The Way Forward

It is widely recognized that conventional policies for managing nutrient and other types of water pollution from agriculture are neither effective nor efficient. Policy change is essential to improve and protect water quality. Designing and implementing policies that are effective in managing water pollution from agriculture and without imposing undue social costs constitute policy challenge. The need for policy innovation is made increasingly urgent by rapidly growing demands for food driven by global population, income growth, and new uses for agricultural output, and effects of climate change on agricultural productivity and water resources. The chapter draws together the lessons developed in the book on basic principles of policy design. These include clear water quality targets, accountability frameworks, spatial targeting, and policy coherence. The chapter also draws lessons developed in the book about instrument choice and policy designs within the basic principles. General themes are that incentives are preferred to standards, and performance-based policies over practice-based policies. A strategy for constructing policy mixtures based on the scope and severity of agriculture’s contributions to water quality problems is suggested. For problems with limited scope and severity, decentralized approaches relying on property rights or liability rules may serve society well. With increased scope and severity, more intense intervention becomes necessary. “Soft” instruments such as nudges, technical assistance, minimum farm planning standards, and perhaps threats of increased regulation may serve society well. But where agriculture is a significant contributor to significant problems, mandatory approaches are essential. We argue for the use of price-based instruments, especially water quality trading, water quality auctions, and credit stacking, possibly augmented by limited regulatory measures. A key conclusion of the book is that main barriers to effective and efficient policies of the kind we describe are not technical or economic, but the necessary political will and ambition to abandon the status quo.