Innovative economic mechanisms for addressing agricultural non-point source water pollution

Environmental and Planning Law Journal

Volumn 22, Issue 1, 2005, Pages 55-67

  Gordon, Simon ^a  

^a AUSTRALIAN NATIONAL UNIVERSITY   (Australia)

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EID: 53749097799     PISSN: 0813300X     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (59)

1. This is not to say that non-point source water pollution is not also a serious problem in developing countries but at this stage the government response to this form of pollution has been largely confined to the developed world.
2. Faeth estimates that 82% of total nitrogen discharges and 84% of total phosphorous discharges into waterways in the United States come from non-point sources (Faeth P, Fertile Ground: Nutrient Trading's Potential to Cost-Effectively Improve Water Quality (World Resources Institute report, Washington DC, 2000).
3. There is little reason to doubt that the comparativ e figures for Australia would be much different. The New South Wales Department of Environment and Conservation (Incorporating the Environmental Protection Authority (EPA)), suggests that non-point sources contribute 80% of phosphorous and 90% of nitrogen pollution in the Warragamba catchment in Sydney (NSW EPA, Green Offsets for sustainable development: Concept Paper (2002)). Available at the New South Wales Department of Environment and Heritage website http://www.epa.nsw.gov.au/greenoffsets/index.htm.
4. In the United States these programs include the Conservation Reserve Program and Environmental Quality Incentives Program; in Australia they include the Landcare and Rivercare programs, funded by the Commonwealth Government through the Natural Heritage Trust.
5. This includes a $10 million commitment in the 2001 National Action Plan for Salinity and Water Quality to pilots for various economic instruments around Australia.
6. Dosi C and Tomasi T, Non-point Source Pollution Regulation: Issues and Analysis (Kluwer Academic Publishers, 1994) at preface.
7. For a comprehensive discussion on the characteristics of non-point source pollution see: Shortle JS and Horan RD, "The economics of non-point pollution control" (2001) 15 Journal of Economic Surveys 3, pp 255-289.
8. While science is making constant advances in terms of being able to measure the level of emissions from non-point sources, the current reality is that doing so in most cases is still either technically unfeasible or prohibitively expensive.
9. In particular, it is politically difficult for the policy maker to require non-point source polluters to undertake potentially costly actions to reduce emissions when it is difficult to demonstrate the public benefits of such actions. In some cases it may be highly uncertain as to whether the public benefits of such actions even outweigh the costs. Furthermore, experience in the United States suggests that such requirements would not only need to match up with general perceptions of fairness but also be legally defensible (Shortle JS and Abler DG, "Non-point pollution" in Folmer H. and Tietenberg T (eds), International Yearbook of Environmental and Natural Resource Economics (Edward Elgar, 1997).
10. This rules out the wide range of proposed economic instruments that are based on ambient nutrient concentrations, including Segerson's ambient subsidies, and Xepapadeas's random fines (for more details on these economic instruments see: Segerson K, "Uncertainty and incentives for non-point pollution control" (1988) 15 Journal of Environmental Economics and Management, pp 87-98
11. Xepapadeas A, "Controlling environmental externalities: observability and optimal policy rules" in Tomasi T and Dosi C (eds), Non-point Source Pollution Regulation: Issues and Analysis, (Kluwer Academic Publishers, 1994).
12. Oates WE and Portney PR, The Political Economy of Environmental Policy, Resources for the Future Discussion Paper 01-55, (2001). Paper available at Resources For the Future website http://www.rff.org. Follow links from homepage to "publications", then "discussion papers", then 2001.
13. For example, in France, calls from environmental groups for increases in emission charges during the 1980s were rejected by President Mitterrand's Ministry of Finance on the grounds that industry should not be subjected to any further tax burden: see Anderson MS, Economics Instruments and Clean Water: Why institutions and Policy Design Matter, (Organisation for Economic Co-operation and Development (OECD) 2001). Available on the OECD website. http://www.oecd.org.
14. see http://www.oecd.org/dataoecd/48/14/1910825.pdf. Viewed January 11, 2005. Similarly, in other European nations, the implementation of emission charges has included a wide array of significant exemptions and tax relief for certain sectors - often to placate vocal industry lobby groups: see Ekins P and Speck S "Competitiveness and exemptions from environmental taxes in Europe" (1999) 13 Environmental and Resource Economics, pp 369-396.
15. The almost universal preference to "grandfather" permits in tradable emission permit schemes is another example of how industry groups have influenced instrument design. This issue is discussed in Keohane NO, Revesz RL and Stavins RN, The Positive Political Economy of Instrument Choice in Environmental Policy, Discussion Paper 97-25, February 1997, Prepared for Presentation at the 1997 Allied Social Science Associations meeting New Orleans, Louisiana, January 4-6, 1997. Available at Resources for the Future website http://www.rff.org/Documents/RFF-DP-97-25.pdf. Viewed 11 January 2005.
16. Paras S, "Environmental taxation and industrial pollution prevention and control: towards a holistic approach" (1997) 7 European Environment, pp 162-168.
17. Paras, n 12, pp 162-168.
18. This approach has been adopted in the Netherlands system of effluent charges. It is estimated that the revenue raised through Dutch effluent charge has been responsible for the majority of industrial investments in water pollution control in that country: see Anderson MS, Economics Instruments and Clean Water: Why Institutions and Policy Design Matter, (OECD 2001).
19. McCann L, and Easter KW, Evaluating Transaction Costs of Alternative Policies to Reduce Phosphorous Pollution in the Minnesota River, University of Minnesota Staff Paper Series, (1998) at pages 97-98.
20. Stavins R, "Transaction costs and tradable permits", (1995) 29 (2) Journal of Environmental Economics and Management 133.
21. Herath PB and Alfons W, Transaction Costs, Economic Instruments and Environmental Policies, Paper presented at the Annual meeting of the American Agricultural Economics Association, Nashville, August 8-11 (1999).
22. Saleth R and Dinar A, Evaluating Water Institutions and Water Sector Performance, World Bank Technical Paper No. 447 (1999).
23. Programs based on volunteerism or education are generally easier to design, faceless stakeholder opposition (and hence require less negotiation) and do not require new legislation. Moreover, by not mandating any pollution abatement they do not require potentially expensive monitoring, enforcement or prosecution. Cost -share programs are likely to have higher policy transaction costs, requiring more considered design and on-going administration. However, they are unlikely to face significant negotiation and legislative costs. Furthermore, being based on the voluntary adoption of improved management practices they do not require an overly onerous monitoring regime. Harder-edged economic instruments, such as emission taxes and emissions trading would be expected to face far higher transaction costs. To operate successfully they demand far more certainty regarding the source and magnitude of emissions and their environmental impact. In turn, this requires greater research and information gathering. Enactment of legislation is likely to become more protracted due to the influence of farm lobby groups and underlying beliefs about property rights (particularly for instruments based on the polluter pays principle).
24. Stavins, n 16, p 146.
25. The costs of the public education and information program would also have to be considered in ex-ante analysis of the instrument, however.
26. Stavins, n 16.
27. Swan River Trust Swan-Canning Cleanup Program Action Plan: An Action Plan to clean up the Swan-Canning Rivers and Estuary, Swan River Trust, Waters and Rivers Commission, Western Australia, May (SRT 1999).
28. In February 2000, a massive toxic blue-green algal bloom resulted in concentrations of algal cells in the system reaching as much as 6500 times the limit considered safe for recreat ional use as nitrogen and phosphorus levels in the Swan-Canning river system exceeded acceptable limits by 700% and 300% respectively: Swan River Trust River Science - Summer Surprise: The Swan River blue-green algal bloom, Issue 2, Swan River Trust, Waters and Rivers Commission, Western Australia, September (SRT 2000).
29. Government policy from the 1930s onwards encouraged the relocation of heavy industry and sewage treatment plants and by 1980 large point sources of nutrients had been mostly eliminated (SRT 1999).
30. While non-point agricultural sources provide the majority of nutrients into the Swan-Canning river system, nutrient emissions from small to medium size industrial and commercial properties and intensive agricultural enterprises such as piggeries, poultry farms and market gardens are also significant and require management: Swan River Trust Swan-Canning Cleanup Program Action Plan: An Action Plan to clean up the Swan-Canning Rivers and Estuary, Swan River Trust, Waters and Rivers Commission, Western Australia, May (SRT 1999).
31. Swan River Trust, River Science - Sources of nutrients to the Swan and Canning rivers, Issue 5, Swan River Trust, Waters and Rivers Commission, Western Australia, December (2000b)
32. Mueller GD, Deeley DM and Lindhorst JW, Total Nitrogen and Total Phosphorus in the Swan-Canning River Catchments, unpublished paper (2000).
33. A major part of the Swan-Canning Cleanup Program Action Plan is aimed at the development and adoption of best management practices to reduce nutrient inputs. In addition, the process of developing best management practices is a statutory requirement in the Swan-Canning Environmental Protection Policy.
34. Banfield K, Sustainable Land Management in the Ellen Brook Catchment, Bulletin No. 4498 (Agriculture Western Australia, 2001)
35. Swan River Trust Swan-Canning Cleanup Program Action Plan: An Action Plan to clean up the Swan-Canning Rivers and Estuary, Swan River Trust, Waters and Rivers Commission, Western Australia, May (SRT 1999).
36. Banfield, n 29
37. More than 5000 people have attended the Heavenly Hectares program since its inception in 2000.
38. Peel-Harvey Expert Review Committee, Peel Inlet and Harvey Estuary System Management Strategy: Progress and Compliance by the Proponents with the Environmental Conditio ns set by the Minister for the Environment in 1990 (Environment Protection Authority 2002)
39. see also Gunningham N and Sinclair D "Non-point pollution, voluntarism and policy failure: lessons for the Swan-Canning" (2004) 21 EPLJ 93.
40. Falconer K and Saunders S, "Transaction costs for SSIs and policy design" (2002) 19 Land Use Policy.
41. Falconer K and Saunders S, n 34
42. Latacz-Lohmann U, Van der Hamsvoot C, "Auctioning conservation contracts: a theoretical analysis and an application" (1997) 79 American Journal of Agricultural Economics, pp 407-418.
43. Latacz-Lohmann U, Van der Hamsvoot C, n 36, pp 407-418.
44. Land retirement contracts under the CRP have been delivered through a competitive bidding mechanism since 1986.
45. For more information, see the Department of Sustainability and Environment website: http://www.dse.vic.gov.au, and follow links "DSE Home" and "Conservation and Environment".
46. Stoneham G, Chaudhri V. and Strappazzon L, Missing Markets and the Environment, (Department of Natural Resources and Environment, Staff Paper 2002)
47. Acacia Springs Environmental The Role of Constructed Wetlands to Improve Runoff Quality from Farms in the Ellen Brook Catchment, (Agriculture Western Australia, 2000).
48. Stoneham G, Chaudhri V. and Strappazzon L, n 40.
49. Banfield, n 29.
50. Stoneham G, Chaudhri V. and Strappazzon L, n 40.
51. Ecotec Research and Consulting, Study on the Economic and Environmental Implications of the Use of Environmental Taxes and Charges in the European Union and its Member States, Prepared for the OECD in association with CESAM, CLM, University of Gothenburg, UCD and IEEP, Brussels: (Ecotec 2001).
52. Vatn A, Krogh E, Gundersen F and Vedeld P, "Environmental taxes and politics - The dispute over nitrogen taxes in agriculture" (2002) 12 European Environment, pp 224-240.
53. See: OECD, Evaluating Economic Instruments for Environmental Policy, Paris, (OECD 1997)
54. Anderson MS, Economics Instruments and Clean Water: Why Institutions and Policy Design Matter, (OECD 2001).
55. Anderson, n 47.
56. Broad management changes that would be likely to reduce emissions from all farms should be chosen. Whether or not this is possible when farms are heterogeneous is uncertain.
57. Any BMPs, which were found to be not as effective as initially intended, could be removed from the schedule. It is important that farmers who have undertaken these actions in the current round of BMP incentive charges are not penalised.
58. Swan River Trust Swan-Canning Cleanup Program Action Plan: An Action Plan to clean up the Swan-Canning Rivers and Estuary, Swan River Trust, Waters and Rivers Commission, Western Australia, May (SRT 1999).
59. Stavins RN, "Lessons from the American experiment with market-based environmental policies" in Donahue JD and Nye JS (eds) Harnessing the Hurricane: the Challenge of Market-Based Governance (Brookings Institution Press, Forthcoming).