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An Empirical Analysis of the Relative Efficiency of Policy Instruments to Reduce Nitrate Water Pollution in the U.S. Southern High Plains

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Author Info
Wu, JunJie
Teague, Mark L.
Mapp, Harry P.
Bernardo, Daniel J.

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Abstract

This paper analyzes the costs and benefits of controlling groundwater pollution from agricultural use of nitrogen fertilizer in southwestern Ontario. The Village of Hensall, where nitrate concentrations have been observed above 10 mg/L in recent years, is selected as the study site.'The CREAMS simulation model is used to estimate the effect of reducing nitrogen fertilizer on nitrate leaching and consequently on nitrate groundwater pollution. Estimates of the value of groundwater are obtained from the literature and are used to calculate the off-farm cost of groundwater contamination. This procedure results in a wide range of values for the benefits of reducing nitrate pollution. Estimated annual benefits of improved ground-water quality range from less than $1,000 to more than $30,000 for the village. The off-farm benefits of nitrate groundwater pollution abatement outweigh the cost of using bottled water and also exceed the on-farm cost of reducing nitrogen fertilizer application rates. Placing a tax on nitrogen fertilizer would reduce the level of nitrogen applications, but the farm cost of compliance to a nitrogen tax policy is substantially higher than the compliance cost under a regulatory policy that imposes a quantitative ceiling on nitrogen application rates over the part of the aquifer from which the village draws its water supply.

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Publisher Info
Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 921.

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Date of creation: 31 Dec 1995
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Publication status: Published in Canadian Journal of Agricultural Economics, November 1995, Vol. 43, pp. 403-20.
Handle: RePEc:isu:genres:921

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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
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  1. P. Bontems & N. Turpin & Gilles Rotillon, 2003. "Acceptibility constraints and self-selecting agri-environmental policies," THEMA Working Papers 2003-14, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise. [Downloadable!]
  2. Kampas, Athanasios, 2001. "Identifying Common Fallacies in the Choice of Environmental Taxes for Agricultural Pollution Control: The Absence of Transaction Costs and the Normality of Agricultural Pollutants," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 2(2), August. [Downloadable!]
  3. Kathleen Segerson & JunJie Wu, 2003. "Nonpoint Pollution Control: Inducing First-best Outcomes through the Use of Threats," Working papers 2003-03, University of Connecticut, Department of Economics, revised Aug 2004. [Downloadable!]
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