Hostname: page-component-586b7cd67f-t8hqh Total loading time: 0 Render date: 2024-11-30T15:04:46.630Z Has data issue: false hasContentIssue false

The Coordination and Design of Point-Nonpoint Trading Programs and Agri-Environmental Policies

Published online by Cambridge University Press:  15 September 2016

Richard D. Horan
Affiliation:
Department of Agricultural Economics, Michigan State University
James S. Shortle
Affiliation:
Department of Agricultural Economics and Rural Sociology, The Pennsylvania State University
David G. Abler
Affiliation:
Department of Agricultural Economics and Rural Sociology, The Pennsylvania State University
Get access

Abstract

Agricultural agencies have long offered agri-environmental payments that are inadequate to achieve water quality goals, and many state water quality agencies are considering point-nonpoint trading to achieve the needed pollution reductions. This analysis considers both targeted and nontargeted agri-environmental payment schemes, along with a trading program which is not spatially targeted. The degree of improved performance among these policies is found to depend on whether the programs are coordinated or not, whether double-dipping (i.e., when farmers are paid twice—once by each program—to undertake particular pollution control actions) is allowed, and whether the agri-environmental payments are targeted. Under coordination, efficiency gains only occur with double-dipping, so that both programs jointly influence farmers’ marginal decisions. Without coordination, double-dipping may increase or decrease efficiency, depending on how the agri-environmental policy is targeted. Finally, double-dipping may not solely benefit farmers, but can result in a transfer of agricultural subsidies to point sources.

Type
Contributed Papers
Copyright
Copyright © 2004 Northeastern Agricultural and Resource Economics Association 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Abler, D. G., Shortle, J. S., Carmichael, J., and Horan, R. D. (2002). “Climate Change, Agriculture, and Water Quality in the Chesapeake Bay Region.” Climatic Change 55, 339359.Google Scholar
Baumol, W. J., and Oates, W. E. (1988). The Theory of Environmental Policy. New York: Cambridge University Press.CrossRefGoogle Scholar
Binswanger, H. P. (1974). “The Measurement of Technical Change Biases with Many Factors of Production.” American Economic Review 64, 964976.Google Scholar
Chesapeake Bay Program (CBP). (2001). CBP Watershed Model Scenario Output Database, Phase 4.3. Online. Available at http:www.chesapeakebay.net/wquality.htm.Google Scholar
Chesapeake Bay Program (CBP). (2004). Chesapeake Bay Program: America's Premier Watershed Restoration Partnership. Online. Available at www.chesapeakebay.net. [Accessed January 2004.]Google Scholar
Claassen, R., Hansen, L., Peters, M., Breneman, V., Weinberg, M., Cattaneo, A., Feather, P., Gadsby, D., Hellerstein, D., Hopkins, J., Johnston, P., Morehart, M., and Smith, M. (2001, January). Agri-Environmental Policy at the Crossroads: Guideposts on a Changing Landscape. Agricultural Economics Report No. 794, USDA/Economic Research Service, Washington, DC.Google Scholar
Edwards, R. E., and Stoe, T. W. (1998). “Nutrient Reduction Cost Effectiveness Analysis, 1996 Update.” Pub. No. 195, Susquehanna River Basin Commission, Harrisburg, PA.Google Scholar
Elmore, T., Jaksch, J., and Downing, D. (1985). “Point/Nonpoint Source Trading Programs for Dillon Reservoir and Planned Extensions for Other Areas. In Perspectives on Nonpoint Source Pollution. Environmental Protection Agency, Washington, DC.Google Scholar
Faeth, P. (2000). “Fertile Ground: Nutrient Trading's Potential to Cost-Effectively Improve Water Quality.” World Resources Institute, Washington, DC. Google Scholar
Freeman, A. M. III. (1990). “Water Pollution Policy.” In Portney, P. (ed.), Policies for Environmental Protection. Washington, DC: Resources for the Future.Google Scholar
Freeman, A. M. III. (1993). The Measurement of Environmental and Resource Values: Theory and Method. Washington, DC: Resources for the Future.Google Scholar
Great Lakes Trading Network. (2000). “Summary of Program and Project Drivers,” and other presentation materials. “Markets for the New Millennium: How Can Water Quality Trading Work For You?” Conference and workshop, Chicago, IL, 18-19 May 2000.Google Scholar
Hanley, N., Shogren, J. F., and White, B. (1997). Environmental Economics: In Theory and Practice. New York: Oxford University Press.CrossRefGoogle Scholar
Hoag, D. L., and Hughes-Popp, J. S. (1997). “Theory and Practice of Pollution Credit Trading in Water Quality Management.” Review of Agricultural Economics 19, 252262.Google Scholar
Horan, R. D. (2001). “Differences in Social and Public Risk Perceptions and Conflicting Impacts on Point/Nonpoint Trading Ratios.” American Journal of Agricultural Economics 83, 934941.Google Scholar
Horan, R. D., Abler, D. G., Shortle, J. S., and Carmichael, J. (2002). “Cost-Effective Point-Nonpoint Trading: An Application to the Susquehanna River Basin. Journal of the American Water Resources Association 38, 467478.Google Scholar
Horan, R. D., Shortle, J. S., and Abler, D. G. (1998). “Ambient Taxes When Polluters Have Multiple Choices.” Journal of Environmental Economics and Management 36, 186199.Google Scholar
Horan, R. D., Shortle, J. S., and Abler, D. G. (1999). “Green Payments for Nonpoint Pollution Control.” American Journal of Agricultural Economics 81, 12101215.Google Scholar
Horan, R. D., Shortle, J. S., and Abler, D. G. (2002). “Nutrient Point-Nonpoint Trading in the Susquehanna River Basin.” Water Resources Research 38(5), 8–1-8-13. [10.1029/2001WR000853].Google Scholar
Horan, R. D., Shortle, J. S., Abler, D. G., and Ribaudo, M. (2001). “The Design and Comparative Economic Performance of Alternative Second-Best Point/Nonpoint Trading Markets.” Staff Paper No. 2001-16, Department of Agricultural Economics, Michigan State University. Online. Available at http://agecon.lib.umn.edu/msu/sp01-16.pdf.Google Scholar
Kawagoe, T., Otsuka, K., and Hayami, Y. (1985). “Induced Bias of Technical Change in Agriculture: The United States and Japan, 1880-1980.” Journal of Political Economy 94, 523544.Google Scholar
Letson, D. (1992). “Point/Nonpoint Source Pollution Reduction Trading: An Interpretive Survey.” Natural Resources Journal 32, 219232.Google Scholar
Malik, A. S., Letson, D., and Crutchfield, S. R. (1993). “Point/Nonpoint Source Trading of Pollution Abatement: Choosing the Right Trading Ratio.” American Journal of Agricultural Economics 75, 959967.Google Scholar
McGartland, A. M., and Oates, W. A. (1985). “Marketable Permits for the Prevention of Environmental Deterioration.” Journal of Environmental Economics and Management 13, 189197.Google Scholar
Montgomery, W. D. (1972). “Markets in Licenses and Efficient Pollution Control.” Journal of Economic Theory 5, 395418.Google Scholar
Nizeyimana, E., Evans, B., Anderson, M., Peterson, G., DeWalle, D., Sharpe, W., Hamlett, J., and Swistock, B. (1997). Quantification of NPS Pollution Loads Within Pennsylvania Watersheds. Final Report to the Pennsylvania Department of Environmental Protection, Environmental Resources Research Institute, The Pennsylvania State University.Google Scholar
Pennsylvania Agricultural Statistics Service. (1998). 1997-1998 Statistical Summary & Pennsylvania Department of Agriculture Annual Report. Pennsylvania Department of Agriculture, Harrisburg, PA.Google Scholar
Pennsylvania Department of Environmental Protection. (1996, January). “Pennsylvania's Chesapeake Bay Nutrient Reduction Strategy.” Pub. No. 3900-BK-DEP1656 Rev. 1/96, Harrisburg, PA.Google Scholar
Rausser, G. C., and Foster, W. E. (1991). “The Evolution and Coordination of U.S. Commodity and Resource Policies.” In Just, R. E. and Bockstael, N. (eds.), Commodity and Resource Policies in Agricultural Systems. Berlin: Springer-Verlag.CrossRefGoogle Scholar
Ribaudo, M. (2001). “Non-Point Source Pollution Control Policy in the USA.” In Shortle, J. S. and Abler, D. G. (eds.), Environmental Policies for Agricultural Pollution Control. Oxfordshire, UK: CAB International.CrossRefGoogle Scholar
Roth, K., and Jury, W. A. (1993). “Modeling the Transport of Solutes to Groundwater Using Transfer Functions.” Journal of Environmental Quality 22, 487493.Google Scholar
Sato, K. (1967). “A Two-Level Constant-Elasticity of Substitution Production Function.” Review of Economic Studies 34, 210218.Google Scholar
Shortle, J. S. (1987). “Allocative Implications of Comparisons Between the Marginal Costs of Point and Nonpoint Source Pollution Abatement.” Northeastern Journal of Agricultural and Resource Economics 16, 1723.Google Scholar
Shortle, J. S. (1990). “The Allocative Efficiency Implications of Water Pollution Abatement Control Cost Comparisons.” Water Resources Research 26, 793797.Google Scholar
Shortle, J. S., and Abler, D. G. (1997). “Nonpoint Pollution.” In Folmer, H. and Tietenberg, T. (eds.), The International Yearbook of Environmental and Resource Economics, 1997/98. Cheltenham, UK: Edward Elgar.Google Scholar
Shortle, J. S., and Dunn, J. W. (1986). “The Relative Efficiency of Agricultural Source Water Pollution Control Policies.” American Journal of Agricultural Economics 68, 688697.Google Scholar
Shortle, J. S., and Horan, R. D. (2002). “The Economics of Nonpoint Pollution Control.” In Hanley, N. and Roberts, C. J. (eds.). Issues in Environmental Economics. Oxford: Blackwell Publishers.Google Scholar
Shortle, J. S., Horan, R. D., and Abler, D. G. (1998). “Research Issues in Nonpoint Pollution Control.” Environmental and Resource Economics 11, 571585.Google Scholar
Smith, R. A., Schwarz, G. E., and Alexander, R. B. (1997). “Regional Interpretation of Water-Quality Monitoring Data.” Water Resources Research 33, 27812798.Google Scholar
Smith, V. K. (1992). “Environmental Costing for Agriculture: Will It Be Standard Fare in the Farm Bill of 2000?American Journal of Agricultural Economics 74, 10761088.Google Scholar
Susquehanna River Basin Commission. (1998). “Information Fact Sheet: Susquehanna River Basin” [revised 8/1998]. SRBC, Harrisburg, PA.Google Scholar
Thirtle, C. G. (1985). “Accounting for Increasing Land-Labour Ratios in Developed Country Agriculture.” Journal of Agricultural Economics 36, 161169.Google Scholar
Tietenberg, T. H. (1995). “Tradeable Permits for Pollution Control When Emission Location Matters: What Have We Learned?Environmental and Resource Economics 5, 95113.Google Scholar
U.S. Department of Agriculture, Economic Research Service. (2000). Corn Costs and Returns. Online. Available at http//www.ers.usda.gov/briefing/farmincome/car/corn2.htm.Google Scholar
U.S. Department of Agriculture and U.S. Environmental Protection Agency. (1998). “Clean Water Action Plan: Restoring and Protecting America's Waters.” Pub. No. EPA-840-R-98-001, U.S. Environmental Protection Agency, Washington, DC.Google Scholar
U.S. Environmental Protection Agency. (2000). The Quality of Our Nation's Waters: A Summary of the National Water Quality. USEPA, Washington, DC.Google Scholar
U.S. Environmental Protection Agency. (2001, January). “The United States Experience with Economic Incentives for Protecting the Environment.” Pub. No. EPA-240-01-001, USEPA, Office of the Administrator, Washington, DC.Google Scholar
U.S. Environmental Protection Agency. (2003, January 13). “Water Quality Trading Policy; Issuance of Final PolicyFederal Register 68(8), 16081613. Available from the Federal Register Online via GPO Access at wais.access.gpo.gov. [DOCID:ff13ja03-53].Google Scholar
U.S. Environmental Protection Agency. (2004). “Total Maximum Daily Loads.” USEPA, Washington, DC. Online. Available at www.epa.gov/owow/tmdl/intro.html. [Accessed January 2004.]Google Scholar