Towards tradable permits for filamentous green algae pollution

• We estimated the monetary value of the impact of algae pollution.
• We derived a reserve price for algae pollution permits.
• We present the fundamentals of an algae pollution permit system for South Africa.

Water pollution permit systems are challenging to design and implement. Operational systems that has maintained functionality remains few and far between, particularly in developing countries. We present current progress towards developing such a system for nutrient enrichment based water pollution, mainly from commercial agriculture. We applied a production function approach to first estimate the monetary value of the impact of the pollution, which is then used as reference point for establishing a reserve price for pollution permits. The subsequent market making process is explained according to five steps including permit design, terms, conditions and transactional protocol, the monitoring system, piloting and implementation. The monetary value of the impact of pollution was estimated at R1887 per hectare per year, which not only provide a “management budget” for filamentous green algae mitigation strategies in the study area, but also enabled the calculation of a reserve price for filamentous green algae pollution permits, which was estimated between R2.25 and R111 per gram filamentous algae and R8.99 per gram at the preferred state.