Three essays on water quality policy and valuation

Oh, Seojeong

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https://hdl.handle.net/2142/121441 Copy

Description

Title

Three essays on water quality policy and valuation

Author(s)

Oh, Seojeong

Issue Date

2023-07-05

Director of Research (if dissertation) or Advisor (if thesis)

Gramig, Benjamin M.

Doctoral Committee Chair(s)

Gramig, Benjamin M.

Committee Member(s)

• Ando, Amy W.
• Atallah, Shadi
• Ellison, Brenna

Department of Study

Agr & Consumer Economics

Discipline

Agricultural & Applied Econ

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

Ph.D.

Degree Level

Dissertation

Keyword(s)

• water quality
• nutrient pollution
• water quality trading
• polluter pays principle
• pay the polluter
• choice experiment
• willingness to pay
• US Corn Belt
• Gulf of Mexico

Abstract

Nutrient pollution is one of the most significant environmental challenges worldwide, with agriculture often the primary driver of this problem. In the US Corn Belt, excess nutrients discharged from crop fields impair water quality and associated ecosystem services at local water bodies while inducing the hypoxic dead zone in the Gulf of Mexico far downstream. These result in considerable welfare losses locally and nationally, leading to calls for more effective nutrient reduction policies. Research and policy efforts to date have shown that addressing agricultural nutrient pollution is challenging. One of the critical reasons is that conventional pollution control instruments, such as standards, emissions trading, or taxes, are often not readily available to implement. For example, diffuse and stochastic features of agricultural nutrient emissions make it hugely costly to identify who emits how much and predict the impacts of farm management decisions on water quality, which form the basis of control policy instruments. Moreover, the fact that regulators are unwilling to restrict farm activities compounds the challenge by limiting the scope of policy choices and the design for optimal policy. Regulators have relied on cost-sharing and other voluntary approaches to address agricultural pollution, but continued poor water quality and limited tax resources raise doubts about achieving water quality goals through the status quo policy set. Therefore, it is essential to investigate whether existing policies are sufficient to advance water quality, what forms alternative approaches can take, and how much benefit these nutrient reduction policies would create for society. In this dissertation, I address these questions in the context of the US Corn Belt. The first chapter examines the potential outcomes of water quality trading where a sewage treatment plant can purchase phosphorus (P) abatement credits from farmers to satisfy a pending P effluent limit. Given that proper trading ratios are critical to water quality trading, this study implements trading ratios as the ratios of marginal social damage from each pollution source. To estimate sources’ marginal damage, I utilize the benefit estimates of water quality improvement obtained from the choice experiment in Chapter 3. In addition, the study investigates alternative P trading schemes to address sediment deposition and P pollution at a local lake, predominantly resulting from farmers. I integrate detailed hydrological knowledge and the watershed’s characteristics to develop these alternative markets. The results show that introducing P markets can induce significant reductions in P and sediment from agricultural sources, with the outcomes enhanced in alternative markets developed. Moreover, these trading markets can lead to significant cost savings for the point source, with an estimated amount of about 1.6 to 2.0 million dollars for meeting the new P limit. The second chapter explores alternative regulatory paradigms to reduce nutrients from the perspective of the general public's preferences. US agencies have long used the pay-the-polluter (PTP) approach in which the government pays agricultural polluters to adopt conservation practices on a voluntary basis to address nutrient pollution. However, limited fiscal resources and continued poor water quality has led to calls for a new paradigm, the polluter-pays-principle (PPP), in which agricultural polluters must clean up their nutrient emissions. Whereas PTP relies on public cost-sharing with farmers, PPP can induce food price increases that result from farm regulation. Little is known about the general public’s preferences with respect to these paradigms. This paper addresses this gap using data from a randomized survey conducted in three Midwestern US states that have significant agricultural nutrient pollution—Illinois, Iowa, and Indiana. I find that, overall, people favor the PPP approach over the PTP approach. Comparing PPP with varying stringency and PTP, multinomial logit regression results suggest that respondents are more likely to support PPP than PTP when given the choice of the most stringent PPP type. Examining specific PPP features, I find that assigning clean-up responsibilities to sources equal to their pollution level positively impacts support for PPP, while combining pollution trading with farm regulation has a negative impact. In addition to the perception that PPP is fairer than PTP, PPP approval is associated with the belief that the PPP approach could make desirable changes to the level of government involvement in agriculture, food safety/quality, and nutrient reduction effectiveness. The last chapter develops a choice experiment to estimate the benefits of nutrient reductions in the US Corn Belt to mitigate the hypoxic dead zone in the Gulf of Mexico. The study area covers the three largest contributing states, Illinois, Indiana, and Iowa, whose nutrient reductions are vital to achieving Gulf hypoxia targets. I find that the public places large values on various ecosystem services, including aquatic biodiversity, aesthetics of increased farm landscape diversity associated with conservation practices, and water-based recreational activities. Moreover, the results indicate that upstream residents have a strong preference for water quality far downstream in the Gulf of Mexico as characterized by reducing the size of the dead zone. The analysis of observed taste heterogeneity indicates that public preferences vary depending on familiarity with nutrient pollution issues, users versus non-users of ecosystem services, and different age groups. The findings inform policies to improve water quality in the Gulf of Mexico and local water bodies in the US Corn Belt.

Graduation Semester

2023-08

Type of Resource

Thesis

Copyright and License Information

Copyright 2023 Seojeong Oh

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