The economics of agricultural groundwater quality : effects of spatial and temporal variability on policy design

Graduation date: 1996Accompanying data file formats may be obsolete and not compatible with current technology.Non-point agricultural contaminants, such as nitrogen, may lower groundwater quality and thereby impose health and environmental risks. The objective of this study is to evaluate tax policies to control agricultural pollutants in a spatially heterogeneous and dynamic setting. The focus of the study is non-point source nitrate contamination of groundwater in Treasure Valley in Malheur County, Oregon. Tax policies to control groundwater nitrates are evaluated utilizing a spatially distributed, dynamic programming model linking the economic and physical processes that determine groundwater quality. Economic and physical processes vary across space and time because of locational (spatial) differences in soil type. Representation of these variations is important when evaluating tax policies. Taxes on unit nitrogen input based on different measures of nitrates (groundwater versus soil water) and at different levels of aggregation (soil zone versus the entire region) are evaluated. The different tax schemes are compared to determine which achieves a standard for nitrate in groundwater at least cost to producers (in terms of lost profit). The tax rate is increased incrementally until predicted (ambient) groundwater nitrate levels at simulated observation well sites meet or exceed a standard for groundwater nitrates. An important implication from this study is the need to base groundwater regulatory policies on ambient groundwater quality and not an intermediate quality indicator, such as soil water quality. A regulatory policy based on soil water quality is inferior relative to a policy based on ambient groundwater quality. Additionally, a spatial tax achieves the standard for groundwater nitrates at a lower cost to producers than a uniform tax, however, the benefits received by utilizing a spatial tax are probably not sufficient to cover the added costs of such a tax. All tax policies require substantial change in agricultural practices at a large cost to producers in the study region. This would call into question the political feasibility of such policies. While tax policies were the focus of this investigation, an analysis of nitrogen input restrictions indicates that other control policies and new technologies may achieve the standard for groundwater nitrates at least cost to producers in the study area