Overlooked Benefits of Nutrient Reductions in the Mississippi River Basin S Bryan Parthum National Center for Environmental Economics, U.S. Environmental Protection Agency, Washington D.C.; [email protected] Amy W. Ando Professor, Department of Agricultural and Consumer Economics, University of Illinois Urbana-Champaign; and university fellow, Resources for the Future, Washington, DC; [email protected] ABSTRACT Improvements in local surface wa- runoff into local waters, but a major policy ter quality in the Mississippi River Basin (MRB) change such as state subsidies will be needed can contribute to the regional environmental to accomplish the 2040 goals (Coppess 2016). goals of reducing hypoxia in the Gulf of Mexico. State agencies and lawmakers are, therefore, To inform estimates of the benefits of water qual- interested in how much their own residents ity policy, we use a choice experiment survey in would support efforts to meet the INLRS a typical subwatershed of the MRB to estimate targets. How much value do residents of the willingness to pay for local environmental im- MRB gain from changes to water quality in provements and helping to reduce hypoxia far their local watersheds, and to what extent do downstream. We find that residents place large people in a state like Illinois value their local values on reduced local algal blooms, improved watershed’s contribution to nonlocal improve- local fish populations and diversity, and meeting ments such as reducing the scale of the hy- local commitments to help with the regional en- poxic dead zone in the Gulf of Mexico? vironmental problem. (JEL Q52, Q53) Integrated assessment of surface water quality policies and management actions can benefit from information about the total val- 1. Introduction ues of changes in water quality and the distri- bution of those values among different groups Nutrient pollution and hydrological disrup- of people. A host of previous studies have tion cause water quality impairments through- shed light on the values people place on some out the Mississippi River Basin (MRB) and dimensions of pollution reduction within the serious problems with widespread oxygen United States. That work is surveyed by Berg- depletion called hypoxia in the Gulf of Mex- strom and Loomis (2017); meta-analyses of ico (U.S. Environmental Protection Agency those studies have informed benefit transfer 2008). The U.S. Environmental Protection efforts to estimate aggregate benefits of water Agency’s 2008 Gulf Hypoxia Action Plan quality changes at the national level (John- (GHP) tasked the 12 upstream states with ston, Besedin, and Stapler 2017; Moeltner the responsibility of reducing their transmis- 2019). There is also a long line of research ex- sion of nutrients such as nitrate-nitrogen and ploring the differences between use and non- phosphorus by 45% by the year 2040. In an use values from local and nonlocal improve- approach similar to the other states in the ments in surface water quality in the United MRB, agencies in Illinois created the Illinois States (Greenley, Walsh, and Young 1981; Nutrient Loss Reduction Strategy (INLRS) to Lant and Roberts 1990; Carson and Mitchell coordinate efforts in that state to meet the nu- 1993; Johnston, Besedin, and Wardwell 2003; trient reduction targets. The INLRS promotes van Houtven, Powers, and Pattanayak 2007), voluntary efforts by farmers to reduce nutrient and recent work has emphasized the need to examine these relationships when consid- Land Economics • November 2020 • 96 (4): 589–607 ering the benefits from policies that reduce ISSN 0023-7639; E-ISSN 1543-8325 hypoxia in the Gulf of Mexico (Babcock and © 2020 by the Board of Regents of the Kling 2015; Keiser, Kling, and Shapiro 2019). University of Wisconsin System This paper advances research on water qual- 589 S Appendix materials are freely available at http://le.uwpress.org and via the links in the electronic version of this article. doi:10.3368/wple.96.4.589 This open access article is distributed under the terms of the CC-BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0) and is freely available online at: http://le.uwpress.org 590 Land Economics November 2020 ity valuation and integrated assessment with a Previous research in stated preference val- choice experiment survey that estimates three uation shows that spatial dimensions matter conventional benefits of water quality im- in other important ways. First, willingness provements (improvements in local fish pop- to pay (WTP) for an environmental improve- ulations, fish diversity, and reductions in local ment can vary widely across space (Johnston algal blooms) and previously overlooked ben- and Duke 2007; Brouwer, Martin-Ortega, efits (local contributions to reaching a regional and Berbel 2010). In particular, people often nutrient reduction target) that arise from poli- have higher WTP when they are closer to the cies targeting hypoxia in the Gulf of Mexico.1 improvement (Sutherland and Walsh 1985; We then illustrate how to use those values in a Hanley, Schläpfer, and Spurgeon 2003; Cza- spatially disaggregated integrated assessment jkowski, Budziński, et al. 2017; Glenk et al. of a land use management plan and explore 2019). Second, researchers have found that two dimensions of value heterogeneity. when estimating WTP for an environmen- The bottom line of a benefit-cost analysis tal change that has a specific location within often aggregates benefits of environmental the landscape, the quality of responses from improvements to all people affected by the stated preference surveys depends on how policy. However, many policy makers and in- clearly the survey describes the location of the terest groups are particularly concerned about change relative to the respondent (Schaafsma the net impact of agricultural-environmen- and Brouwer 2013; Johnston, Holland, and tal policies on rural residents (Gibbs 2016; Yao 2016). Our survey shows respondents Farber 2018), although evidence regarding exactly where they live relative to the pro- preference heterogeneity between rural and posed improvements. We also vary distance urban areas is mixed. Some research shows from the improvement experimentally across that urban residents give more support for alternatives to identify how WTP varies with environmental policies than people in rural exogenously determined distance from the en- areas of the United States (Salka 2001), and vironmental good. other research finds little difference between We find that people place positive and rural and urban residents in their interests for significant values on local water quality im- environmental quality (Arcury and Christian- provements and on helping to achieve basin- son 1993; Mobley 2016). Racevski and Lupi wide success in reducing hypoxia in the Gulf (2006) find rural residents in Michigan are of Mexico. We do not find evidence of joint less likely to support forest management ef- differences in preferences between rural and forts involving conservation, but conclude this urban residents in the same watershed. We do, is likely because those rural communities rely however, find that rural residents and people on forests products for production or exports. who are familiar with nutrient pollution prob- Melstrom et al. (2015) find that urban rivers lems place more value on moving away from and streams are less valued than rural rivers the status quo conditions in the watershed re- for recreational fishing, but do not estimate gardless of the improvements a program pro- the differences in preferences between rural duces. Finally, we demonstrate how these es- and urban recreationists themselves. We make timates can be used in spatially disaggregated a contribution to this discussion in the context integrated assessments, where benefit totals of surface water quality by testing whether and distributions depend on spatial details the values that people place on water quality of the improvements and the population that improvements vary between people in rural stands to gain. areas and people in urban areas of the same watershed, located in the heart of the MRB. 2. Application 1 Phaneuf (2002) estimates use values within a watershed for achieving total maximum daily load targets (nutrient Freshwater systems throughout the U.S. Mid- reductions). We extend this analysis to estimate the local (within the watershed) benefits of contributing to regional, west have been severely altered due to decades downstream (outside the watershed) nutrient reduction tar- of intensive agriculture production (Manifold gets. 1998; Alexander et al. 2008). Tributaries lo- 96(4) Parthum and Ando: Benefits of Nutrient Reductions 591 cated within the upper MRB carry excess Figure 1 nutrients, byproducts of intensive agriculture Study Area in Upper Sangamon River Basin, production, to the Mississippi River, where Central Illinois: The Four Sections of River (A, B, C, D) Are Highlighted and Included they are eventually released into the northern as Attributes on the Choice Card Gulf of Mexico. An overabundance of these nutrients contributes to the large seasonal hy- poxic dead zone off the cost of Louisiana and Texas (Diaz and Rosenberg 2008; Rabalais et al. 2010; Rabotyagov et al. 2014). This paper presents survey results from people in the Upper Sangamon River Water- shed (USRW) in central Illinois (Figure 1). This watershed is listed as a priority water- shed due to its high levels of nitrate-nitrogen and phosphorus transmission within the MRB (U.S. Environmental Protection Agency