10.2190/0APH-V62F-JEUA-GT6X 0APHV62FJEUAGT6X 3 Market Incentives to Reduce Nonpoint Source Agricultural Nutrient Pollution: A Theoretical and Implementational Discussion 151 167 20020509 20020509 20020509 20020509 0APHV62FJEUAGT6X.pdf http://baywood.metapress.com/link.asp?target=contribution&id=0APHV62FJEUAGT6X 2 Marc E. Norman John D. Keenan University of Pennsylvania, Philadelphia 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. U. S. Environmental Protection Agency, <i>National Water Quality Inventory: 1988 Report to Congress</i>, EPA 440-4-90-003, April 1990. U. S. Environmental Protection Agency, Office of Wetlands, Oceans, and Watersheds, <i>Evaluation of the Experimental Rural Clean Water Program</i>, EPA-841-R-93-005, May 1993. S. Coffey et al., <i>Elements of a Model Program for Nonpoint Source Pollution Control</i>, proceedings of National RCWP Symposium, pp. 361-374, 1992. C. Young et al., Nutrient Management on Dairy Farms in Southeastern Pennsylvania, <i>Journal of Soil and Water Conservation</i>, pp. 443-445, September-October 1985. R. C. Griffin and D. W. Bromley, Agricultural Runoff as a Nonpoint Externality: A Theoretical Development, <i>American Journal of Agricultural Economics</i>, pp. 547-552, August 1982. J. S. Shortle and J. W. Dunn, The Relative Efficiency of Agricultural Source Water Pollution Control Policies, <i>American Journal of Agricultural Economics</i>, pp. 669-677, August 1986. K. Segerson, Uncertainty and Incentives for Nonpoint Pollution Control, <i>Journal of Environmental Economics and Management, 15</i>, pp. 87-98, 1988. R. Cabe and J. A. Herriges, The Regulation of Non-Point-Source Pollution under Imperfect and Asymmetric Information, <i>Journal of Environmental Economics and Management, 22</i>, pp. 134-146, 1992. W. T. McSweeny and R. A. Kramer, The Integration of Farm Programs for Achieving Soil Conservation and Nonpoint Control Objectives, <i>Land Economics, 62</i>:2, pp. 159-173, May 1986. D. Southgate et al., A Case Study for Adoption of Less-Polluting Manure Handling Techniques, <i>North Central Journal of Agricultural Economics, 2</i>:2, pp. 125-130, July 1990. R. E. Just and J. M. Antle, Interactions between Agricultural and Environmental Policies: A Conceptual Framework, <i>American Economic Review, 80</i>:2, pp. 197-202, May 1990. W. Harrington et al., Policies for Nonpoint-Source Water Pollution Control, <i>Journal of Soil and Water Conservation, 40</i>:1, pp. 27-32, January-February 1985. B. Zander, Permit Trading—In the Wings, <i>EPA Journal</i>, pp. 47-49, November-December 1991. M. E. Norman, <i>Market Mechanisms to Abate Nonpoint Source Nutrient Water Pollution: An Analysis Using Complementarity Programming Techniques</i>, doctoral dissertation, University of Pennsylvania, Philadelphia, Pennsylvania, 1994.