Economic Analysis of Best Management Practices in a Pilot Cost-Sharing Water Quality Program

Simulated crop growth and nonpoint pollution yields under stochastic weather conditions generated farmers' expected net returns and the environmental effects of implementing 'Best Management Practices' (BMPs) under risky and uncertain conditions. Results from varying nitrogen fertilizer and irrigation management levels over a growing season show that, for production-optimal levels of nitrogen fertilization and irrigation without regard to pollution, nitrogen leaching is more serious, but soil loss and nitrogen runoff are lower, than for other scenarios tested. Voluntary implementation of BMPs to reduce levels of inputs and decrease water quality impacts would require substantial cost-sharing incentives. Farmers favour a cost-sharing program, with 87 percent willing to participate when government's costshare is at the 80 percent level. When tight budgets restrict implementation of stricter pollution targets, a 20 percent cost-sharing would induce 27 percent of the farmers surveyed to voluntarily select BMPs.