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Title: Cost effectiveness of on- and off-field conservation practices designed to reduce nitrogen in downstream water

Author
item HANSEN, LEROY - Economic Research Serivce (ERS, USDA)
item Delgado, Jorge
item RIBAUDO, MARC - Economic Research Serivce (ERS, USDA)
item CRUMPTON, WILLIAM - Iowa State University

Submitted to: Journal of Environmental Economics and Management
Publication Type: Peer Reviewed Journal
Publication Acceptance Date: 11/23/2012
Publication Date: 11/16/2012
Citation: Hansen, L., Delgado, J.A., Ribaudo, M., Crumpton, W. 2012. Cost effectiveness of on- and off-field conservation practices designed to reduce nitrogen in downstream water. Journal of Environmental Economics and Management. 67:162A-166A.

Interpretive Summary: This analysis differs from earlier economic analyses of nitrogen conservation practices in its focus on spatial differences in the costs and effectiveness of each conservation practice. Past analyses have evaluated very large (20 percent or more) reductions in agricultural nitrogen losses. Those analyses used regional-average values of practice costs and effects. But regional averages do not account for important variations in economic and ecological factors that may be important determinants of cost-effectiveness. For example, our analysis found that, within Ohio, wetland costs range from $1,200 to over $1,700 per acre. Although our analysis is limited by the spatial overlap of our biophysical models, results are insightful and demonstrate the importance of considering the heterogeneity of economic and ecological factors. Perhaps the most important finding of this analysis is that one cannot assume a priori, that on-field conservation practices are more cost-effective at reducing nitrogen in downstream waters. At $0.11 per pound, our estimates suggest that on-field conservation practices are most cost-effective, but only for conservation practices targeted to lands in corn-corn rotations. The cost-effectiveness of expanding conservation practices to lands in corn-soybean production is $0.49 per pound. The cost-effectiveness of wetlands, at $0.37 per pound, is not out of the competitive range of on-field practices. And our more optimistic estimate of VFS cost-effectiveness, at $0.41 per pound, suggests that VFS might also be an option, though less-optimistic estimates suggest that the cost-effectiveness of VFS may exceed $3.50.

Technical Abstract: The objective of this analysis is to estimate and compare the cost-effectiveness of on- and off-field approaches to reducing nitrogen loadings. On-field practices include improving the timing, rate, and method of nitrogen application. Off-field practices include restoring wetlands and establishing vegetative filter strips (VFS). The models and methods used here are designed to generate spatially-reliable estimates across large geographic regions. Results indicate that one cannot conclude, a priori, that one conservation practice will be more cost-effective than others. The cost-effectiveness of on-field practices ranges from $0.11 to $0.49 per pound. The cost-effectiveness of well-placed wetlands ranges from $0.37 to $0.44 per pound. The cost-effectiveness of VFS is estimated to range from $0.41 to $4.25 per pound.