MECHANISM DESIGN FOR NUTRIENT TRADING UNDER ASYMMETRIC INFORMATION

The objective of this paper is to evaluate first- and second-best trading mechanisms for regulating point and nonpoint source phosphorus emissions. The trading mechanisms are differentiated on the degree to which regulators can observe abatement efforts. The deadweight losses attributable to informational asymmetries and those of the second-best mechanisms will provide regulators the shadow value of foregoing first-best measures.Environmental Economics and Policy,

Watershed Nutrient Trading Under Asymmetric Information

This study evaluates first- and second-best trading policies for regulating watershed phosphorus under asymmetric information. The trading policies are differentiated on the degree to which regulators observe point and nonpoint source abatement efforts. The efficiency losses attributable to these informational asymmetries and those of the second-best policies can be measured in social welfare, and provide regulators the shadow value of foregoing first-best measures. Given representative monitoring costs from national water monitoring programs, it is shown that under asymmetric information, the chosen second-best trading policies outperform first-best policies by 11% in the control of watershed nutrient pollution.Environmental Economics and Policy,

Participant Bidding Enhances Cost Effectiveness

A multitude of design decisions influence the performance of voluntary conservation programs. This Economic Brief is one of a set of five exploring the implications of decisions policymakers and program managers must make about who is eligible to receive payments, how much can be received, for what action, and the means by which applicants are selected. The particular issue examined here is the potential benefits of allowing farmers to "bid" for the activity they will undertake and the level of payment they would receive for it.Agricultural and Food Policy, Environmental Economics and Policy,

Conflicting Goals: Energy Security vs. GHG Reductions under the EISA Cellulosic Ethanol Mandate

Increasing energy security and lowering greenhouse gas (GHG) emissions have been prominent goals in recent energy and environmental policies. While these goals are often complementary, there may also be cases where they conflict. A case in point is the Energy Independence and Security Act of 2007 (EISA). The goals of EISA are to increase the United States' energy independence and security as well as to increase the production of clean renewable fuels. Title II of EISA establishes mandates for increasing the use of low carbon fuels to replace gasoline. While the Title II mandates will meet the energy security goal of EISA, the mandate for the use of at least 16 billion gallons of cellulosic ethanol by 2022 may conflict with efforts to reduce substantially the nation's GHG emissions over the next 20 years. The nation's production capacity for biomass is likely to be limited and the use of biomass to replace coal in generating electricity yields 2 to 3 times the GHG reduction associated with using cellulosic ethanol to displace gasoline. Thus, there is a trade-off between the energy security gains of the biofuels mandate under EISA and the more effective (in terms of GHG emission reductions) use of biomass in the electric utility sector. One means of evaluating this trade-off is to examine the factors that affect the costeffectiveness of diverting biomass from electricity production to cellulosic ethanol production. This paper identifies some of the key factors that affect the cost-effectiveness of the energy security and climate change goals of EISA. The cost-effectiveness of EISA will depend on (1) constraints on biomass production, that is, the extent to which the EISA mandate may crowd out the use of biomass to generate electricity; (2) the world oil price (and the cost of production of cellulosic ethanol); and (3) the social cost of carbon.energy security, cost-effective policy, cellulosic ethanol

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,

NEW CONSERVATION INITIATIVES IN THE 2002 FARM BILL

The role of agri-environmental programs has taken on increased importance in the current Farm Bill debate with an eighty percent increase in Title II funding. However, little empirical evidence exists on the tradeoffs between economic costs and environmental benefits of new agri-environmental programs to assist policymakers in their designs. This paper illustrates some of the budgetary and environmental issues inherent in these initiatives. Several policy options are explored using an environmental simulation model and an economic spatial-equilibrium model for U.S. agriculture. Results indicate abatement levels of nitrogen and pesticides are higher under performance-based policies and those for wind erosion and soil productivity are higher under practice-based policies. Abatement of phosphorus discharge, soil erosion and carbon sequestration remains relatively constant regardless of policy type. A national performance-based conservation policy funded at the $1 billion level has the potential to improve the environmental performance of U.S. farmers by as much as ten percent.Agricultural and Food Policy, Land Economics/Use,

On how environmental stringency influences BMP adoption

Replaced with revised version of paper 06/22/06.Farm Management,

UNION DENSITY EFFECTS IN THE SUPERMARKET INDUSTRY

Higher union density (the percentage of employees in an area who belong to unions) is known to raise the wages of union members. We find that in the supermarket industry, higher density locally also leads to higher wages for non-union members. Despite this, workers who are not in unions lose ground relative to union members. For a 10% increase in local union densities in the supermarket industry it is estimated that the wages of union employees in that labor market will increase by 5.3% and by 1.2% for nonunion. Hence, the union wage premium will increase in regions with higher union densities. At the time of the last national examination of the retail industry in 1977, union influence in the retail food industry was near its peak. Subsequently union membership and influence have declined. In 1993 a reported 25.7% of supermarket employees listed themselves as union members, a decline from 29.4% in 1984 (NBER, 1995). After conducting an extensive review of wage estimation literature, we focus on the structure of wages in the supermarket industry between 1984 and 1993. The effect of union penetration in local markets on nonunion wages or the "spill-over" effect, is an important focus of this study. While it is widely accepted that the higher the union percentage in local labor markets the higher the wages for those in the union, the corresponding effect has not been closely examined for the nonunion sector. To investigate this phenomenon we first replicate as closely as possible the results of a previous supermarket wage study (Belman and Voos, 1993). Following a baseline comparison of this initial estimation, we enlarge the data set to include individuals in rural areas and from additional years. By using a more sophisticated estimation technique we find that increasing union densities positively affect union and nonunion wages. The significant results for the nonunion sector is of particular importance, as this is the first confirmation of this effect to the best of our knowledge.Agribusiness, Labor and Human Capital, Marketing,

Greener Acres or Greener Waters? Potential U.S. Impacts of Agricultural Trade Liberalization

This paper examines the elimination of all agricultural policy distortions in all trading countries and agricultural production decisions in the United States, as well as subsequent environmental quality in the presence and absence of nondegradation environmental standards. The results suggest that trade liberalization has the potential to increase domestic production and boost agricultural returns by as much as 8.5 percent. Consumer surplus would likely fall, and the discharge of nutrients, sediment, and pesticides would likely increase. However, environmental policies can limit these adverse environmental impacts and mute the potential decrease in consumer surplus, while leaving increased returns to agricultural production.agriculture, trade reform, environment, nondegradation, Environmental Economics and Policy, International Relations/Trade,