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Simple vs. Complex: Implications of Lags in Pollution Delivery for Efficient Load Allocation and Design of Water-quality Trading Programs

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  • Shortle, James
  • Abler, David
  • Kaufman, Zach
  • Zipp, Katherine Y.

Abstract

Water-quality markets that allow point-nonpoint trades assume that nonpoint best management practices (BMPs) achieve the targeted reductions as soon as they are implemented. However, changes in water quality in response to BMPs occur over time—from a few months to decades. We simulate emission allocations using static and dynamic-optimization models to determine whether a simple static allocation can produce results comparable economically and environmentally to complex multi-period designs for nitrogen emissions to Chesapeake Bay. We find that static rules provide relatively large cost savings compared to dynamic rules but result in a delay in achievement of water-quality targets.

Suggested Citation

  • Shortle, James & Abler, David & Kaufman, Zach & Zipp, Katherine Y., 2016. "Simple vs. Complex: Implications of Lags in Pollution Delivery for Efficient Load Allocation and Design of Water-quality Trading Programs," Agricultural and Resource Economics Review, Cambridge University Press, vol. 45(2), pages 367-393, August.
  • Handle: RePEc:cup:agrerw:v:45:y:2016:i:02:p:367-393_00
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    Cited by:

    1. Cook, Aaron & Shortle, James, 2018. "Intertemporal Trading Ratios for Nutrient Pollution Control," 2018 Annual Meeting, August 5-7, Washington, D.C. 274845, Agricultural and Applied Economics Association.
    2. Fleming, Patrick & Lichtenberg, Erik & Newburn, David, 2018. "Water Quality Trading Program Design with Heterogeneous Behavioral Responses," 2018 Annual Meeting, August 5-7, Washington, D.C. 274429, Agricultural and Applied Economics Association.
    3. Jayash Paudel & Christine L. Crago, 2021. "Environmental Externalities from Agriculture: Evidence from Water Quality in the United States," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(1), pages 185-210, January.
    4. James Shortle & Richard D. Horan, 2017. "Nutrient Pollution: A Wicked Challenge for Economic Instruments," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 3(02), pages 1-39, April.

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