Multiple Environmental Externalities and Manure Management Policy

Livestock waste pollutes multiple environmental media along multiple dimensions. This study explores the economic and environmental implications of single-medium and coordinated multi-media policies for reducing manure-related externalities, with particular attention paid to tradeoffs that occur when policies designed to correct an externality in one medium ignore externalities in other media.Environmental Economics and Policy,

A Carrot-and-Stick Approach to Environmental Improvement: Marrying Agri-Environmental Payments and Water Quality Regulations

Agri-environmental programs, such as the Environmental Quality Incentives Program, provide payments to livestock and crop producers to generate broadly defined environmental benefits and to help them comply with federal water quality regulations, such as those that require manure nutrients generated on large animal feeding operations to be spread on cropland at no greater than agronomic rates. We couch these policy options in terms of agri-environmental "carrots" and regulatory "sticks," respectively. The U.S. agricultural sector is likely to respond to these policies in a variety of ways. Simulation analysis suggests that meeting nutrient standards would result in decreased levels of animal production, increased prices for livestock and poultry products, increased levels of crop production, and water quality improvements. However, estimated impacts are not homogeneous across regions. In regions with relatively less cropland per ton of manure produced, the impacts of these policies are more pronounced.Environmental Economics and Policy,

WHEN THE !%$? HITS THE LAND: IMPLICATIONS FOR US AGRICULTURE AND ENVIRONMENT WHEN LAND APPLICATION OF MANURE IS CONSTRAINED

Confined animal production in the U.S. and its associated discharge of manure nutrients into area waters is considered a leading contributor to current water quality impairments. A common option to mitigate these impairments is to limit land application of manure. This paper evaluates the implications of alternative land application constraints for U.S. agriculture and the environment at the regional and sector level. The results suggest that when these constraints are particularly binding, due to minimal acceptance of manure as a substitute for commercial fertilizer, potentially large and unanticipated changes in returns to agricultural production and water quality may occur. Furthermore, we find that some of the cost of meeting the land application constraints will be passed on to consumers through higher prices and to a portion of rural economies through lower production rates and labor expenditures.Environmental Economics and Policy, Livestock Production/Industries,

(NON)COMPLIANCE WITH AGRICULTURAL CONSERVATION PROGRAMS: THEORY AND EVIDENCE

This paper introduces enforcement costs and farmer noncompliance into the economic analysis of the USDA conservation program on highly erodible lands. A model of heterogeneous producers is developed to determine the economic causes of farmer noncompliance with the provisions of the conservation program. In addition, the paper determines the enforcement policy design that can induce conservation compliance and examines the effectiveness of the current enforcement policy in deterring producer noncompliance. The implications of the theoretical model are tested empirically with data provided by USDA. The analysis shows that farmer compliance with the provisions of the conservation program is not necessarily the natural outcome of self-interest and complete deterrence of noncompliance is not feasible with the current enforcement policy of the government. Both theoretical and empirical results indicate that the use of farm program payments as a leverage against noncompliance is not sufficient for inducing full producer compliance. Unless the government alters its policy on fines for fraudulent behavior, enforcement of conservation compliance will remain imperfect and some degree of noncompliance with the provisions of the program on highly erodible lands will continue to persist.Land Economics/Use,

Valuing Options in Water Markets: A Laboratory Investigation

Risk and reliability dominate water supply discussions in the arid western United States in light of increasing demand and finite, weather-dependant supply. Thus water agencies increasingly turn to contractual mechanisms such as dry-year options to manage supply risk in advance of need. Although a few water agencies across the West have implemented dry-year options, sufficient data for conventional econometric analysis do not yet exist. We thus utilize experimental economics to analyze the effect of annual dry-year options on water markets. We consider how market structure (competitive versus monopsony power) and option contract availability affect water price and allocation within a market and find that realized gains from trade are on average higher when options can be traded, by 46% in competitive markets and by 63% in dominant buyer markets. Important for the political feasibility of such markets, we also find that gains from trade, once an options market is available, are much more evenly distributed between the single buyer and the many sellers in the case of monopsony.Resource /Energy Economics and Policy, D23, L22, Q25,

Valuing Options in California Water Markets: A Laboratory Investigation

Risk and reliability dominate water supply discussions in the arid western United States. In the past, water managers built additional storage to mitigate supply risk. The optimal, least expensive storage sites have now been taken, and there are strong, environmental objections to new facilities. Reliability of existing supplies is further diminished due to concerns about endangered species and global climate change. Thus water agencies increasingly turn to contractual mechanisms such as dry-year options to manage supply risk in advance of need. However, although a few water agencies across the West have implemented dry-year options, sufficient data for conventional econometric analysis do not yet exist. We thus utilize experimental economics to analyze the effect of annual dry-year options on water markets. How do market structure (competitive versus market power) and option contract availability affect water price and allocation within a market? Experiment participants trade stochastic realizations of water in a non-uniform double auction parameterized to resemble the California water market. We find that realized gains from trade are on average higher when options can be traded, by 11% in competitive markets and by 21% in dominant buyer markets. Findings in this analysis may assist policymakers in preparing for the next multi-year drought in California.Resource /Energy Economics and Policy,

MANAGING MANURE TO IMPROVE AIR AND WATER QUALITY

Animal waste from confined animal feeding operations is a potential source of air and water quality degradation from evaporation of gases, runoff to surface water, and leaching to ground water. This report assesses the potential economic and environmental tradeoffs between water quality policies and air quality policies that require the animal agriculture sector to take potentially costly measures to abate pollution. A farm-level analysis of hog farms estimates the economic and environmental tradeoffs that occur when policies are designed to address pollutant flows to one environmental medium without considering flows to another medium. A national analysis addresses the broader impacts of coordinated (water and air) policies, including long-term structural adjustments and welfare impacts on both producers and consumers. The report also analyzes the potential implications of adding air quality regulations to existing Clean Water Act regulations in the Chesapeake Bay watershed, where a limited land base increases producers' costs of meeting manure management requirements.animal waste, nitrogen, ammonia, water quality, nutrient management plan, manure management costs, price and quantity adjustments, CAFO, Environmental Economics and Policy, Livestock Production/Industries,

An information-theoretical analysis of budget-constrained nonpoint source pollution control

This paper analyses budget-constrained, nonpoint source (NPS) pollution control with costly information acquisition and learning. To overcome the inherent ill-posed statistical problem in NPS pollution data the sequential entropy filter is applied to the sediment load management program for Redwood Creek, which flows through Redwood National Park in northwestern California. We simulate the dynamic budget-constrained management model with informationacquisition and learning, and compare the results with those from the current policy. The analysis shows that the manager can reallocate resources from treatment effort to information acquisition, which in turn increases overall treatment effectiveness, and reduces sediment-related damage

MANURE MANAGEMENT FOR WATER QUALITY COSTS TO ANIMAL FEEDING OPERATIONS OF APPLYING MANURE NUTRIENTS TO LAND

Nutrients from livestock and poultry manure are key sources of water pollution. Ever-growing numbers of animals per farm and per acre have increased the risk of water pollution. New Clean Water Act regulations compel the largest confined animal producers to meet nutrient application standards when applying manure to the land, and USDA encourages all animal feeding operations to do the same. The additional costs for managing manure (such as hauling manure off the farm) have implications for feedgrain producers and consumers as well. This report's farm-level analysis examines on-farm technical choice and producer costs across major U.S. production areas for hauling manure to the minimum amount of land needed to assimilate manure nutrients. A regional analysis then focuses on off-farm competition for land to spread surplus manure, using the Chesapeake Bay region as a case study. Finally, a sectorwide analysis addresses potential long-term structural adjustments at the national level and ultimate costs to consumers and producers.manure management costs, price and quantity adjustments, water quality, animal waste, manure nutrients, excess nutrients, confined animals, CAFO, manure nitrogen, manure phosphorus, manure use, assimilative capacity, nutrient management plan, Environmental Economics and Policy, Livestock Production/Industries,