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ENCOURAGING THE USE OF WETLANDS IN WATER QUALITY TRADING PROGRAMS
Citation:
HEBERLING, MATTHEW T., J. Garcia, AND H. THURSTON. ENCOURAGING THE USE OF WETLANDS IN WATER QUALITY TRADING PROGRAMS. Presented at American Water Resources Assoiation (AWRA) 2008, New Orleans, LA, November 17 - 20, 2008.
Impact/Purpose:
information
Description:
The interest in water quality trading (WQT) has grown in recent years because of its potential to meet nutrient reduction goals at lower costs. However, one problem identified by researchers in most WQT programs has been few actual trades, usually associated with low numbers of participants in the markets. Policy makers would like to increase the numbers of participants by encouraging traders, primarily agricultural traders, to use restored and constructed wetlands as a nutrient reducing technology in WQT programs. Wetlands not only remove nutrients from nonpoint sources of pollution, but also provide ancillary benefits like carbon sequestration, wildlife habitat, and biodiversity provision. But, these ancillary benefits can affect how the market functions. We propose the use of a wetland subsidy linked to the ancillary benefits and consider the impact this subsidy would have on the design of an efficient program. Based on the theoretical model, we will present the effects these subsidies have on agricultural sources’ behavior (e.g., changes in crop production, fertilizer use, and wetland use) and therefore on levels of nonpoint source pollution. Although the results reveal that the subsidy will increase the use of wetlands, we find that changes in fertilizer use and runoff depend on how fertilizer and wetlands are interrelated in the crop market and nutrient market. But, we find that the changes in fertilizer use and runoff remain ambiguous even with simple functional forms. Therefore, it is not clear that the supply of nutrient credits will expand as indicated by policy makers. Future research will include improving our understanding of how to model wetland services and investigating alternative approaches for incentivizing the use of wetlands such as promoting multiple markets for different wetland services.
