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Fertilizer Use and Water Quality in the United States

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Fertilizer Use and Water Quality in the United States Fertilizer Use and Water Quality in the United States Jayash Paudel* and Christine L. Crago** * PhD Candidate (corresponding author), Department of Resource Economics, University of Massachusetts Amherst, email: [email protected] ** Assistant Professor, Department of Resource Economics, University of Massachusetts Amherst, email: [email protected] Selected Paper prepared for presentation at the 2018 Agricultural & Applied Economics Association Annual Meeting, Washington, D.C., August 5 – August 7 Copyright 2018 by Jayash Paudel and Christine L. Crago. All rights reserved. Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies. Fertilizer Use and Water Quality in the United States Jayash Paudely Christine L. Cragoz May 21, 2018 Abstract Fertilizer use from agriculture is widely acknowledged to be a leading cause of water pollution, yet no national estimates exist on the effect of fertilizer application on concentrations of agricultural pollutants in US watersheds. This paper examines the impact of fertilizer use on water quality using the most comprehensive data available on agricultural pollutants, including over 2.9 million pollution readings on nitrogen and phosphorus concentrations in water sites across the country. Findings show that a 10% increase in the use of nitrogen and phosphorus fertilizers (kg) leads to a 1.47% increase in the concentration of nitrogen (mg/l) and a 1.68% increase in the concentration of phosphorus (mg/l), respectively. Results also indicate that there exists heterogeneity in these elasticity measures across 18 water resource regions, ranging from 0.3% to 4.75% in the case of phosphorus pollution. More broadly, empirical estimates suggest that a 100% increase in the use of nitrogen fertilizers expands the size of the hypoxic zone in the Gulf of Mexico by roughly 1,598 square miles on average, equivalent to about one-fifth of the estimated size of the “dead zone” in the Gulf of Mexico. Keywords: Fertilizer use, water quality, environmental externalities, agriculture JEL Codes: Q12, Q15, Q51 and Q53 yCorresponding Author: Department of Resource Economics at University of Massachusetts Amherst, Stockbridge Hall, 80 Campus Center Way, Amherst, MA 01003. Email: [email protected] zDepartment of Resource Economics at University of Massachusetts Amherst, Stockbridge Hall, 80 Campus Center Way, Amherst, MA 01003. Email: [email protected] 1 Introduction The US agricultural sector has seen a huge increase in demand for chemical fertilizers.1 Nitrogen fertilizer application, which rose from 2.7 to 12.3 million tons between 1960 and 2005, incurs almost a quarter of total production cost among corn farmers in the US (Beckman et al., 2013; Bejan and Pozo, 2016). Although fertilizers are essential for agricultural productivity, they lead to “groundwater contamination, eutrophication of freshwater and estuarine ecosystems, tropospheric pollution related to emissions of nitrogen oxides and ammonia gas, and accumulation of nitrous oxide” (Zhang et al., 2015). Previous reports on toxic algal bloom in Lake Erie in 2014 and federal lawsuit filed by a water utility company against three counties in Iowa in 2015 highlight the recurring problem of fertilizer overuse, agricultural runoff and subsequent deterioration in water quality.2 Nitrogen pollution, which has exceeded “planetary boundaries” (Steffen et al., 2015), originates from fertilizer run-off that “causes $200bn-800bn worth of damage” to the ocean every year (Economist, 2018). Although scientists agree that fertilizer use is responsible for water quality problems such as the hypoxic growth in the Northern Gulf of Mexico (Whittaker et al., 2015), there remains a need to precisely estimate the percentage change in water quality that can be attributed to changes in on-farm fertilizer use. This paper seeks to shed light on the linkage between agricultural fertilizer use and nutrient pollution in the entire US. We construct an empirical model of the determinants of water quality, and study the impact of fertilizer use on the concentration of agricultural pollutants such as nitrogen and phosphorus. We employ a rich panel of watersheds constructed from over 35 years of data and condition our estimates on watershed and water resource region-by-year fixed effects to identify the impact of fertilizer use on water quality. To obtain fertilizer application at the watershed level, we overlay the 8-digit hydrologic unit (HU) watershed polygons with a raster of county boundaries and a raster of the cropland cover to derive a weighting factor for fertilizer application in a county within a watershed. We sum the weighted county-level fertilizer application data to derive the total fertilizer applied within each 8-digit HU watershed. We use temperature, precipitation, urban runoff, prior levels of agricultural pollution and economic variables such as population and Gross Domestic Product (GDP) as the main explanatory variables in our econometric model. We also include upstream rainfall shock as a determinant of downstream watershed pollution and account 1According to Lu and Tian(2017), global nitrogen and phosphorus fertilizer use has increased by approximately 8 times and 3 times, respectively, over the last fifty five years. 2Farmers apply nitrogen and phosphorus fertilizers that contain major sources of nourishment for crops. Nutrient runoff from agriculture causes several water quality problems, such as eutrophication of the “Dead Zone” in the Gulf of Mexico and nitrate contamination in drinking water. Presence of nitrates in water can lead to several health problems such as fatal blood disorder among infants commonly known as blue-baby. Excess phosphorous levels in portions of Lake Erie that provided drinking water for residents led to poisonous algal blooms, making tap water unsafe to drink for several days (Cohen and Keiser, 2017). 1 for spatial spillovers when pollutants move downstream and traverse multiple locations. We find that a 10% increase in the use of nitrogen fertilizer (kg) leads to a 1.47% increase in the amount of nitrogen (mg/l) in water. Similarly, a 10% increase in the use of phosphorus fertilizer (kg) is associated with a 1.68% increase in the concentration of phosphorus (mg/l) in water. We find large effects of fertilizer use on water quality among (i) non-metropolitan areas and (ii) areas with low GDP. Our results are also robust to the use of fertilizer application intensity as measured by total fertilizer use per unit area of cropland. Furthermore, we observe heterogeneity in nutrient pollution elasticity estimates across eighteen water resource regions in the US. Among these regions, the marginal effect estimates on nitrogen pollution range from 2.2% to 7.3%, and those on phosphorus pollution range from 1.7% to 4.7%. We also combine our estimates with statistics reported in prior hydrology-based studies and find that a 100% increase in agricultural fertilizer use leads to an increase of 1,598 square miles in the size of the hypoxic zone, which is an area about the size of Rhode Island and almost 20% the estimated size of the “dead zone” in the Gulf of Mexico. In the context of the Hypoxia Task Force 2008 Action Plan, our estimates suggest that reducing the concentration of nitrogen in water by 9-15% between 5 and 20 years requires a significant decrease of 41-67% in the use of nitrogen fertilizers. This is the first study to apply the largest standardized water quality data access tool available in assessing the impact of fertilizer use on agricultural pollutants across the US. Previous studies using similar data have focused mostly on non-agricultural pollutants and investigated the role of the Clean Water Act in improving alternative measures of water quality such as dissolved oxygen deficit, biochemical oxygen demand and total suspended solids. For example, Keiser and Shapiro (2017) evaluate the impact of the 1972 Clean Water Act on water pollution concentrations and highlight that grants issued to municipal wastewater treatment plants led to a downward trend in US water pollution in the last forty years.3 Smith and Wolloh(2012) assess dissolved oxygen in freshwater lakes over a 36-year period from 1975 to 2011 and conclude that there has been no significant change in water quality since the Clean Water Act. Our work differs from literature exploring the Clean Water Act and examines the overall impact of fertilizer application on nitrogen and phosphorus concentration in water. To the best of our knowledge, this is the first study to employ over 2.9 million nitrogen and phosphorus readings collected at 149, 887 water sites from the Water Quality Portal (WQP) to assess the linkage between fertilizer use and nutrient pollution across the US. This study provides the first national estimates of how fertilizer application affects concentration of agricultural pollutants in water. Majority of studies in water pollution research have employed ex ante engineering simulations to explore nutrient pollution in agriculture (Thorp 3Keiser and Shapiro(2017) report that each grant decreases the probability that downriver areas violate standards for being fishable by about half a percentage point. 2 et al., 2007; Gowda et al., 2008; Nangia et al., 2008; Burkart and Jha, 2012; Iho and Laukkanen, 2012; Hendricks et al., 2014; Bostian et al., 2015) These studies focus on a specific watershed or a water resource region and cannot readily provide generalizable estimates
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