Policy intervention in a concentration permit market: efficiency analysis of obligatory manure processing in Flanders

Tradable permits (tradable quota) have become an important tool in managing externalities. Cost efficiency has been seen as the main advantage of these types of policy measures: a predefined environmental target can be reached at lowest costs (Baumol and Oates, 1971). Assuming perfect market conditions (i.e. in absence of transaction costs), those permits will be used by those who attribute it the highest value (Tietenberg, 2003) and this regardless the initial allocation of the permits (Montgomery, 1972).Tradable permits are useful when the concerned emissions have no local impact on environment or population (Lejano and Hirose, 2005) such as greenhouse gases and NO