10.2190/8130-17X0-88G8-2041 813017X088G82041 1 Regulating Nutrient Discharge from Poultry Litter into Surface Waters: Total Maximum Daily Load Rules and Economic Incentives 273 287 20070221 20070221 20070221 20070221 813017X088G82041.pdf http://baywood.metapress.com/link.asp?target=contribution&id=813017X088G82041 4 Keith Willett David M. Mitchell Oklahoma State University, Stillwater Missouri State University, Springfield The first 25 years of the Water Quality Act was characterized by major emphasis on regulating point sources with technology-based standards, but today many water quality problems still remain. The recent renewal of emphasis on water quality has been articulated in the form of proposed total maximum daily load (TMDL) rules. A TMDL identifies the amount of a pollutant that is allowed in a water body, allocates allowable pollutant loadings among sources, and provides a foundation for achieving water quality levels. The most important characteristic of TMDL rules is the impact on nonpoint source pollution. Poultry production has become an important component of the economic base in many watersheds, and the growing concern with the need to dispose of poultry litter that is loaded with nutrients has intensified the discussions surrounding the development of TMDL rules. Once a TMDL rule for nutrients such as phosphorus has been promulgated, it can be implemented by using an "optimal tax," which is levied on poultry litter that is applied to crops and pastures. But to do so is viewed as problematic. This can be done using a "standards and charges" approach, which involves two steps. First, standards or targets for phosphorus in the watershed are set on the basis of the TMDL rule. Second, a set of taxes (charges) is designed and put into place to achieve the stated target for phosphorus. This article explores the application of a standards and charges policy framework for a TMDL rule regulating phosphorus from poultry litter in surface water under stochastic conditions using simulation and mathematical programming techniques. That is, a protocol is established that uses simulation and mathematical programming techniques to compute the tax for a standards and charges framework for implementing a TMDL rule for phosphorus from poultry litter in a stochastic environment. This protocol allows the tax rate to be determined on the basis of information on crop demands for nutrients as well as the amount of nutrients contained in the poultry litter. The tax rate determined from this protocol also reflects the stochastic nature of the fate and transport of the nutrients as well as an appropriately defined margin of safety. As shown, the Kuhn-Tucker conditions are used as the basis to develop the appropriate taxes. R. Govindasamy, M. J. Cochran, and E. 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