Academic journal article Journal of Agricultural and Resource Economics

Willingness to Pay for Water Quality Improvements: The Case of Precision Application Technology

Academic journal article Journal of Agricultural and Resource Economics

Willingness to Pay for Water Quality Improvements: The Case of Precision Application Technology

Article excerpt

A contingent valuation survey conducted in Mississippi is used to assess public willingness to pay for reductions in agricultural nonpoint pollution. The analysis focuses on implementation of a policy to provide farmers with precision application equipment to reduce nutrient runoff. Findings suggest public support exists for such policies. This study also finds that inclusion of debriefing questions can be used to refine willingness-to-pay estimates in contingent valuation studies. A nonparametric scope test suggests respondents are sensitive to level of runoff reduction and associated water-quality benefits.

Key words: contingent valuation, econometrics, site-specific management, variable-- rate technology

Introduction

In recent years, public concern about potential environmental damages has spurred development of environmentally friendly agricultural practices and technologies. New water quality rules in the form of total maximum daily load (TMDL) standards for water-- sheds will intensify regulatory attention on agricultural practices. Thus, new practices and technologies aimed at reducing agricultural nonpoint pollution will be needed for producers to meet water quality standards. One technology that holds promise for reducing runoff is variable-rate technology (VRT), which precisely matches nutrient and chemical application to local crop needs.

A contingent valuation (CV) survey was conducted in Mississippi to measure public willingness to subsidize the adoption of VRT to mitigate agricultural pollution. A survey of the public in Mississippi is of particular interest because the state is critically located within the lower Mississippi River Basin, and has a high percentage of rivers and streams on the U.S. Environmental Protection Agency's (USEPA's) 301(D) list of impaired waterways (USEPA 1998).

Additionally, in 1999, the National Oceanic and Atmospheric Administration (NOAA) issued a set of reports on the hypoxic, or "dead," zones in the Gulf of Mexico to the White House Committee on Environment and Natural Resources. The NOAA reports link the size of the dead zone to influx of nutrients, primarily originating from agricultural runoff.2 Based on a cost-benefit analysis, Doering et al. suggest that among the most economically efficient means of controlling hypoxia would be to restore wetlands and riparian zones in a number of geographic areas, with the Delta region of Mississippi being heavily targeted. Even though the state's net outflows of nitrogen into the basin are lower than those of Corn Belt states, Mississippi may contribute more to hypoxia because of its proximity to the Gulf of Mexico.

A contingent valuation study in Mississippi is also of interest because Mississippi shares a number of attributes with other states in the Midsouth. In particular, its economy is dominated by agriculture, and it is among the poorest states in the United States. Further, issues associated with TMDLs have received significant publicity in recent years, and there is public concern about the impact of environmental regulations on the state's economy.

This contingent valuation study was designed to measure Mississippi taxpayers' willingness to pay (WTP) for a subsidy to producers that provides public benefits.3 Citizens who believe adoption of variable-rate technology would reduce agricultural pollution of fresh water, and who value environmental quality in the form of clean water, should be willing to pay for a program to subsidize adoption of the technology. Public perceptions of agriculturally related nonpoint pollution are assessed, and public willingness to pay for a program to adopt precision application technology to improve water quality is estimated in this analysis.

Importance of Reducing Nonpoint Water Pollution

Since implementation of the 1972 Clean Water Act, point source pollution has been significantly reduced, but nonpoint pollution remains a problem, particularly runoff of chemicals and nutrients into bodies of water. …

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