An Ex Post Evaluation of Ohio’s Great Miami Water Quality Trading Program1

Newburn, David A. and Richard T. Woodward, 2011. An Ex Post Evaluation of Ohio’s Great Miami Water Quality Trading Program. Journal of the American Water Resources Association (JAWRA) 48(1): 156‐169. DOI: 10.1111/j.1752‐1688.2011.00601.x Abstract: Market‐based approaches to address water quality problems have resulted in only limited success, especially in trading programs involving both point and nonpoint sources. We analyze one of the largest point‐nonpoint trading programs – the Great Miami Trading Program in Ohio, administered by the Miami Conservancy District (MCD). Our evaluation focuses on the economic and institutional aspects of the program, including cost effectiveness, efficiency of bidding, transaction costs, trading ratios, and innovation. We use a unique dataset consisting of all bids from agricultural nonpoint sources and interviews of soil and water conservation district (SWCD) agents in the watershed. We find that the MCD’s reliance on county‐level SWCD offices to recruit and advise farmers has been essential to achieve relatively high rates of farmer participation. Additionally, the MCD is able to partly free ride on the administrative costs that SWCD offices receive to assist federal conservation programs, which is helpful to lower costs for a fledgling trading program. However, the involvement of SWCD offices reduced the potential cost savings from the reverse auction structure because some agents were able to learn about the threshold price over the six rounds of bidding and help farmers bid strategically. Overall, the program structure serves as an effective model for future trading programs in other regions that seek to involve agricultural nonpoint sources.     

MUNICIPAL WATER USE AND WATER RATES DRIVEN BY SEVERE DROUGHT: A CASE STUDY1

ABSTRACT: This paper synthesizes and interprets data pertaining to the evolution of average water revenue, water use, and the average cost of water supply in the City of Santa Barbara, California, from 1986 to 1996, a period which included one of the most devastating droughts in California this century. The 1987–1992 drought hit the study area particularly hard. The City of Santa Barbara was dependent exclusively on local sources for its water supply. That made it vulnerable as the regional climate is prone to extreme variability and recurrent droughts. The 1986–1992 drought provided a rare opportunity to assess the sensitivity of municipal water use to pricing, conservation, and other water management measures under extreme drought conditions. Our analysis indicates that the average cost of water rose more than three-fold in real terms from 1986 to 1996, while the gap between the average cost of supply and the average revenue per unit of water (= 100 cubic feet) rose in real terms from $0.14 in 1986 to $ 0.75 in 1996. The rise of $3.08 in the average cost of supplying one unit of water between 1986 and 1996 measures the cost of hedging drought risk in the study area. Water use dropped 46 percent at the height of the drought relative to pro-drought water use, and remains at 61 percent of the pre-drought level. The data derived from the 1987–1992 California drought are unique and valuable insofar as shedding light on drought/water demand adaptive interactions. The experience garnered on drought management during that unique period points to the possibilities available for future water management in the Arid West where dwindling water supplies and burgeoning populations are facts that we must deal with.     

A New Modus Operandi for the Agricultural Economics Profession

Agricultural economics has, until the 1990s, enjoyeda reputation for relevance and usefulness to theagri-food industry and policy-makers. Thatreputation has been jeopardized by a growinginfatuation with models and quantification, and aconcomitant underemphasis placed on many complexproblems and issues of society. An illustrativeexample is explored, using agriculturalactivity-related damage to the natural resourcebase, environment and ecology. Agriculturaleconomists are urged to respond by broadening theirterms of reference and joining forces with otherdisciplines.     

ANALYZING THE IMPACT OF LAND USE ON SEWER SERVICE AREA PLANNING1

ABSTRACT: The density and distribution of land uses has important consequences for the planning of sewerage systems and for the costs of these systems. This paper examines these consequences using a simplified service area model. The model determines the area to be served by a central waste treatment plant, where alternative on-lot disposal systems are also available. The model is applied to various urban area configurations, which are summarized by their total populations and by their population density distributions. Both minimum regional cost and minimum local cost service area configurations are determined. In addition, the sensitivity of the model to the parameters of the cost and population density functions is assessed. It is found that the model is most sensitive to the parameters of the collection cost function.     

FARMERS' ATTITUDES TOWARD NONPOINT POLLUTION CONTROL AND PARTICIPATION IN COST-SHARE PROGRAMS1

The success of government programs to control nonpoint source pollution depends upon attitudes toward those programs and the availability of technical and financial assistance. Applicants for the Rural Clean Water Program cost-share funding in Virginia possess different personal and operational characteristics than do nonapplicants. Factors associated with participation in the Rural Clean Water Program differed from those associated with the more traditional soil conservation programs. Discriminant analysis was used to differentiate between other farmers who may become applicants and nonapplicants. Farmers' attitudes toward various policy options for inducing implementation of nonpoint source management practices varied greatly. Farmers were most favorable to cost sharing, low-interest loans and tax credits, and least favorable to a soil loss tax. They were either very favorably or very unfavorably inclined toward cross-compliance between pollution control and other agricultural programs.     

COST SHARING IN TRANSITION: THE CASE OF PLAN 6, CENTRAL ARIZONA PROJECT1

ABSTRACT: In the past, development of Federal water resource projects depended heavily or exclusively on Federal financing of construction costs. However, pressures on the Federal budget, environmental issues, and the notion that there are economic efficiency gains when beneficiaries of Federal water resource projects increase their cost share are causing changes. The case of the Central Arizona Project Plan 6 is a noteworthy example of the transition to more non-Federal participation in water resource development. This is because the non-Federal financing is to be provided for a project already under construction. The negotiation and terms of the Plan 6 financing agreement between the Department of the Interior and multiple interests in Arizona are used as an example of how Federal water project cost sharing is in a state of transition. The negotiation process is described, a financial analysis is provided, and the terms of the agreement and policy issues that were deliberated in the Executive Branch of the Federal Government are discussed.