An Economic Assessment of the Southern Atlantic Coastal Region’s Stormwater Management Practices

This study explores one of the least studied but most widely used instruments to control stormwater runoff — retention ponds. It is surprising that so little research within the economics literature has examined the efficacy of stormwater retention ponds. We address this gap in the literature by (1) offering a brief review of the existing literature; (2) discussing the nature of retention ponds as an impure public good; (3) extending a theoretical model to explain how stormwater runoff is currently managed; and (4) offering illustrative examples of governmental stormwater management practices in the coastal region of South Carolina. We posit that the current regulatory environment leads to a less than socially optimal level of management including a general lack of compliance enforcement and a misunderstanding of resource ownership. If sea levels continue to rise due to global climate change, then the mismanagement of stormwater runoff can lead to potentially severe adverse effects within coastal watersheds and estuarine ecosystems. We propose a combination of subsidy schemes and more-stringent enforcement actions to invoke a socially optimal provision of stormwater management services.