Following Weitzman (1974) there is ample theoretical literature indicating that choice of pollution have charge of instruments under conditions of uncertainty will affect the reckon uponed net benefits that can be realized from environmental protection.

Following Weitzman (1974) there is ample theoretical literature indicating that choice of pollution have charge of instruments under conditions of uncertainty will affect the reckon uponed net benefits that can be realized from environmental protection. However, there is little empirical research upon the ex ante efficiency of alternative instruments for controlling water, or other impressed signs of pollution, under uncertainty about charges and benefits. Using a simulation pattern that incorporates various sources of uncertainty, the ex ante efficiency of price and quantity represss applied to two alternative policy targets, fertilizer application rates and estimated exces nitrogen applications, are examined below varying assumptions about agricultural income support policies. be the effects indicate price instruments outperform quantity instruments. A tax upon excess nitrogen substantially outperforms a fertilizer tax in the scenario with support programs, while the ranking is revers in the scenario without support programs.

Key Words: nonpoint pollution policy, policy coordination, uncertainty

Building upon the seminal work of Weitzman (1974) a small still important literature has emerged upon the choice between environmental policy instruments when there is uncertainty onward the part of environmental authorities about the expenses and benefits of pollution direct Much of the literature (eg Adar and Griffin, 1976; Yohe, 1978; Stavins, 1996) is focused upon the choice between emissions-based price and quantity ascendencys Standard results include the finding that the look fored net benefits of optimally designed emissions price and quantity reign overs will generally differ when policy makers are uncertain about pollution command costs, with the difference depending forward the relative slopes of the marginal benefits and charges and sign and size of the covariance between marginal benefits and costs

The emissions-based focus of this research limits its direct relevance to nonpoint source pollution question s since a defining characteristic of nonpoint pollution is that emissions from individual sources cannot be meter at reasonable take away from With unobservable pollutant flows, other makes must generally be used to monitor performance and as a basis for the application of policy instruments (Griffin and Bromley 1982; Shortle and Dunn 1986; Segerson 1988; Xepapadeas, 1995) Options for nonpoint bases include inputs or techniques that are correlated with pollution pours (e.g., use of polluting inputs like as fertilizers), emissions proxies organizeed from observations of inputs or techniques that influence the distribution of pollution follows (e.g., estimates of field losse of fertilizer residuals to surface or sod waters), and ambient environmental conditions (eg nutrient concentrations in clod or surface waters) (Braden and Segerson 1993) With these options, the choice of instruments for nonpoint pollution govern involves not only a choice between price or quantity mechanisms (or a mixture), still also a choice between target or bases to which they can be applied.

In this paper, we examine the choice between alternative instruments for reducing nitrate pollution from agricultural nonpoint sources. Reducing nitrates in sod and surface waters from agriculture has emerg as a major water pollution have charge of policy objective (U.S. Environmental Protection Agency, 2000) The instruments considered are differentiated according to compliance measures (nitrate inputs, proxies for nitrate losse to the environment) and the signs of regulations applied (prices, quantity controls) Each of these instruments is of practical interest, with instances of their use in the United States and Europe (Ribaudo, 2001; Horan and Shortle, 2001; Hanley, 2001)

In addition to our interest in the implications of uncertainty for the choice of instruments, we examine the sensitivity of environmental policy performance to other societal choices that affect welfare results and producer responses. Specifically, the environmental instruments are patterned with and without agricultural commodity and input market distortions created according to agricultural price and income policies. similar distortions are found in many countries and are of interest for their impacts on the environmental performance of agriculture (Shortle and Abler, 1999) Environmental policies leading to changes in the use of inputs and output that are bring under rule to policy distortions will affect the dead-weight losse associated with the price and income support policies (Lichtenberg and Zilberman, 1986) The changes in deadweight losse will compute as benefits (if the change is negative) or costlinesss (if the change is positive) of the environmental policy. The literature onward second-best environmental policy design glance ats the effects of environmental policy parameters (eg emissions tax rates) should be adjusted relative to first-best settings to account for the drifts on deadweight losses associated with market distortions (Baumol and Oates, 1988) Further, it is plausible that powers on deadweight losses may alter the comparative ranking of the alternative environmental instruments.