Nonpoint Source Pollution Regulation Issues And Analysis

In April 1992 the Foundation Eni Enrico Mattei organized a workshop on the regulation of nonpoint source pollution. This volume inc1udes the proceedings of that meeting, as well as additional original contributions, in an attempt to provide an overview of recent theoretical developments in the field. Research on the causes, consequences, and control of nonpoint source pol lution has been carried out over the last two decades. Interest in this subject has grown as a result of the increasing recognition of the insufficiency of traditional pollution control policies focused on the large scale, confined, and general ly predictable pollutant discharges. In fact, many contemporary problems are caused by the combined activities of small polluters, along with natural pro cesses, intermittent and unpredictable events, and often involve pollutants with complex environmental outcomes. Despite the progress made in understanding the nature and size of pollution from diffuse sources, the issue of regulation is still far from being system at ically and adequately addressed. This policy vacuum is partly attributable to the difficulty of adapting the traditional point source regulatory tool kit to the specific features of nonpoint source problems. Such features inc1ude the tech nical difficulty of identifying sources and measuring individual emissions, their variability over time and space, the role played by natural processes in detennin ing pollutant discharges at source and their ultimate impacts on the receiving environmental media.

Abstract: The purpose of this study was to design a regulatory policy to solve a nonpoint source (NPS) water pollution problem, . Cost-sharing programs of various kinds have dominated NPS policy since the 19802s. However, such programs are neither efficient nor effective. Economists agree that, in principle, performance-based approaches are preferred to design-based, because they allow firms to choose least-cost abatement practices. However, nonpoint sources are seldom included in performance-based programs since it is very costly to monitor the performance of individual NPS polluters. The NPS pollution problem can be modeled as a generalized principal-agents problem. That is, the principal has to regulate agents while he cannot observe either the types and or the effort level of the agents; only total level of ambient pollution is verifiable. However this kind of problem is very complicated and a general solution has yet to be derived. Simplified models (with either only adverse selection, or hidden action) have been analyzed and first best solutions derived. Nevertheless, these solutions are incomplete, since they fail to solve simultaneously the adverse selection and moral hazard problems. I show that under assumptions consistent with the NPS pollution situation it is possible to decompose the generalized principal-agent problem into two univariate variational problems in the multi-agents case, and to design a two-step contract that solves both the adverse selection and the hidden action problems. I offer a policy-maker2s algorithm that can be used to design a regulatory policy to control NPS pollution. Three steps of a transaction 6 property rights/initial endowment assignment, price and quantity determination, and money/product exchange 6 are considered sequentially; an optimal regulatory intervention is chosen for each step; and then the whole policy is evaluated for consistency and for as-yet-unexamined effects on related markets. Inconsistencies and undesired general equilibrium effects are resolved by modifying the intervention at the appropriate step and re-iterating through the policy algorithm. This research has resulted in contributions in three areas of economic theory: policy design, mechanism design (the generalized principal agent problem), and environmental economics (the nonpoint source water pollution problem).

Nonpoint-source pollution (NPSP) poses a special challenge to society's ability to manage its collective environmental good - especially surface and groundwater quality. Since there is no `point', such as an outfall pipe, from which the pollution is being discharged and can be measured, pollution can reach the ambient environment without being monitored. Since management of air and water polution requires the definition and enforcement of limits on discharges or the imposition of fees on those discharges, inability to measure limits our ability to manage this environmental problem. This book presents a state-of-the-art review and discussion of economists' efforts to resolve this major problem and attempts to provide a way of working around it. The book sets forth the theoretical issues, modeling, and the actual programs set up to confront this issue.

Pollution control, a key component of U.S. environmental policy, has made important progress in recent decades. Yet important problems remain and there is need for improvement in the pollution control regulatory system. This book is the most extensive evaluation of that system ever produced. It reveals many strengths and accomplishments, but also illustrates serious shortcomings and the need for reform. The volume emerges from three years of research on a fragmented 'system' of institutions, statutes, and procedures that is often inefficient and ineffective, hobbled by misplaced priorities. Part I provides an in-depth description of this system, centered on the federal Environmental Protection Agency and the labyrinthine laws it must implement. The authors evaluate the federal legislation, administrative decisionmaking, and the state-federal division of labor that defines the system. Davies and Mazurek assess the effectiveness and efficiency of U.S. pollution control. They discuss the performance of U.S. laws and regulations in comparison with those of other nations, assess the ability of the U.S. pollution control system to meet future problems, and consider proposals for reform and repair. Within this far reaching analysis, they include criteria that are often overlooked by policymakers and analysts, including social values, equity, nonintrusiveness, and public participation.

Flexible Incentives for the Adoption of Environmental Technologies in Agriculture identifies and structures more flexible economic incentives for the achievement of environmental goals in agriculture. It provides a conceptual framework and presents case studies that analyze how flexible incentives can address environmental problems that are caused by agricultural production. The book brings together economists, agency personnel and political economists for the purpose of exploring how new cutting-edge economic tools could be developed and applied to environmental problems. The goal of the book is to complement and to expand the economic theory of environmental regulation and technology adoption with new research findings. The key theme of this book is the important role technology takes when addressing environmental problems. New technologies and technical development are broadly defined to include economic instruments, innovative ways to communicate environmental information, new economic institutions, and education. This book is designed for public and private policymakers, government analysts, teachers, researchers and students who specialize in the fields of natural resources, agricultural economics and environmental regulation. It provides a fresh perspective on what types of incentives may be used to lead us to the desired environmental outcomes and offers new ideas about the types of economic instruments that may achieve these outcomes.

This major reference book comprises specially commissioned surveys in environmental and resource economics written by an international team of experts. Authoritative yet accessible, each entry provides a state-of-the-art summary of key areas that will be invaluable to researchers, practitioners and advanced students.