IDEAS home Printed from https://ideas.repec.org/a/eee/ecolec/v105y2014icp233-239.html
   My bibliography  Save this article

Controlling non-additional credits from nutrient management in water quality trading programs through eligibility baseline stringency

Author

Listed:
  • Ribaudo, Marc
  • Savage, Jeffrey

Abstract

A concern for programs that offer payment for environmental services is that those services be additional. Non-additional services are those that would have been provided without the payment. One source of non-additionality is farmer misrepresentation of their pre-program management. Farm management practices are often difficult to observe, particularly those that do not involve structural changes, such as nutrient management. If practices are difficult to observe, management oversight lax, and enforcement weak, the farmer has an incentive to provide biased information that increases the likelihood that he will receive a more favorable baseline for calculating services created, and a larger payment. This is a moral hazard problem. The presence of non-additional credits in a water quality trading program can result in the degradation of water quality. Point source discharges above permitted levels are replaced by equivalent reductions from unregulated nonpoint sources. If the abatement that point sources purchase from nonpoint sources is non-additional, discharges will be higher than if the abatement was truly additional. Preventing non-additional credits from entering a water quality trading market is one of the goals of program design. In this paper we assess how program eligibility baseline choice affects the incentive to misrepresent baseline nutrient management practices.

Suggested Citation

  • Ribaudo, Marc & Savage, Jeffrey, 2014. "Controlling non-additional credits from nutrient management in water quality trading programs through eligibility baseline stringency," Ecological Economics, Elsevier, vol. 105(C), pages 233-239.
    • Handle: RePEc:eee:ecolec:v:105:y:2014:i:c:p:233-239
    DOI: 10.1016/j.ecolecon.2014.06.017
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0921800914001979
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ecolecon.2014.06.017?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Roger Claassen & Eric N. Duquette & David J. Smith, 2018. "Additionality in U.S. Agricultural Conservation Programs," Land Economics, University of Wisconsin Press, vol. 94(1), pages 19-35.
    2. Philip W. Gassman & Jimmy R. Williams & Xiuying Wang & Ali Saleh & Edward Osei & Larry M. Hauck & R. César Izaurralde & Joan D. Flowers, 2009. "Agricultural Policy Environmental EXtender (APEX) Model: An Emerging Tool for Landscape and Watershed Environmental Analyses, The," Center for Agricultural and Rural Development (CARD) Publications 09-tr49, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    3. Ribaudo, Marc O. & Heimlich, Ralph & Claassen, Roger & Peters, Mark, 2001. "Least-cost management of nonpoint source pollution: source reduction versus interception strategies for controlling nitrogen loss in the Mississippi Basin," Ecological Economics, Elsevier, vol. 37(2), pages 183-197, May.
    4. Gassman, Philip W. & Reyes, Manuel R. & Green, Colleen H. & Arnold, Jeffrey G., 2007. "The Soil and Water Assessment Tool: Historical Development, Applications, and Future Research Directions," ISU General Staff Papers 200701010800001027, Iowa State University, Department of Economics.
    5. Mariano Mezzatesta & David A. Newburn & Richard T. Woodward, 2013. "Additionality and the Adoption of Farm Conservation Practices," Land Economics, University of Wisconsin Press, vol. 89(4), pages 722-742.
    6. Ribaudo, Marc & Hansen, LeRoy T. & Hellerstein, Daniel & Greene, Catherine R., 2008. "The Use of Markets To Increase Private Investment in Environmental Stewardship," Economic Research Report 56473, United States Department of Agriculture, Economic Research Service.
    7. Wainger, Lisa A. & Van Houtven, George & Loomis, Ross & Messer, Jay & Beach, Robert H. & Deerhake, Marion, 2013. "Tradeoffs among Ecosystem Services, Performance Certainty, and Cost-efficiency in Implementation of the Chesapeake Bay Total Maximum Daily Load," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 42(1), pages 1-29, April.
    8. Perez, Michelle, 2011. "Regulating Farmers: Lessons Learned from the Delmarva Peninsula," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 26(3), pages 1-4.
    9. Horowitz, John K. & Just, Richard E., 2013. "Economics of additionality for environmental services from agriculture," Journal of Environmental Economics and Management, Elsevier, vol. 66(1), pages 105-122.
    10. Leonard Shabman & Kurt Stephenson & William Shobe, 2002. "Trading Programs for Environmental Management: Reflections on the Air and Water Experiences," Working Papers 2002-01, Center for Economic and Policy Studies.
    11. Philip W. Gassman & Jimmy R. Williams & Xiuying Wang & Ali Saleh & Edward Osei & Larry M. Hauck & R. César Izaurralde & Joan D. Flowers, 2009. "Agricultural Policy Environmental EXtender (APEX) Model: An Emerging Tool for Landscape and Watershed Environmental Analyses, The," Center for Agricultural and Rural Development (CARD) Publications 09-tr49, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    12. Marshall, Elizabeth P. & Weinberg, Marca, 2012. "Baselines in Environmental Markets: Tradeoffs Between Cost and Additionality," Economic Brief 138922, United States Department of Agriculture, Economic Research Service.
    13. Konstantinos Giannakas & Jonathan D. Kaplan, 2005. "Policy Design and Conservation Compliance on Highly Erodible Lands," Land Economics, University of Wisconsin Press, vol. 81(1).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fleming, Patrick & Lichtenberg, Erik & Newburn, David, 2018. "Water Quality Trading Program Design with Heterogeneous Behavioral Responses," 2018 Annual Meeting, August 5-7, Washington, D.C. 274429, Agricultural and Applied Economics Association.
    2. Meyer, Andrew G. & Raff, Zach, 2022. "Pass-through of water pollution regulation: Evidence from sewer utility bills and Wisconsin's phosphorus rule," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322444, Agricultural and Applied Economics Association.
    3. Caela O'Connell & Marzieh Motallebi & Deanna L. Osmond & Dana L. K. Hoag, 2017. "Trading on risk: The moral logics and economic reasoning of North Carolina farmers in water quality trading markets," Economic Anthropology, Wiley Blackwell, vol. 4(2), pages 225-238, June.
    4. Nicholas J Pates & Nathan P Hendricks, 2020. "Additionality from Payments for Environmental Services with Technology Diffusion," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(1), pages 281-299, January.
    5. Hao Wang & Sander Meijerink & Erwin van der Krabben, 2020. "Institutional Design and Performance of Markets for Watershed Ecosystem Services: A Systematic Literature Review," Sustainability, MDPI, vol. 12(16), pages 1-26, August.
    6. Nielsen, Rasmus & Hoff, Ayoe & Waldo, Staffan & Hammarlund, Cecilia & Virtanen, Jarno, 2019. "Fishing for nutrients – economic effects of fisheries management targeting eutrophication in the Baltic Sea," Ecological Economics, Elsevier, vol. 160(C), pages 156-167.
    7. Lin, Yongsheng & Dong, Zhanfeng & Zhang, Wei & Zhang, Hongyu, 2020. "Estimating inter-regional payments for ecosystem services: Taking China’s Beijing-Tianjin-Hebei region as an example," Ecological Economics, Elsevier, vol. 168(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ribaudo, Marc & Savage, Jeffrey & Aillery, Marcel P., 2014. "An Economic Assessment of Policy Options To Reduce Agricultural Pollutants in the Chesapeake Bay," Economic Research Report 171880, United States Department of Agriculture, Economic Research Service.
    2. Lichtenberg, Erik, "undated". "Additionality of Conservation Cost Sharing," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 259939, Agricultural and Applied Economics Association.
    3. Catherine L. Kling & Yiannis Panagopoulos & Sergey S. Rabotyagov & Adriana M. Valcu & Philip W. Gassman & Todd Campbell & Michael J. White & Jeffrey G. Arnold & Raghavan Srinivasan & Manoj K. Jha & Je, 2014. "LUMINATE: linking agricultural land use, local water quality and Gulf of Mexico hypoxia," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 41(3), pages 431-459.
    4. Horowitz, John & Ueda, Kohei, 2013. "Paying Farmers to Reduce Nitrogen Application on Corn: The Baseline Approach," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150561, Agricultural and Applied Economics Association.
    5. Fleming, Patrick & Lichtenberg, Erik & Newburn, David, 2018. "Water Quality Trading Program Design with Heterogeneous Behavioral Responses," 2018 Annual Meeting, August 5-7, Washington, D.C. 274429, Agricultural and Applied Economics Association.
    6. Pates, Nicholas J. & Hendricks, Nathan P., 2016. "Additionality in Payments for Environmental Service Contracts with Technology Diffusion," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236066, Agricultural and Applied Economics Association.
    7. Nicholas J Pates & Nathan P Hendricks, 2020. "Additionality from Payments for Environmental Services with Technology Diffusion," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(1), pages 281-299, January.
    8. Claassen, Roger & Bowman, Maria & Breneman, Vince & Wade, Tara & Williams, Ryan & Fooks, Jacob & Hansen, LeRoy & Iovanna, Rich & Loesch, Chuck, 2017. "Conservation Compliance: How Farmer Incentives Are Changing in the Crop Insurance Era," Economic Research Report 261814, United States Department of Agriculture, Economic Research Service.
    9. Claassen, Roger & Duquette, Eric & Horowitz, John & Kohei, Ueda, 2014. "Additionality in U.S. Agricultural Conservation and Regulatory Offset Programs," Economic Research Report 180414, United States Department of Agriculture, Economic Research Service.
    10. Kim, Youngho & Lichtenberg, Erik & Newburn, David, 2022. "Payments and Penalties in Ecosystem Services Programs," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322103, Agricultural and Applied Economics Association.
    11. Rossetto, Rudy & De Filippis, Giovanna & Triana, Federico & Ghetta, Matteo & Borsi, Iacopo & Schmid, Wolfgang, 2019. "Software tools for management of conjunctive use of surface- and ground-water in the rural environment: integration of the Farm Process and the Crop Growth Module in the FREEWAT platform," Agricultural Water Management, Elsevier, vol. 223(C), pages 1-1.
    12. Lichtenberg, Erik & Wang, Haoluan & Newburn, David, 2018. "Uptake and Additionality in a Green Payment Program: A Panel Data Study of the Maryland Cover Crop Program," 2018 Annual Meeting, August 5-7, Washington, D.C. 274455, Agricultural and Applied Economics Association.
    13. Ribaudo, Marc & Greene, Catherine & Hansen, LeRoy & Hellerstein, Daniel, 2010. "Ecosystem services from agriculture: Steps for expanding markets," Ecological Economics, Elsevier, vol. 69(11), pages 2085-2092, September.
    14. Cisneros, J.M. & Grau, J.B. & Antón, J.M. & de Prada, J.D. & Cantero, A. & Degioanni, A.J., 2011. "Assessing multi-criteria approaches with environmental, economic and social attributes, weights and procedures: A case study in the Pampas, Argentina," Agricultural Water Management, Elsevier, vol. 98(10), pages 1545-1556, August.
    15. Woodward, Richard T. & Newburn, David A. & Mezzatesta, Mariano, 2016. "Additionality and reverse crowding out for pollution offsets in water quality trading," Ecological Economics, Elsevier, vol. 128(C), pages 224-231.
    16. Degen Lin & Hao Guo & Fang Lian & Yuan Gao & Yaojie Yue & Jing’ai Wang, 2016. "A Quantitative Method for Long-Term Water Erosion Impacts on Productivity with a Lack of Field Experiments: A Case Study in Huaihe Watershed, China," Sustainability, MDPI, vol. 8(7), pages 1-18, July.
    17. Naveen Adusumilli & Rowell Dikitanan & Hua Wang, 2019. "Effect of Cost-Sharing Federal Programs on Adoption of Water Conservation Practices: Results from Propensity Score Matching Approach," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 6(01), pages 1-16, July.
    18. Uchida, Emi & Swallow, Stephen K. & Gold, Arthur J. & Opaluch, James & Kafle, Achyut & Merrill, Nathaniel H. & Michaud, Clayton & Gill, Carrie Anne, 2018. "Integrating Watershed Hydrology and Economics to Establish a Local Market for Water Quality Improvement: A Field Experiment," Ecological Economics, Elsevier, vol. 146(C), pages 17-25.
    19. Osei, Edward & Jafri, Syed H., 2017. "Climate Change impacts on Corn and Soybean Production in Iowa," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258348, Agricultural and Applied Economics Association.
    20. Valcu, Adriana Mihaela, 2013. "Agricultural nonpoint source pollution and water quality trading: empirical analysis under imperfect cost information and measurement error," ISU General Staff Papers 201301010800004451, Iowa State University, Department of Economics.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolec:v:105:y:2014:i:c:p:233-239. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolecon .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.