Across the three evaluated periods, each consisting of seven trading scenarios, equitable permit allocation led to significant reductions in total abatement costs, with reduction of 58%, 62%, and 45% in the first, second, and third periods, respectively, while maintaining compliance with BOD standards. These findings highlight those scenarios with higher equity indices facilitated greater participation in trading, leading to increased cost savings and promoting collaborative pollution control among dischargers. The proposed TRS model effectively balances economic efficiency and fairness, offering a viable solution for sustainable water quality management. Ensuring fairness in permit allocation not only reduces individual treatment costs but also fosters cooperative pollution control, thereby enhancing both economic and environmental outcomes.