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Simulated Trading for Maryland's Nitrogen Loadings in the Chesapeake Bay

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  • Hanson, James C.
  • McConnell, Kenneth E.

Abstract

We investigate nutrient trading for point and non-point sources for the Bay Restoration Fund in Maryland. We demonstrate how to use the proceeds from the tax revenue to mimic a market by trading high-cost upgrades of sewage treatment plants for low-cost winter cover crops. Under an optimistic assumption about costs for non-point sources and naïve assumptions about the lag from planting cover crops to changes in nitrogen load, we calculate that 100 percent of abatement could be achieved at 56 percent of total costs, while in a pessimistic scenario, 100 percent of abatement could be could be achieved at 83 percent of total costs.

Suggested Citation

  • Hanson, James C. & McConnell, Kenneth E., 2008. "Simulated Trading for Maryland's Nitrogen Loadings in the Chesapeake Bay," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 37(2), pages 1-16.
    • Handle: RePEc:ags:arerjl:45669
    DOI: 10.22004/ag.econ.45669
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    References listed on IDEAS

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    1. Richard Schmalensee & Paul L. Joskow & A. Denny Ellerman & Juan Pablo Montero & Elizabeth M. Bailey, 1998. "An Interim Evaluation of Sulfur Dioxide Emissions Trading," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 53-68, Summer.
    2. David A. Hennessy & Hongli Feng, 2008. "When Should Uncertain Nonpoint Emissions Be Penalized in a Trading Program?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(1), pages 249-255.
    3. Shortle, James S., 1987. "Allocative Implications Of Comparisons Between The Marginal Costs Of Point And Nonpoint Source Pollution Abatement," Northeastern Journal of Agricultural and Resource Economics, Northeastern Agricultural and Resource Economics Association, vol. 16(01), pages 1-7, April.
    4. Richard D. Horan, 2001. "Differences in Social and Public Risk Perceptions and Conflicting Impacts on Point/Nonpoint Trading Ratios," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(4), pages 934-941.
    5. Arun S. Malik & David Letson & Stephen R. Crutchfield, 1993. "Point/Nonpoint Source Trading of Pollution Abatement: Choosing the Right Trading Ratio," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 75(4), pages 959-967.
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    Cited by:

    1. Stephenson, Kurt & Aultman, Stephen & Metcalfe, Todd & Miller, Alex, 2009. "An Evaluation of Nutrient Trading Options in Virginia: A Role for Agriculture?," 2009 Annual Meeting, January 31-February 3, 2009, Atlanta, Georgia 46779, Southern Agricultural Economics Association.
    2. Movafaghi, Olivia S. & Stephenson, Kurt & Taylor, Daniel, 2013. "Farmer Response to Nutrient Credit Trading Opportunities in the Coastal Plain of Virginia," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150414, Agricultural and Applied Economics Association.
    3. Geret S. DePiper & Douglas W. Lipton & Romuald N. Lipcius, 2017. "Valuing Ecosystem Services: Oysters, Denitrification, and Nutrient Trading Programs," Marine Resource Economics, University of Chicago Press, vol. 32(1), pages 1-20.
    4. Duke, Joshua M. & Liu, Hongxing & Monteith, Tyler & McGrath, Joshua & Fiorellino, Nicole M., 2020. "A method for predicting participation in a performance-based water quality trading program," Ecological Economics, Elsevier, vol. 177(C).
    5. 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(01), pages 1-29, April.

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