Economic Issues in Nutrient Pollution Control
Open Access
- Author:
- Cook, Aaron Matthew
- Graduate Program:
- Agricultural, Environmental and Regional Economics
- Degree:
- Doctor of Philosophy
- Document Type:
- Dissertation
- Date of Defense:
- October 01, 2018
- Committee Members:
- James Samuel Shortle, Dissertation Advisor/Co-Advisor
James Samuel Shortle, Committee Chair/Co-Chair
Douglas Harvey Wrenn II, Committee Member
Karen Ann Fisher-Vanden, Committee Member
Mort D Webster, Outside Member - Keywords:
- nutrient pollution
Chesapeake Bay
dynamic control
water quality trading
lag times
multiple pollutants - Abstract:
- Nutrient pollution represents one of the most signicant threats to water quality in the United States and worldwide due to its physical complexity and the magnitude of its attendant environmental costs. Nutrient pollution problems involve elements of hydrology, biology, and engineering that complicate the economic analysis of optimal management and the design of efficient policy. These elements include 1) the persistent nature nutrient pollution, 2) the capital intensity of nutrient abatement processes, 3) lags times between nutrient discharge and delivery, and 4) the need to manage multiple pollutants jointly. Each essay in this dissertation treats some combination of these four elements. The first essay examines the combined implications of elements 1, 2, and 3, developing a model to capture these aspects of the nutrient pollution problem and solving for the optimal time path of nutrient reductions across two polluting sectors---wastewater and agriculture. The model is calibrated to conditions in the Chesapeake Bay watershed and the optimal solution is compared to the reductions specified by the Chesapeake Bay's current Total Maximum Daily Load (TMDL) policy. The optimal plan calls for much more aggressive nutrient reductions in early periods relative to the TMDL, and the TMDL's total social cost exceeds the least-cost dynamic solution by 5-9% (depending on the lag length in the agricultural sector). An alternative policy---a time-invariant plan that jumps immediately to and maintains the optimal steady state loads for all time---exceeds the cost of the dynamically optimal plan by only 0.05%, suggesting the gains to a time-varying policy to be small despite the inherently dynamic character of the problem. The second essay examines the implications of lag times for the design of markets for nutrient reductions. I characterize the first-best solution to the problem of managing discharges among sources with varying lag lengths, noting that optimality requires separate "regimes" of control corresponding to sets of sources that delivery their pollution at the same time. While this first-best solution would be prohibitively complex with either a forward market or a trading ratio system, the essay proposes a second-best trade ratio system that incorporates an adjustment to the trading rules based on the lag length disparity between the sources involved in the trade. This second-best system will implement the optimal steady state loads in the long run, representing a practical approach to governing trades between the point and nonpoint sectors given differences in lag lengths. The third essay examines the implications of complementarity in the costs of nitrogen and phosphorus removal at wastewater treatment facilities for the timing of policy implementation. When policies for two or more interdependent pollutants are implemented sequentially, potential cost savings may be overlooked. I develop a conceptual framework for evaluating the efficiency loss associated with managing two pollutants through a sequential policy. Analysis shows that the sequential policy is inecient only for a subset of possible joint discharge targets (even when cost interdependencies exist). This framework is useful not only for evaluating and designing markets for nutrient reductions where municipal wastewater dischargers feature prominently, but also for other areas of environmental policy such as land conservation, habitat protection, and carbon sequestration where multiple environmental goods are produced jointly. Overall, the essays represent three novel approaches for modeling several complex elements of the nutrient pollution problem. The findings therein offer conceptual guidance for the design of policies to help control it.