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The Coordination and Design of Point-Nonpoint Trading Programs and Agri-Environmental Policies

Published online by Cambridge University Press:  15 September 2016

Richard D. Horan
Department of Agricultural Economics, Michigan State University
James S. Shortle
Department of Agricultural Economics and Rural Sociology, The Pennsylvania State University
David G. Abler
Department of Agricultural Economics and Rural Sociology, The Pennsylvania State University
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Agricultural agencies have long offered agri-environmental payments that are inadequate to achieve water quality goals, and many state water quality agencies are considering point-nonpoint trading to achieve the needed pollution reductions. This analysis considers both targeted and nontargeted agri-environmental payment schemes, along with a trading program which is not spatially targeted. The degree of improved performance among these policies is found to depend on whether the programs are coordinated or not, whether double-dipping (i.e., when farmers are paid twice—once by each program—to undertake particular pollution control actions) is allowed, and whether the agri-environmental payments are targeted. Under coordination, efficiency gains only occur with double-dipping, so that both programs jointly influence farmers’ marginal decisions. Without coordination, double-dipping may increase or decrease efficiency, depending on how the agri-environmental policy is targeted. Finally, double-dipping may not solely benefit farmers, but can result in a transfer of agricultural subsidies to point sources.

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Copyright © 2004 Northeastern Agricultural and Resource Economics Association 

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