Cost-effective control of nitrogen loadings in long island sound

Long Island Sound is plagued by conditions of severe hypoxia (low levels of dissolved oxygen) during the summer months because of the existence of exc essive amounts of nitrogen. A new proposal that would allow sewage treatmen t plants to buy or sell nitrogen discharge credits is currently being evalu ated by the states of Connecticut and New York. Existing theory suggests th at a trading program for nitrogen emissions would be a cost-effective means of addressing the problem. We estimate the costs associated with several t rading scenarios and find that the potential for cost savings is substantia l and that cost savings rise as the scope of trading expands.