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Allocating Nutrient Load Reduction across a Watershed: Implications of Different Principles

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  • Feng, Hongli
  • Jha, Manoj K.
  • Gassman, Philip W.

Abstract

A watershed based model, the Soil and Water Assessment Tool (SWAT), along with transfer coefficients is used to assess alternative principles of allocating nutrient load reduction in the Raccoon River watershed in central Iowa. Four principles are examined for their cost-effectiveness and impacts on water quality: absolute equity, equity based on ability, critical area targeting, and geographic proximity. Based on SWAT simulation results, transfer coefficients are calculated for the effects of nitrogen application reduction. We find both critical area targeting and downstream focus (an example of geographic proximity) can be more expensive than equal allocation, a manifestation of absolute equity. Unless abatement costs are quite heterogeneous across the subwatersheds, the least-cost allocation (an application of the principle of equity based on ability) have a potential of cost savings of about 10% compared to equal allocation. We also find that the gap between nitrogen loading estimated from transfer coefficients and nitrogen loading predicted by SWAT simulation is small (in general less than 5%). This suggests that transfer coefficients can be a useful tool for watershed nutrient planning. Sensitivity analyses suggest that these results are robust with respect to different degrees of nitrogen reduction and how much other conservation practices are used.

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Bibliographic Info

Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2006 Annual meeting, July 23-26, Long Beach, CA with number 21131.

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Date of creation: 2006
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Handle: RePEc:ags:aaea06:21131

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Keywords: Environmental Economics and Policy;

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  1. Carlson, Curtis & Burtraw, Dallas & Cropper, Maureen & Palmer, Karen L., 1998. "Sulfur dioxide control by electric utilities : what are the gains from trade?," Policy Research Working Paper Series 1966, The World Bank.
  2. Babcock, Bruce A., 1992. "Effects of Uncertainty on Optimal Nitrogen Applications (The)," Staff General Research Papers 10588, Iowa State University, Department of Economics.
  3. Newell, Richard G & Stavins, Robert N, 2003. "Cost Heterogeneity and the Potential Savings from Market-Based Policies," Journal of Regulatory Economics, Springer, vol. 23(1), pages 43-59, January.
  4. Madhu Khanna & Wanhong Yang & Richard Farnsworth & Hayri �nal, 2003. "Cost-Effective Targeting of Land Retirement to Improve Water Quality with Endogenous Sediment Deposition Coefficients," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(3), pages 538-553.
  5. Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December.
  6. Hung, Ming-Feng & Shaw, Daigee, 2005. "A trading-ratio system for trading water pollution discharge permits," Journal of Environmental Economics and Management, Elsevier, vol. 49(1), pages 83-102, January.
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