| Discharge permit trading, as a market-based economic policy, has gradually drawn the attention of the public and management agency. The paper refers the update research situation on trading technology of water pollution in the world, exploratively proposes a trading technology of water pollution discharge permits for a small range of watershed based on multi-objective optimization theory, and takes Qinshan Watershed as a research case to address the feasibility of the technology. The results of research are listed as follows.(1) Trading Technology of Water Pollution Discharge Permits for Small WatershedTrading technology of water pollution discharge permits includes allocation technology of the initial discharge permits, waste-load allocation model based on the multi-objective optimization theory and trading process of discharge permits. In order to satisfy the requirement of total amounts control target in watershed, the initial discharge permits quotas of different space points are determined by a proportional allocation method based on allocation technology of the initial discharge permits. Pricing mechanism is defined and transaction price range is calculated by comparing pollution abatement costs of various types of pollution sources. A waste-load allocation model is established and used in the optimization of the allocation quotas of discharge permits in order to minimize the pollutant reduction costs and the risk of water bodies. On the basis of transaction prices, annual tradable permit amounts and trading parties at a watershed are approved by comparison of the initial discharge permits quotas and the optimal load allocation quotas. Finally, a trading scheme and related trading process are established.(2) An Empirical Study on Trading Technology in Qingshan Watershed of the South TiaoxiQingshan Watershed is a sub-watershed of the South Tiaoxi, with a catchment area of 62.55 km~2. The proposed trading technology is applied to Qingshan Watershed, combined with data on water pollution abatement costs of Zhejiang Province. The results showed that, discharge permits can be traded among industries with different environmental impacts in three scenarios, of which the river discharge permits of Chemical Oxygen Demand (COD) are 1181.43, 1127.58, 896.09, 746.75, 741.58, 608.58 and 500.77 t/a, respectively. Meanwhile, management agencies are supposed to purchase excess abatements from discharge permits suppliers by the initial discharge permits prices, which will be affected by the difference of transaction prices and the size of tradable permits. The discharge permits demand of chemical industry from paper industry and sewage treatment plants under seven scenarios of different river discharge permits were0.86 t/a and 12.49t/a respectively. Similarly, the demand of dyeing and printing industry from the sewage treatment plants and other industries under the scenario of 1127.5 t/a were 34.99 t/a and 5.02 t/a, respectively; the demand from the sewage treatment plants under the scenario of 1181.43 t/a was 34.99 t/a. Besides, cost-benefit analysis showed that economic benefits of trading in Qinshan Watershed was quite low because of the small catchment area, limited amount of point sources discharge, as well as a high abatement cost of non-point source pollution. Therefore, catchment area should be expanded, more pollutants indices should be added, such as NH4-N and TP, and lower-cost pollution abatement measures for non-point sources should be considered to achieve the practical application of trading technology in the future.Trading technology of water pollution discharge permits is proved to be one of the key management measures to improve the water environment quality, based on current theoretical research and empirical analysis. However, several technical issues and policy problems should be solved first before applying the trading technology of water pollution discharge permits to watershed in China.
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