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Cost-sharing Incentive Programs for Source Water Protection: The Grand River’s Rural Water Quality Program

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  • Diane P. Dupont

    ()
    (Department of Economics, Brock University)

Abstract

Canadian provinces have become increasingly concerned with possible contamination of water from upstream agricultural activities. Many see watershed-based source protection, so called “source-to-tap†programs, as a means of improving water quality. A key factor in the success of these programs is the extent to which they provide incentives to farmers to undertake actions that ultimately result in a reduction of non-point source pollution. One type of program is cost-sharing whereby farmers are reimbursed for out-of-pocket expenses relating to best management practices which are expected to reduce runoff into water courses. Given increasing reliance on these types of programs, it is necessary from a public policy perspective to identify design features leading to the greatest likelihood of farmer participation. This paper examines Ontario’s Rural Water Quality Program for the Grand River using data from the first seven years of its operation, along with data from Agricultural Canada’s Farm Census, to model and estimate participation rates. Significantly positive determinants include: the maximum grant available and performance incentives, although both with diminishing returns. Projects with a one-time capital subsidy alone are much less likely to encourage participation than projects that combine a subsidy with a performance incentive.

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Bibliographic Info

Paper provided by Brock University, Department of Economics in its series Working Papers with number 0905.

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Length: 29 pages
Date of creation: Jun 2009
Date of revision: Jun 2009
Handle: RePEc:brk:wpaper:0905

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Keywords: cost-sharing; non-point source pollution; best management practices; economic incentives;

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References

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  1. Ribaudo, Marc & Horan, Richard D. & Smith, Mark E., 1999. "Economics of Water Quality Protection from Nonpoint Sources: Theory and Practice," Agricultural Economics Reports 33913, United States Department of Agriculture, Economic Research Service.
  2. Cooper, Joseph C. & Keim, Russ, 1996. "Incentive payments to encourage farmer adoption of water quality protection practices," MPRA Paper 24779, University Library of Munich, Germany.
  3. Lyubov Kurkalova & Catherine Kling & Jinhua Zhao, 2006. "Green Subsidies in Agriculture: Estimating the Adoption Costs of Conservation Tillage from Observed Behavior," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 54(2), pages 247-267, 06.
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  6. Alfons Weersink & John R. Livernois & Jason F. Shogren & James S. Shortle, 1998. "Economic Instruments and Environmental Policy in Agriculture," Canadian Public Policy, University of Toronto Press, vol. 24(3), pages 309-327, September.
  7. Sunding, David & Zilberman, David, 2001. "The agricultural innovation process: Research and technology adoption in a changing agricultural sector," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 4, pages 207-261 Elsevier.
  8. Houston, Jack E. & Sun, Henglun, 1999. "Cost-Share Incentives And Best Management Practices In A Pilot Water Quality Program," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 24(01), July.
  9. Cooper, Joseph C., 1997. "Combining Actual And Contingent Behavior Data To Model Farmer Adoption Of Water Quality Protection Practices," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 22(01), July.
  10. Alfons Weersink & John Livernois, 1996. "The Use of Economic Instruments to Resolve Water Quality Problems from Agriculture," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 44(4), pages 345-353, December.
  11. Kelly A. Davey & W. Hartley Furtan, 2008. "Factors That Affect the Adoption Decision of Conservation Tillage in the Prairie Region of Canada," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 56(3), pages 257-275, 09.
  12. Lichtenberg, Erik, 2004. "Cost-Responsiveness of Conservation Practice Adoption: A Revealed Preference Approach," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 29(03), December.
  13. Norris, Patricia E. & Batie, Sandra S., 1987. "Virginia Farmers' Soil Conservation Decisions: An Application Of Tobit Analysis," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 19(01), July.
  14. Engel, Stefanie & Pagiola, Stefano & Wunder, Sven, 2008. "Designing payments for environmental services in theory and practice: An overview of the issues," Ecological Economics, Elsevier, vol. 65(4), pages 663-674, May.
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