Integrated Regulation of Nonpoint Pollution: Combining Managerial Controls and Economic Instruments under Multiple Environmental Targets

Regulators are often reluctant to rely solely on economic incentives to achieve environmental standards. We evaluate a "mixed approach" of economic instruments and management standards when two environmental objectives need to be met simultaneously: minimum river flow rates and reductions in nitrate pollution. We show how the relative efficiency of such mixed approaches can depend on exogenous factors, in this case weather conditions. Results indicate that mixed instruments outperform stand-alone economic incentives or managerial controls under wet weather conditions, but not in 'average' years. However, the relative cost-effectiveness of mixed approaches increases considerably at higher levels of environmental standard compliance.