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ENVIRONMENTAL POLICIES for AGRICULTURAL POLLUTION CONTROL 00Environ PRELIMS 3/8/01 2:12 PM Page Ii 00Environ PRELIMS 3/8/01 2:12 PM Page Iii 00Environ PRELIMS 3/8/01 2:12 PM Page i ENVIRONMENTAL POLICIES FOR AGRICULTURAL POLLUTION CONTROL 00Environ PRELIMS 3/8/01 2:12 PM Page ii 00Environ PRELIMS 3/8/01 2:12 PM Page iii ENVIRONMENTAL POLICIES FOR AGRICULTURAL POLLUTION CONTROL Edited by J.S. SHORTLE AND D.G. ABLER Department of Agricultural Economics and Rural Sociology Pennsylvania State University USA CABI Publishing 00Environ PRELIMS 3/8/01 2:12 PM Page iv CABI Publishing is a division of CAB International CABI Publishing CABI Publishing CAB International 10 E 40th Street Wallingford Suite 3203 Oxon OX10 8DE New York, NY 10016 UK USA Tel: +44 (0)1491 832111 Tel: +1 212 481 7018 Fax: +44 (0)1491 833508 Fax: +1 212 686 7993 Email: [email protected] Email: [email protected] Web site: http://www.cabi.org © CAB International 2001. All rights reserved. No part of this publication may be reproduced in any form or by any means, electronically, mechanically, by photocopying, recording or otherwise, without the prior permission of the copyright owners. A catalogue record for this book is available from the British Library, London, UK. Library of Congress Cataloging-in-Publication Data Environmental policies for agricultural pollution control/edited by J.S. Shortle and D.G. Abler. p. cm. Includes bibliographical references (p. ). ISBN 0-85199-399-0 (alk. paper) 1. Agricultural pollution--Government policy. 2. Water--Pollution--Government policy. 3. Environmental policy--Economic aspects. I. Shortle, J.S. (James S.) II. Abler, David Gerrard, 1960– TD428.A37 E58 2001 363.739Ј45--dc21 2001020355 ISBN 0 85199 399 0 Typeset in Photina by Columns Design Ltd, Reading. Printed and bound in the UK by Biddles Ltd, Guildford and King’s Lynn. 00Environ PRELIMS 3/8/01 2:12 PM Page v Contents Contributors vii Preface ix 1. Agriculture and Water Quality: the Issues 1 J.S. Shortle, D.G. Abler and M. Ribaudo 2. Environmental Instruments for Agriculture 19 R.D. Horan and J.S. Shortle 3. Voluntary and Indirect Approaches for Reducing Externalities and Satisfying Multiple Objectives 67 R.D. Horan, M. Ribaudo and D.G. Abler 4. Estimating Benefits and Costs of Pollution Control Policies 85 M. Ribaudo and J.S. Shortle 5. Non-point Source Pollution Control Policy in the USA 123 M. Ribaudo 6. Policy on Agricultural Pollution in the European Union 151 N. Hanley 7. Decomposing the Effects of Trade on the Environment 163 D.G. Abler and J.S. Shortle References 183 Index 213 v 00Environ PRELIMS 3/8/01 2:12 PM Page vi 00Environ PRELIMS 3/8/01 2:12 PM Page vii Contributors D.G. Abler, Department of Agricultural Economics and Rural Sociology, College of Agricultural Sciences, Pennsylvania State University, 207 Armsby Building, University Park, PA 16802, USA N. Hanley, Department of Economics, University of Glasgow, Adam Smith Building, Glasgow G12 8RT, UK R.D. Horan, Department of Agricultural Economics, 87 Agriculture Hall, Michigan State University, East Lansing, MI 48824-1039, USA M. Ribaudo, United States Department of Agriculture, Economic Research Service, 1800 M St NW, Room 4004, Washington, DC 20036-5831, USA J.S. Shortle, Department of Agricultural Economics and Rural Sociology, College of Agricultural Sciences, Pennsylvania State University, 112 Armsby Building, University Park, PA 16802, USA vii 00Environ PRELIMS 3/8/01 2:12 PM Page viii 00Environ PRELIMS 3/8/01 2:12 PM Page ix Preface Environmental experts have recognized for years that agriculture is a major cause of water quality problems. Governments have taken up the problem with varying intensity and success. On the whole, progress has been limited and serious problems remain. There is now considerable support within environmental agencies and environmental groups for expanding pollution control efforts in agriculture. However, there is little consensus about appro- priate policies. As with other types of pollution, significant reductions in agriculture’s contribution to water pollution will require the application of either enforce- able regulatory approaches or changes in the economic environment such that farmers find it in their economic interest to adopt ‘environmentally friendly’ production practices. The appropriate choices among the range of options that fall within these boundaries are the subject of much debate. One option would be to pursue command and control regulations that require farmers to adopt certain management practices or technologies. This has been the dominant approach to air and water pollution control, but there are other options that are likely to have greater political and economic appeal. There is a huge engineering and hydrological literature on managing water pollution from agriculture. This literature is an important resource for policy analysts, but many of the key questions that must be addressed in poli- cy design and evaluation involve economic questions. What will it cost to reduce water pollution from agriculture, and how does that compare with costs of reducing pollution from other sources instead? What are the economic benefits from water pollution control? Why do the traditional approaches to water pollution control in agriculture, which involve education and voluntary compliance, have a limited impact? How will producers and agricultural mar- kets respond to innovative policy initiatives? How will changes in agricultural markets induced by trade liberalization affect the location and severity of agriculture’s contribution to pollution, and the costs and effectiveness of environmental policy choices? What are the merits of public spending on ‘green’ agricultural technology when competition for public resources is intense? ix 00Environ PRELIMS 3/8/01 2:12 PM Page x x Preface Our fundamental goal in this volume is to provide a resource for econo- mists, other professionals and students interested in economic dimensions of designing and evaluating pollution control policies for agriculture. This vol- ume includes chapters describing theoretical and empirical research on policy design, methods for policy evaluation, the policy experiences of various coun- tries and linkages between agricultural trade and the environment. There are some sections that make use of mathematics and more advanced economic analysis, but on the whole we believe the book will be accessible to interested students, professionals and analysts with varied backgrounds. Our thanks to our editor Tim Hardwick at CABI Publishing for his great patience in seeing us through to the end. We also thank Rose Ann Alters and Lubing Wang for various contributions to this project. We would also like to acknowledge the Economic Research Service of the US Department of Agriculture (Cooperative Agreement No. 43-3AEL-8-80058) for its support of our research on pollution control policies for agriculture and the collabora- tions it has enabled between the contributors to this book. James Shortle David Abler December 2000 01Environ Policies 01 3/8/01 2:12 PM Page 1 Chapter 1 Agriculture and Water Quality: the Issues JAMES S. SHORTLE1, DAVID G. ABLER1 AND MARK RIBAUDO2 1Department of Agricultural Economics and Rural Sociology, Pennsylvania State University, University Park, PA 16802, USA; 2USDA, Economic Research Service, Washington, DC 20036-5831, USA Agriculture has pervasive impacts on water quality. Conversion of forests, wetlands and prairies to crop and grazing lands has reshaped landscapes and the hydrology and ecology of agriculturally developed regions. Reservoirs constructed to supply water to agriculture and other sectors have destroyed significant natural assets by inundation.1 Dams and diver- sions impede fish migration, alter stream flow regimes and water tempera- tures, and trap sediments. Consequences include severe degradation of aquatic and riparian habitats, with significant threats to aquatic species. Surface runoff from cropland carries salts, fertilizers, pesticides, pathogens and other pollutants into surface waters, damaging aquatic ecosystems and wildlife, degrading drinking water supplies, and impairing water for commercial and recreational uses. Pesticides and other chemicals applied to cropland also enter aquifers used for drinking water, posing risks to human and animal health. Accessible and relatively comprehensive environmental assessment data make it easy to use the USA to illustrate the significance of these problems. At present, scores of species of fish are threatened or endangered in rivers where habitat has been degraded by large-scale irrigation projects (Moore et al., 1996). Bird deaths, deformities and reproductive failures at the Kesterson Reservoir in California in 1983 highlighted the risks of agricultural drain water to wildlife. A recent assessment by the US Environmental Protection Agency (USEPA) concluded that agriculture is the leading cause of impaired water quality in rivers and lakes, and among the leading causes of impaired estuaries and shorelines in the US (USEPA, 2000a). Pesticides and nitrates are routinely found in groundwater supplies in agricultural regions of the country (USGS, 1997, 1999a). © CAB International 2001. Environmental Policies for Agricultural Pollution Control (eds J.S. Shortle and D.G. Abler) 1 01Environ Policies 01 9/8/01 4:30 PM Page 2 2 J.S. Shortle and D.G. Abler These problems are by no means unique to the US. Similar problems are found in developed and developing countries, and they are drawing increas- ing attention from scientists, environmental advocates and policy-makers (FAO, 1996; OECD, 1998). Concerns for the environmental impacts of dam building have become a significant
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