"In the areas we studied in Bureau County with small wastewater
treatment plants (WWTPs), it was much cheaper to do pollution
control by installing just a few wetlands than it was to have the
WWTPs do the upgrades that would be necessary to achieve the same
thing," said U of I environmental economist Amy Ando.
Bureau County was selected for the simulation because it is an
area that has waterways with heavy nitrogen and phosphorus
pollution, and it is a rural area of the state, but with some
population density and a couple of wastewater treatment plants.
"In some ways, it's a poster child for an environment where a
program like this could work," Ando said. "There is enough farmland
to put in some wetlands, but there are also enough people
contributing to the WWTPs that are generating nutrients -- so there
are parties on both sides that could trade with each other."
The study analyzed the amount of land needed to reduce nitrogen
pollution, data on the costs of actual wetland restorations, and
other factors such as the opportunity costs to the landowner from no
longer farming the new wetland area.
"Wastewater treatment plants can already remove nitrogen, but
their current technology is only capable of removing them up to a
point," Ando said. "If they wanted to do more nitrogen removal, they
would have to make upgrades. The cost of phosphorus removal isn't
high, but for nitrogen, the upgrades are pretty expensive."
Ando also explained that, depending on how environmental permit
markets are set up, if an area is set aside as a wetland, the
landowner could qualify for several incentive programs through
pollution trading markets, even if the original purpose of the
wetland conversion was only to reduce nitrogen.
"This is a big issue in the design of markets for ecosystem
services," Ando said. "A wetland does a lot of things. It will
filter out nutrients, but it also creates habitat for waterfowl, and
it might sequester carbon. The cost of installing a wetland is large
enough that in some cases no single payment might be enough to
convince a farmer to do it, but if they get paid for the full value
to society of all three benefits, then they might be willing to do
"There's an almost violent debate among scholars and
environmental groups and people who are trying to get these markets
into place about whether farmers should be able to stack payments.
We were trying to be agnostic and just ask the question, What
effects would stacking have on market outcomes?" she said.
[to top of second column]
Ando said that, under some circumstances, if multiple payments
for the same action are not allowed, it can result in inefficiently
low levels of conservation activity on parcels of land that generate
nutrient removal and other benefits such as wildlife habitat.
However, some farmers may be willing to convert farmland to wetland
on the strength of just one payment.
"Ideally we want to pay farmers to create a wetland that they
would not have done anyway," Ando said. "But in some cases, they
might not need the extra incentive and would have been happy to do
it for the nitrogen payment alone. In our study area, we found that
allowing multiple payments may or may not make society as a whole
better off, depending on the details of the policy situation."
When questioned about the fairness of stacking credits, Ando
said: "Fair is a different question than efficient and from
cost-effectiveness overall. If multiple payments for a single
wetland don't increase the provision of ecosystem services relative
to single payments, then it's not cost-effective. Some of that money
could be used to pay a different landowner and get more services
overall. So there might be a trade-off between what seems fair and
just and what yields the greatest environmental benefit to society
for a fixed amount of money available for payments."
"Water Quality Trading with Lumpy Investments, Credit Stacking,
and Ancillary Benefits" was published in a recent issue of the
Journal of the American Water Resources Association. Additional
authors are Adam H. Lentz and Nicholas Brozović.
The research was funded in part by the U.S. Environmental
Protection Agency and the U.S. Department of Agriculture's National
Institute of Food and Agriculture.
[Text from file received from the
University of Illinois College of Agricultural, Consumer and