Cost and benefits of using best management practices to control non-point sources of pollution under environmental and economic uncertainty

The economy of northwest Arkansas, including the Lincoln Lake watershed (a sub-watershed of the Illinois River), relies greatly upon livestock and poultry production. The supply of production by-products is increasingly under scrutiny as one of the potential sources of water pollution in the region. In light of the recent economic crisis, methodologies that help producers to evaluate the environmental and economic impacts of several practices before implementing them may be a cost-effective means of increasing BMP adoption. This study uses stochastic dominance techniques to evaluate, environmentally and economically, ten best management practices (BMPs) combinations to lessen water pollution in the Lincoln Lake watershed. All BMP combinations analyzed were effective in reducing total phosphorous (TP) losses. However, six combinations also decreased net returns (NR) when compared to a baseline. This suggests that including BMPs in the bermudagrass production systems may lead to increased NR risk. Without additional incentives, producers will not likely implement these BMP combinations regardless of their TP reduction benefits. Although, as expected, rankings of BMP combinations in terms of TP or NR differed from each other, four scenarios established that environmental and economic goals are not necessarily conflicting; they may be complementary. Additionally, this analysis revealed that producers’ risk preferences did not matter when selecting among the top-four BMP combinations but it could be a factor for other less preferred scenarios.

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Conference Paper/ Presentation
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JEL Codes:
Q25; Q53
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 Record created 2017-04-01, last modified 2017-04-26

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