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Nutrient Trading, the Flush Tax, and Maryland's Nitrogen Emissions to the Chesapeake Bay

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  • Hanson, James C.
  • McConnell, Kenneth E.

Abstract

We investigate nutrient trading for point and non-point sources for the Bay Restoration Fund in Maryland. We demonstrate how to use the proceeds from the tax revenue to mimic trading high-cost upgrades of sewage treatment plants for low-cost winter cover crops. Under an optimistic assumption about costs for non-point sources, we calculate that abatement could be increased by more than 50%, while in a pessimistic scenario, abatement could be increased by 2%. We also explore the role of uncertainty in determining the appropriate trading ratio between point and non-point sources of pollution, showing that the higher uncertainty associated with non-point sources should induce a lower trading ratio.

Suggested Citation

  • Hanson, James C. & McConnell, Kenneth E., 2007. "Nutrient Trading, the Flush Tax, and Maryland's Nitrogen Emissions to the Chesapeake Bay," Working Papers 7343, University of Maryland, Department of Agricultural and Resource Economics.
    • Handle: RePEc:ags:umdrwp:7343
    DOI: 10.22004/ag.econ.7343
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    References listed on IDEAS

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    1. Arun S. Malik & David Letson & Stephen R. Crutchfield, 1993. "Point/Nonpoint Source Trading of Pollution Abatement: Choosing the Right Trading Ratio," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 75(4), pages 959-967.
    2. Richard D. Horan, 2001. "Differences in Social and Public Risk Perceptions and Conflicting Impacts on Point/Nonpoint Trading Ratios," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(4), pages 934-941.
    3. Shortle, James S., 1987. "Allocative Implications Of Comparisons Between The Marginal Costs Of Point And Nonpoint Source Pollution Abatement," Northeastern Journal of Agricultural and Resource Economics, Northeastern Agricultural and Resource Economics Association, vol. 16(1), pages 1-7, April.
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