An enviro-economic analysis of potential policy instruments targeting phosphorus nonpoint pollution

The state of Minnesota seeks to reduce phosphorus loading to the Minnesota River by 40% from levels estimated in the 1980's. I hypothesized potential policies for reducing pollution that targeted specific practices or regions would be no worse than policies requiring proportional reductions in every region.; Using the Le Sueur River watershed as an example, I analyzed the cost-effectiveness of nonpoint pollution reduction policies (pollution standard, phosphorus effluent tax, conventional tillage tax, and phosphorus fertilizer tax). With a biophysical process model (ADAPT), I simulated systems representative of those producers currently use. Current systems were corn-soybean rotations under various tillage and nutrient management practices. Also simulated were alternative systems for reducing phosphorus loading (using conservation tillage, reducing phosphorus input levels, and incorporating fertilizer applications). For each system, I linked phosphorus loss estimates with production costs, risk premiums, net returns, and location within the watershed to create a nonlinear, positive mathematical programming model. This enviro-economic model was used to analyze the policies mentioned above.; Under the pollution standard, targeted and nontargeted strategies reduced agricultural nonpoint phosphorus pollution by 40%. Nonetheless, the nontargeted strategy affected the watershed more adversely than the strategy targeting practices or regions. With targeting, annual net farm income for the watershed declined by {dollar}2.8 million (5% loss) from {dollar}53 million. Income declined by {dollar}11.4 million (21% loss) annually with a nontargeted strategy.; The phosphorus effluent tax had to rise to {dollar}162 per pound before estimated loading was reduced by 40% from base-year levels. At this tax rate, watershed farm income declined by {dollar}14 million (25% decline) and generated tax revenues of {dollar}11 million.; Neither a {dollar}35 per acre conventional tillage tax nor a 900% phosphorus fertilizer tax achieved a 40% reduction in phosphorus loading. All policies examined caused some land retirement.; These results indicated that strategically targeting particular regions or practices in a watershed to reduce agricultural nonpoint phosphorus pollution is more cost-effective than requiring all farmers and land to adapt. Cost-savings from targeting become evident when critical factors for mitigating nonpoint pollution are represented in an enviro-economic model.