Multiple Environmental Externalities and Manure Management Policy
Key, Nigel D., Kaplan, Jonathan D., Journal of Agricultural and Resource Economics
This paper considers the economic and environmental implications of regulating water and air nitrogen emissions under single and multi-environmental media policies in the U.S. hog industry. We examine tradeoffs from policies designed to correct an externality in one medium, when there are multiple environmental externalities. We separately and jointly analyze: (a) nitrogen land application restrictions consistent with recently adopted EPA requirements under the Clean Water Act, and (b) hypothetical air quality restrictions under the Clean Air Act, both with and without EQIP payments available to mitigate the costs of complying with nutrient application regulations.
Key words: ammonia emission, livestock waste, mathematical programming, multiple externalities, nutrient management
One of the difficulties in addressing the environmental problems associated with livestock waste is that manure can pollute multiple media (air, water, and soil) along multiple dimensions. Air quality concerns related to manure include odorous gases (ammonia and hydrogen sulfide), particulate material (by-products of ammonia), and greenhouse gases (methane and nitrous oxide). Water pollutants from manure include nitrogen, phosphorus, antibiotics, and pathogens.1 The theory of the second best demonstrates that the correction of a single market distortion without simultaneously correcting other sources of market failure can lead to Pareto-inferior resource allocations (Lipsey and Lancaster, 1956). The theory implies that policies to address pollution in a single medium could worsen pollution in other media, resulting in lower societal welfare. This paper considers the economic and environmental implications of regulating both water and air nitrogen emissions under single-environmental medium and multi-environmental media policies in the U.S. hog industry. Particular attention is paid to tradeoffs which occur when policies are designed to correct an externality in one medium without considering externalities in other media.
The U.S. Environmental Protection Agency (USEPA) continues to revise regulations for concentrated animal feeding operations (CAFOs) under the Clean Water Act.2 These regulations require, among other things, that CAFOs which land-apply manure meet nutrient application standards defined by a Comprehensive Nutrient Management Plan (USEPA, 2003). To help defray the costs of meeting the new regulations, producers can apply for financial assistance from the U.S. Department of Agriculture's (USDA's) Environmental Quality Incentives Program (EQIP). Producers can receive up to $450,000 per farm during 2002-2007 to help them develop and implement a nutrient management plan, and to transfer and apply manure to land in an approved manner (Ribaudo, Cattaneo, and Agapoff, 2004).
Although livestock are the largest source of ammonia emissions in the United States [National Research Council (NRC), 2003], neither state nor federal governments currently regulate nitrogen air emissions from animal feeding operations. However, ammonia nitrogen emissions could be regulated under the PM2.5 particulate standard of the Clean Air Act. According to the National Research Council, "Ammonia is regulated as a precursor for PM2.5, which is a criteria pollutant. Hence it may be considered a regulated air pollutant" (p. 42). The EPA is currently developing Federal PM2.5 rules for animal feeding operations (USEPA, 2004, 2006).
Some past research has considered the effect of livestock production across multiple environmental media. Innes (2000) develops a spatial model of regional livestock production and three associated externalities: spills from animal waste storage facilities, nutrient runoff from excess application of manure to croplands, and ambient pollution. He models the regulation of waste storage lagoon "quality," the number of animals in the production facility, or the distances between facilities. …