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Revisited water-oriented relationships between a set of farmers and an aquifer: accounting for lag effect

  • Cyril Bourgeois
  • Pierre-Alain Jayet

Many environmental problems are due to damages caused by stock of pollutants which accumulate with time lag to their emission. In this paper, we focus on nitrates used in agriculture which can pollute groundwater years after their initial use. A dynamic optimal control problem with heterogeneous farmers is proposed. Usual structural parameters like the discount rate, the natural clearing rate, the lagged time interval between the soil-level pollution occurrence and the impact on groundwater are taken into account. We also examine pollution as caused by a continuous set of farms characterized by their individual performance index and by their individual marginal contribution to the pollution. The issue is further investigated by taking account of change in the information context, successively related to perfect information and to asymmetric information. As a result, when the delay between the spreading of N-fertilizer and the impact on the aquifer increases, i.e., the higher the lag, the steady state pollution stock and the steady state shadow price of the stock both increase. Moreover, asymmetric information leads to a higher stock of pollution. Given the U.S. EPA context or given the European Union context and their directives focusing on nitrate pollution and water quality, the qualitative results provided in this paper should help modellers and decision makers promote suitable environmental policies.

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Paper provided by INRA, Economie Publique in its series Working Papers with number 2010/06.

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Date of creation: 01 Jun 2010
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Handle: RePEc:apu:wpaper:2010/06
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  1. Cabe, Richard & Herriges, Joseph A., 1992. "The regulation of non-point-source pollution under imperfect and asymmetric information," Journal of Environmental Economics and Management, Elsevier, vol. 22(2), pages 134-146, March.
  2. Ulrich Brandt-Pollmann & Ralph Winkler & Sebastian Sager & Ulf Moslener & Johannes P. Schlöder, 2006. "Numerical solution of optimal control problems with constant control delays," CER-ETH Economics working paper series 06/59, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  3. Patrick K. Asea & Paul J. Zak, 1997. "Time-to-Build and Cycles," NBER Technical Working Papers 0211, National Bureau of Economic Research, Inc.
  4. Shortle, James S & Horan, Richard D, 2001. " The Economics of Nonprofit Pollution Control," Journal of Economic Surveys, Wiley Blackwell, vol. 15(3), pages 255-89, July.
  5. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, June.
  6. Koundouri, Phoebe, 2004. "Current issues in the economics of groundwater resource management," MPRA Paper 38425, University Library of Munich, Germany.
  7. Lacroix, Anne & Beaudoin, Nicolas & Makowski, David, 2005. "Agricultural water nonpoint pollution control under uncertainty and climate variability," Ecological Economics, Elsevier, vol. 53(1), pages 115-127, April.
  8. Winkler, Ralph, 2011. "A Note On The Optimal Control Of Stocks Accumulating With A Delay," Macroeconomic Dynamics, Cambridge University Press, vol. 15(04), pages 565-578, September.
  9. Xepapadeas, A. P., 1991. "Environmental policy under imperfect information: Incentives and moral hazard," Journal of Environmental Economics and Management, Elsevier, vol. 20(2), pages 113-126, March.
  10. Segerson, Kathleen, 1988. "Uncertainty and incentives for nonpoint pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 15(1), pages 87-98, March.
  11. Bourgeon, Jean-Marc & Jayet, Pierre-Alain & Picard, Pierre, 1995. "An incentive approach to land set-aside programs," European Economic Review, Elsevier, vol. 39(8), pages 1487-1509, October.
  12. Bystrom, Olof & Bromley, Daniel W., 1998. "Contracting For Nonpoint-Source Pollution Abatement," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 23(01), July.
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