Transactions costs of expanding nutrient trading to agricultural working lands: A Virginia case study

Abstract

Agricultural nonpoint sources (NPS) figure prominently in the design of many water quality trading programs. In concept water quality trading programs can create incentives for agricultural operators to supply low cost pollutant reductions while still keeping land in agricultural production. In practice water quality trading programs in the United States have produced few trades involving agricultural NPS. Transactions costs are a critical, but poorly understood, feature of water quality trading programs. The objective of this study is to examine the transactions costs associated with expanding the use of NPS credits in a water quality trading program in Virginia (United States) to include credits generated from agricultural working lands best management practices (BMPs). Findings indicate that transactions costs for agricultural NPS trades in Virginia are currently relatively low, due to the activity being credited: simple land conversion. Based on best available evidence, transactions costs of creating credits using management and structural BMPs will be 2 to 16 times more costly on a per project basis than for land conversion credits. Compliance monitoring protocols are a significant driver of costs for

Salinity Management in the Murray‐Darling Basin: A Transaction Cost Study

“…AIC tests suggest support for inclusion of a time trend. Based on the above findings, we select the specification including a time trend as indicative of the existence of a single cointegrating vector and estimate these in long-run and short-run (ECM) form using the DOLS method of Stock and Watson (1993). 10.1029/2018WR022912…”

“…Although the focus of this study was on salinity management programs, the raw data contained figures on related TCs including cultural flow assessments, erosion and flora monitoring, and safety reviews. A 2015 data cutoff aligns well with recent transitions from the original Salinity and Drainage Strategy (1988)(1989)(1990)(1991)(1992)(1993)(1994)(1995)(1996)(1997)(1998)(1999)(2000) and Basin Salinity Management Strategy (2001)(2002)(2003)(2004)(2005)(2006)(2007)(2008)(2009)(2010)(2011)(2012)(2013)(2014)(2015) and neatly predates the most recent Basin Salinity Management 2030 arrangements (2016-2030MDBMC, 2015).…”

Exploring Nontraditional Participation as an Approach to Make Water Quality Trading Markets More Effective

“…Modifying existing WQT programs may reduce startup transaction costs because nutrient credits already are defined and trading rules have been established (Alston et al. ; DeBoe and Stephenson ). However, disseminating information about the market or what a credit means, coordinating among new participants, and developing monitoring and enforcement strategies for nontraditional participants must be addressed — meaning additional transaction costs.…”

Where Did the Agricultural Nonpoint Source Trades Go? Lessons from Virginia Water Quality Trading Programs

“…Third, the costs of certifying and verifying the implementation of a nonpoint source control practice adds to credit production costs. The transaction costs to quantify nonpoint source load changes, certify these changes as credits, and then monitor credit generating practices, can represent a substantial portion of the costs to supply agricultural nonpoint source credits (Deboe and Stephenson, ; Motallebi et al ., ). Finally, some speculate that agricultural producers may be leery about entering into contracts with regulated sources.…”