Water Resources Research Act Program

Details for Project ID 2012DE234B

The Returns to Best Management Practices: Evidence from Early Proposals for Nutrient Trading in the Chesapeake Bay Watershed

Institute: Delaware
Year Established: 2012 Start Date: 2012-06-01 End Date: 2013-02-28
Total Federal Funds: $3,500 Total Non-Federal Funds: $7,000

Principal Investigators: Joshua Duke

Abstract: Institutions affecting Chesapeake Bay water quality are currently undergoing a significant change - change that if completed will be unprecedented in scope. Federal and state policies are being created, which will affect point sources and nonpoint sources (including agriculture) of nutrients entering the Bay over the entire Bay watershed. These policies for water quality improvements: (1) involve heretofore unseen levels of collaboration between state and federal agencies on nutrients; (2) are the most ambitious policies to tackle nutrient pollution on a watershed scale; and (3) will test bed future policy efforts to tackle Gulf pollution in the entire Mississippi basin. Economic analyses are greatly needed so that the most cost effective policies with the least transaction costs and information asymmetries can be designed. This is particularly true because policy makers have latched onto the concept of nutrient trading, which involves economic principles of cap and trade. The research proposed here seeks to offer economic insight on the likely performance of the proposed nutrient trading institutions by examining the revenue farmers can expect from adopting several agricultural best management practices (BMPs). There is a fortuitous window of opportunity for economists to use analytical results to help design better policies up-front - a critical goal because each state is pursuing their own policies.