Grantee Research Project Results

The coordination and design of point-nonpoint trading programs and agri-environmental policies.

Citation:

Horan RD, Shortle JS, Abler DG. The coordination and design of point-nonpoint trading programs and agri-environmental policies. Agricultural and Resource Economics Review 2004;33(1):61-78.

Abstract:

Agricultural agencies have long offered agri-environmental payments that are inadequate to achieve water quality goals, and many state water quality agencies are considering point-nonpoint trading to achieve the needed pollution reductions. This analysis considers both targeted and nontargeted agrienvironmental payment schemes, along with a trading program which is not spatially targeted. The degree of improved performance among these policies is found to depend on whether the programs are coordinated or not, whether double-dipping (i.e., when farmers are paid twice-once by each program-to undertake particular pollution control actions) is allowed, and whether the agri-environmental payments are targeted. Under coordination, efficiency gains only occur with double-dipping, so that both programs jointly influence farmers' marginal decisions. Without coordination, doubledipping may increase or decrease efficiency, depending on how the agri-environmental policy is targeted. Finally, double-dipping may not solely benefit farmers, but can result in a transfer of agricultural subsidies to point sources.