Authors: Kelly Lock, Suzi Kerr
There is no "correct' answer to the question of who should pay. The "best' answer for Lake Rotorua will depend on what the community thinks is fair and what will be politically feasible. If the trading market does not operate efficiently, the way that allowances are allocated will affect the efficiency with which the catchment achieves its environmental goal.
If the allocation of allowances provides significant capital it could also affect economic behaviour by loosening capital constraints that limit land development and mitigation.
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