Nutrient Trading, the Flush Tax, and Maryland's Nitrogen Emissions to the Chesapeake Bay

Abstract

We investigate nutrient trading for point and non-point sources for the Bay Restoration Fund in Maryland. We demonstrate how to use the proceeds from the tax revenue to mimic trading high-cost upgrades of sewage treatment plants for low-cost winter cover crops. Under an optimistic assumption about costs for non-point sources, we calculate that abatement could be increased by more than 50%, while in a pessimistic scenario, abatement could be increased by 2%. We also explore the role of uncertainty in determining the appropriate trading ratio between point and non-point sources of pollution, showing that the higher uncertainty associated with non-point sources should induce a lower trading ratio.Chesapeake Bay, cover crops, nitrogen abatement, nutrient trading, sewage treatment plants, trading ratios, water pollution, Environmental Economics and Policy,