Second‐Best Tax Policies to Reduce Nonpoint Source Pollution

Abstract

Control of nonpoint source pollution often requires regulation of inputs, but first-best solutions are unattainable. Because inputs are monitored by different agencies and regulatory coordination can be costly, it may be more practical to regulate single inputs. A cost-effectiveness approach to determining the best single-input tax policy is developed and applied to the question of reducing nitrate leaching from lettuce production in California. Water is the best single input to regulate, and efficiency losses from this second-best approach appear not to be great. Conditions for the welfare ranking of policies to be invariant to heterogeneity in production or leaching are identified. Copyright 1996, Oxford University Press.

Évaluation et régulation de l’effet de serre d’origine agricole

“…Cette dernière permet de minimiser le coût global de réduction de la pollution (Pigou, 1932;Tietenberg, 1990;Barde et Smith, 1997). Dans le cas où l'information fait défaut ou est trop onéreuse à obtenir pour l'instance régulatrice, on peut être amené à préférer des schémas indirects de second rang sous-optimaux, mais efficaces du point de vue du coût d'application (Larson et al, 1996).…”

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“…Since it generally isn't, an alternative is to impose existing quality requirements on the management problem. 9 In what follows it will be assumed that quality does not affect production. It will be shown that even in this case, the existence of a restriction on Ψ means that optimal policy must again consider stock effects on quantity and quality jointly.…”

“…The implementation of emissions taxes is even less attractive in the joint quantity/quality dynamic model because water has to be taxed anyway due to the scarcity problem. These two papers, as well as Larson et al [9], deal specifically with the issue of suboptimal input-based instruments, such as uniform taxes for different users or singleinput taxation. Additional inefficiencies of simpler schemes might appear in the dynamic case, since optimal tax levels require continuous adjustment to reflect changing scarcity and quality costs.…”

“…Xepapadeas [22] presents such incentives for the case of a dynamic pollutant accumulation model with imperfect monitoring. Given implementation difficulties, there is also some work in the literature evaluating suboptimal pollution control instruments (see Shortle and Dunn [20], Larson et al [9], Helfand and House [8], and Mapp et al [11]). This paper uses a dynamic resource management perspective to show how an optimal policy takes into account effects on water stock as well as on its quality.…”

“…However, this effect could be negative, at least for some range of w, if other roles of water were considered, namely its complementarity with polluting inputs in the production of y (for instance, in agriculture, water allows plants to absorb nitrogen and phosphorus more efficiently decreasing the presence of these elements in topsoil) and its own dilution effect (if all the contaminant load is already being carried down, the addition of extra water will improve the quality of the leachates that reach the aquifer). Examples of pollution production functions for nitrates in agriculture can be found in Vickner et al [21], Larson et al [9], and Helfand and House [8]. Following the contamination literature (see Yadav [24] for nitrates, Anderson et al [1] for pesticides), it is assumed that there is a constant natural decay rate for the pollutant, so that contamination would evolve according to:…”