Market Incentives to Reduce Nonpoint Source Agricultural Nutrient Pollution: A Theoretical and Implementational Discussion
Marc E. Norman
John D. Keenan
DOI: 10.2190/0APH-V62F-JEUA-GT6X
Abstract
This article provides a theoretical and implementational discussion of several potential market-based mechanisms to reduce nonpoint source agricultural nutrient pollution, including an excess nutrient tax; off-site animal waste disposal subsidy; animal waste transport subsidy; compost subsidy; and nutrient permit trading system. Market incentives have theoretical appeal in that, if set at the proper level, they compel polluters to reduce pollution generation to the socially efficient level automatically. However, each market-based mechanism has associated implementational factors which must be overcome. The implementation discussion highlights the basic information, monitoring, enforcement, and political requirements concerning each of the policies. In addition, market inefficiencies may reduce the practical effectiveness of market-based incentives. In cases where informational and other inefficiencies are high, alternative approaches (such as market surveys and nutrient management education) aimed at reducing those inefficiencies may be required.
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