way the resource managers can change the TAC in response to changing biological conditions without triggering legal recourse by the right holder.23 Some fisheries actually have defined two related rights (Young,1999). The first conveys the share of the TAC, while the second conveys the right to catch a specific number of tons of harvest in a particular year. Separating the two rights allows a harvester to sell the right to catch fish in a particular year (perhaps due to an illness or malfunctioning equipment) without giving up the right of future access.24
Water has a different kind of adaptive management need. Considerable uncertainty among users is created by the fact that the amount of water can vary significantly from year to year.25 Because different users have quite different capacities for responding to shortfalls, the system for allocating this water needs to be flexible enough to respond to this variability or the water could be seriously misallocated.
These needs have been met by a combination of technological solutions (principally water storage) and building some flexibility into the rights system. In the American West, the appropriation doctrine that originated in the mining camps created a system of priorities based on the date of first use. The more senior rights then have a higher priority of claim on the available water in any particular year and consequently could be expected to claim the highest price (Howe and Lee, 1983; Livingston, 1998).26 Other systems, most notably in Australia, use a system of proportionality that resembles the share system in fisheries (Livingston, 1998).
An alternative approach to flexibility with security, the “drop-through mechanism,” involves a cascade of fixed-term entitlements, a variation of an approach currently used in the New South Wales fishery (Young, 1999) and proposed for use in controlling climate change (Tietenberg, 1998b). Under this scheme, initial entitlements (call them Series A Entitlements) would be defined for a finite period, but one long enough to encourage investments (say, for the sake of illustra tion, 30 years; see Figure 6-1). The rights and obligations covered by the Series A entitlements would be known in advance.27 Periodically (say, for illustration, every 10 years) a comprehensive review would be undertaken that would result in a new set of entitlements (Series B, Series C, and so forth) that also would have a 30-year duration. Emitters holding Series A Entitlements could have the option to switch to the new set of entitlements at any time earlier than the expiration of their Series A Entitlements. Once they switched they would be able to hold Series B Entitlements for their remaining life. This process would continue until it appeared no more reviews were necessary.
In all three applications, the limits are defined on the basis of some notion of sustainable use. In air pollution control, the limits are defined to assure that the resulting concentrations fall below the Ambient Air Quality Standards (AAQS).