Article

Water quality trading opportunities in two sub-watersheds in the northern Lake Okeechobee watershed

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Abstract

For decades, the increase of nutrient enrichment has threatened the ecological integrity and economic sustainability of many rivers, lakes, and coastal waters, including Lake Okeechobee, the second largest freshwater lake in the contiguous United States. Water quality trading programs have been an area of active development to both, reduce nutrient pollution and minimize abatement costs. The objective of this study was to apply a comprehensive modeling framework, integrating a hydrologic-water quality model with an economic model, to assess and compare the cost-effectiveness of a water quality trading program over a command-and-control approach in order to reduce phosphorus loadings to Lake Okeechobee. The Upper Kissimmee (UK) and Taylor Creek/Nubbin Slough (TCNS) sub-watersheds, identified as major sources of total phosphorus (TP) loadings to the lake, were selected for this analysis. The effect of different caps on the market potential was assessed while considering four factors: the least-cost abatement solutions, credit prices, potential cost savings, and credit supply and demand. Hypothetical trading scenarios were also developed, using the optimal caps selected for the two sub-watersheds. In both sub-watersheds, a phosphorus credit trading program was less expensive than the conventional command-and-control approach. While attaining cost-effectiveness, keeping optimal credit prices, and fostering market competition, phosphorus reduction targets of 46% and 32% were selected as the most appropriate caps in the UK and TCNS sub-watersheds, respectively. Wastewater treatment facilities and urban areas in the UK, and concentrated animal feeding operations in the TCNS sub-watershed were identified as potential credit buyers, whereas improved pastures were identified as the major credit sellers in both sub-watersheds. The estimated net cost savings resulting from implementing a phosphorus trading program in the UK and TCNS sub-watersheds were 76% ($ 34.9 million per year) and 45% ($ 3.2 million per year), respectively. It is important to note that the realization of the environmental and economic benefits of this market-based alternative is also contingent on other important factors, such as the market structure, the specific program rules, the risk perception, and the education and outreach to develop trusted relationships among regulatory agencies, the public sector, and other stakeholders. Nevertheless, this research provided the foundation for stakeholders to better understand whether water quality trading has the potential to work in the Lake Okeechobee watershed and to facilitate the development of a pilot program.

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... WAM has been already used to model the NLO basins in phosphorus budget analysis studies [26,40,41]. These existing model setups were obtained from the SFWMD (personal communication) for all basins shown in Figure 1, except the UK setup, which was obtained from [42]. The above listed studies have detailed information on WAM input datasets used in the modeling (land use, soil, rainfall, hydrography, elevation, water control structures and their operations, etc.). ...
... The above listed studies have detailed information on WAM input datasets used in the modeling (land use, soil, rainfall, hydrography, elevation, water control structures and their operations, etc.). Re-calibration was performed for all the individual basins through minor adjustments to the location of the calibration gauges, evapotranspiration, and phosphorus attenuation exponent and multiplier parameters for streams and dominant land uses [35,43] to account for marginally different simulation periods in earlier studies (1999)(2000)(2001)(2002)(2003)(2004)(2005)(2006)(2007) in [40] and 2002-2007 in [42]). Two goodness of fit (GOF) measures, Nash-Sutcliffe Efficiency (NSE) Equation (3) and Percentage Bias (PBIAS) Equation (4), were calculated for monthly flows and TPL at 10 locations (one gauge per basin) [44] (Figure 1). ...
... However, due to the large size of the investigated region (10,600 km 2 ) and focus on overall restoration cost to achieve TMDL, no explicit spatial optimization of these restoration strategies was performed. TP loading hot-spots were identified for this region ( Figures S2 and S3, Table S1) and were found to be consistent with previous studies [26,40,42]. The analysis presented in this work can be used as a starting point for further optimization of restoration projects. ...
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Achieving total phosphorus (TP) total maximum daily loads (TMDL) for Lake Okeechobee (Florida, FL, USA), a large freshwater lake, is a key component of the greater Everglades ecosystem restoration and sustainability of south Florida. This study was aimed at identification of a cost-effective restoration alternative using four TP control strategies—Best Management Practices (BMPs), Dispersed Water Management (DWM), Wetland Restoration, and Stormwater Treatment Areas (STAs)—to achieve a flow-weighted mean TP concentration of 40 µg/L at lake inflow points, through a phased scenario analysis approach. The Watershed Assessment Model was used to simulate flow and phosphorus dynamics. The 10-year (1998–2007) ‘Base’ scenario calibration indicated ‘acceptable’ to ‘good’ performance with simulated annual average flows and TP load of 2.64 × 109 m3 and 428.6 metric tons, respectively. Scenario results showed that TP load reduction without STAs would be around 11–40% with respect to Base compared to over 75% reduction requirement to achieve TMDL, indicating STAs as a necessary component to achieve restoration. The most cost-effective alternative to achieve TP target consisted of implementation of nutrient management BMPs, continuation of existing DWM projects, and the construction of ~200 km2 of STAs for a total project cost of US $4.26 billion.
... To better understand the complex mechanisms and processes of NPS pollution, various watershed-scale NPS models and tools were developed to understand NPS pollution, and to evaluate water quality. These NPS models and tools are widely used to identify critical source areas of pollutants [1][2][3], evaluate the effects of NPS pollution on the water environment [4,5], future scenarios evaluation of hydrology and water quality [6,7], assist in the planning and implementation of best management practices (BMPs) [8][9][10], support development of water quality criteria or standards [11,12], and provide informed decision support for policy-makers [13][14][15]. Models have become essential tools in the effort to reduce the adverse effects of NPS pollution. However, the current diversity of the NPS pollution models makes it difficult to select the most suitable model for a given NPS pollution issue. ...
... Bottcher, et al. [140] applied WAM into a predominately agricultural watershed to hydrologic and hydraulic processes and NPS pollution loading simulation with 2025 and 2055 future scenario analysis. Corrales, et al. [13] used WAM in the northern Lake Okeechobee watershed (4150 km 2 ) to evaluate total P load at the source area, streams, and outfall levels. ...
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Watershed-scale nonpoint source (NPS) pollution models have become important tools to understand, evaluate, and predict the negative impacts of NPS pollution on water quality. Today, there are many NPS models available for users. However, different types of models possess different form and structure as well as complexity of computation. It is difficult for users to select an appropriate model for a specific application without a clear understanding of the limitations or strenghts for each model or tool. This review evaluates 14 more commonly used watershed-scale NPS pollution models to explain how and when the application of these different models are appropriate for a given effort. The models that are assessed have a wide range of capacities that include simple models used as rapid screening tools (e.g., Long-Term Hydrologic Impact Assessment (L-THIA) and Nonpoint Source Pollution and Erosion Comparison Tool (N-SPECT/OpenNSPECT)), medium-complexity models that require detail data input and limited calibration (e.g., Generalized Watershed Loading Function (GWLF), Loading Simulation Program C (LSPC), Source Loading and Management Model (SLAMM), and Watershed Analysis Risk Management Frame (WARMF)), complex models that provide sophisticated simulation for NPS pollution processes with intensive data and rigorous calibration (e.g., Agricultural Nonpoint Source pollution model (AGNPS/AnnAGNPS), Soil and Water Assessment Tool (SWAT), Stormwater Management Model (SWMM), and Hydrologic Simulation Program Fortran (HSPF)), and modeling systems that integrate various sub-models and tools, and contain the highest complexity to solve all phases of hydrologic, hydraulic, and chemical dynamic processes (e.g., Automated Geospatial Watershed Assessment Tool (AGWA), Better Assessment Science Integrating Point and Nonpoint Sources (BASINS) and Watershed Modeling System (WMS)). This assessment includes model intended use, components or capabilities, suitable land-use type, input parameter type, spatial and temporal scale, simulated pollutants, strengths and limitations, and software availability. Understanding the strengths and weaknesses of each watershed-scale NPS model will lead to better model selection for suitability and help to avoid misinterpretation or misapplication in practice. The article further explains the crucial criteria for model selection, including spatial and temporal considerations, calibration and validation, uncertainty analysis, and future research direction of NPS pollution models. The goal of this work is to provide accurate and concise insight for watershed managers and planners to select the best-suited model to reduce the harm of NPS pollution to watershed ecosystems.
... Despite enticing projections of cost efficiency in setting up markets (e.g., a recent phosphorus trading program in two sub-watersheds in the northern Lake Okeechobee watershed was estimated to have net cost savings of $34.9 million per year Corrales et al. 2017), the markets with the most trades indicate costs ranging between 35 percent (Fang et al. 2005) and 201 percent greater than their original estimates Stephenson and Shabman 2017). Studies also offer a lengthy list of additional barriers including market structure, specific program rules, risk perception, and developing trusted relationships among stakeholders through intensive education and outreach as important factors to the realization of environmental and economic benefits in a marketbased program (Corrales et al. 2017). The combined low rates of successfully trading markets and long list of factors for successful implementation are why Hoag et al. (2017) have argued that successful situations should be considered "virtual policy utopias." ...
... Slightly more than half had reservations over the relationships between the buyers and sellers in the trading program (Table 2.). Another third or so of people were uncertain, supporting what has been suggested elsewhere (Breetz et al. 2005;Corrales et al. 2017), that very clear and transparent communication regarding program mechanisms, trading partnerships, and finances, along with education, would be necessary to ensure confidence and ultimately participation. ...
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Achieving cleaner water for rural and suburban communities in a sustainable way requires approaches tailored to the unique socioeconomic, ecological, and historic contexts embedded in a particular community and place. Water quality trading (WQT) is a payment for ecosystem services style policy that is currently popular across North America as a mechanism to reduce water pollution from rural communities. Yet this approach is failing to generate markets with enough trades to measurably improve waterways. Some failures are attributed to poor program design and others to stakeholder communities who are averse to the premise or morality of WQT. However, rural communities are not homogenous and many are in fact amenable to payment for ecosystem services policies such as WQT. Although our case study identified Tennessee watersheds as “feasible” locations, we present evidence that the typical program design parameters would fail, despite having a willing population of farmers. We argue that identifying amenable communities or feasible locations simplifies the agency of stakeholders and is ultimately insufficient to make ecosystem services programs work unless the design and implementation phases of the programs include local stakeholders.
... These policies have come at a substantial cost to regulated entities and society generally (Keiser and Shapiro 2018). Implementing nitrogen abatement policies that provide flexibility to farmers with respect to the choice of abatement options could significantly reduce the societal costs of meeting water quality targets (Greenhalgh and Selman 2012;Corrales et al. 2013Corrales et al. , 2017Shortle 2013). One way of achieving this is via a nitrogen trading scheme. ...
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Markets in pollution permits for managing environmental quality have been advocated by economists since early 1970s as a mechanism that can deliver pollution reduction targets at lower cost to regulated entities than traditional uniform command-and control approaches. This study explores whether a ‘smart market’ cap-and-trade scheme between non-point sources can offer meaningful, robust and policy amenable, advantages over alternative approaches for nitrogen management in a realistic setting: 6504 individual farms in Limfjorden catchment, Denmark. The scheme involves multilateral trading of nitrogen emission rights among farms via changes in agricultural land management practices under a catchment-level cap on total nitrogen load. In this, the first exploration of non-point to non-point smart market nitrogen trading in a real setting, we estimate efficiency gains compared to uniform command-and-control regulation, explore the robustness of these gains in the face of non-participation, and reflect on farmers’ potential acceptance of the trading market in comparison with its command-and-control analog: spatially-targeted regulation, implemented via location-specific limits on nitrogen leaching. Results indicate that the smart market has the potential to substantially reduce the cost of meeting the catchment’s nitrogen reduction target. For a 21.5% reduction from baseline nitrogen load, the market delivers cost savings of 56% (DKK273 million, €36.6 million) compared to uniform regulation, with participating farms realising a mean net benefit of DKK 723/ha (€ 97/ha). Market performance is relatively robust against transaction cost; when delivering a 21.5% reduction in nitrogen load to Limfjorden, approximately 70% of the overall efficiency gain could be retained if only 24% of farms engaged with the market.
... Zhang et al. (2019a, b) developed a Bayesian risk-induced interval stochastic modeling framework to disclose the interactions of trading ratio and treatment rate on effluent trading under system risk. Corrales et al. (2017) applied an integrated hydrology-economic modeling framework for assessing the effectiveness of effluent trading across two watersheds in Lake Okeechobee; the two-watershed phosphorus credit trading effort achieved a lower cost compared with command-and-control methods. The cross-watershed trading policy has a favorable role in promoting the development of green economy under certain conditions (Wang and Pang 2019;Zhang and Li 2019). ...
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Multiple rivers flowing into the same bay can be correlated in water quality management and together determine the environmental status of the bay. Nonpoint source pollution management for multi-watershed aiming to alleviate environmental contamination as well as yield considerable economic and environmental benefits can be under additional challenges. In this study, a Bayesian simulation-based multi-watershed effluent trading designing model (BS-METM) is established for multi-watershed nonpoint source pollution management through incorporating techniques of water quality simulation, uncertainty analysis with Bayesian inference, optimal design for effluent trading, as well as mechanism analysis. BS-METM is capable of reflecting parameter uncertainties in nutrient simulation, disclosing the detailed optimal trading schemes under the impact of uncertainties and vital factors, and identifying optimal effluent trading mechanisms through revealing interaction among trading processes of multiple watersheds. BS-METM is applied to a real case of adjacent coastal watersheds (i.e. Daguhe and Moshuihe watersheds), which are identified as major sources of total phosphorus and ammonia nitrogen loadings to Jiaozhou Bay, China. Effluent trading optimization under multiple mechanisms, including intra-watershed trading, cross-watershed trading and non-trading, are conducted. The optimized industry scales and trading processes are obtained. The effects of vital factors on the trading process (i.e. environmental allowance-violation risk level and water availability level) are investigated. The interactions between water availability level and trading mechanism are also analyzed. It is proved that non-trading mechanism would be recommended under low water availability level and cross-watershed trading mechanism would be recommended under medium and high water availability level. The results provide a solid scientific basis for nonpoint source pollution management as well as effective sustainable development for multi-watershed region. Graphical abstract
... The motivation for converting croplands to forest may be to generate carbon and water quality credits, support broader biodiversity, or perhaps it is driven by the desire to produce forestry products in marginal cropland; farmers need to evaluate the value of the credits or forestry products vs. the value of the crops that can be grown on the particular property [3,4,[14][15][16][17][18][19]. The economic incentive for a water quality trading program comes from funds provided by credit buyers, who have specific incentives to reduce nutrient and sediment loads in a particular region [20][21][22][23]; the program needs to be properly designed to create appropriate incentives [24]. In a water quality trading program, a credit is generated by an action that reduces the load, for example in total nitrogen (TN), by a given amount (e.g. 100 kg/yr). ...
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While there is a general belief that reforesting marginal, often unprofitable, croplands can result in water quality benefits, to date there have been very few studies that have attempted to quantify the magnitude of the reductions in nutrient (N and P) and sediment export. In order to determine the magnitude of a credit for water quality trading, there is a need to develop quantitative approaches to estimate the benefits from forest planting in terms of load reductions. Here we first evaluate the availability of marginal croplands (i.e. those with low infiltration capacity and high slopes) within a large section of the Ohio River Basin (ORB) to assess the magnitude of the land that could be reforested. Next, we employ the Nutrient Tracking Tool (NTT) to study the reduction in N, P and sediment losses from converting corn or corn/soy rotations to forested lands, first in a case study and then for a large region within the ORB. We find that after reforestation, N losses can decrease by 40 to 80 kg/ha-yr (95–97% reduction), while P losses decrease by 1 to 4 kg/ha-yr (96–99% reduction). There is a significant influence of local conditions (soils, previous crop management practices, meteorology), which can be considered with NTT and must be taken into consideration for specific projects. There is also considerable interannual and monthly variability, which highlights the need to take the longer view into account in nutrient credit considerations for water quality trading, as well as in monitoring programs. Overall, there is the potential for avoiding 60 million kg N and 2 million kg P from reaching the streams and rivers of the northern ORB as a result of conversion of marginal farmland to tree planting, which is on the order of 12% decrease for TN and 5% for TP, for the entire basin. Accounting for attenuation, this represents a significant fraction of the goal of the USEPA Gulf of Mexico Hypoxia Task Force to reduce TN and TP reaching the dead zone in the Gulf of Mexico, the second largest dead zone in the world. More broadly, the potential for targeted forest planting to reduce nutrient loading demonstrated in this study suggests further consideration of this approach for managing water quality in waterways throughout the world. The study was conducted using computational models and there is a need to evaluate the results with empirical observations.
... Zhong et al. (2015) investigated farmers' willingness to participate in Best Management Practices through a proposed water quality trading program in Kentucky; the farmers' willingness were estimated under different levels of compensation. Corrales et al. (2017) applied a com- prehensive modeling framework, integrating a hydrologic-water quality model with an economic model, to assess the cost-effectiveness of a water quality trading program in Lake Okeechobee; the effect of dif- ferent factors on the market potential was assessed, including the least- cost abatement solutions, credit prices, potential cost savings, and credit supply and demand. In practical trading system, factors that have individual effects on the buying and selling process can have interac- tions on the efficiency of the trading efforts. ...
... Development of trading-ratio system (Hung and Shaw 2005), modeling of non-point source effluent trading (Wang et al. 2004;Luo et al. 2005), assessing the main reasons for the failure of some water quality trading programs (Shortle and Horan 2006), pollution trading with multiple pollutants (Sarang et al. 2008;, the use of conflict resolution theory to determine the agreement point on the trade-off curve between the total treatment cost and fuzzy risk of violation of water quality standards (Niksokhan et al. 2009a), real-time management of pollution trading using Bayesian networks (Mesbah et al. 2009), fair allocation of treatment costs with the use of game theory concept (Niksokhan et al. 2009b), providing several optimization models for simultaneous use of treatment and trading discharge permit methods (López-Villarreal et al. 2011, analyze the water pollution trading pilot programs in face of existence of overlap and conflict among policies (Zhang et al. 2012), the use of agent-based models (ABMs) to simulate the trading process and providing the structure of a virtual market (Zhang et al. 2013;Nguyen et al. 2013), simultaneous trade of reclaimed water and discharge permits (Jamshidi et al. 2014), development of a benchmark dynamic trading pattern algorithm among point and non-point sources (Caplan and Sasaki 2014), the use of best management practices (BMPs) in a pollution trading program (Zhong et al. 2016;Zaidi and deMonsabert 2015), the effect of different uncertainties on non-point pollution trading policies (Zhang et al. 2014;Li et al. 2014;Zhang et al. 2015a), the effect of artificial aeration process on pollution trading programs , providing an economic model for the seasonal pollution trading (Jamshidi et al. 2016), an interval optimization model for multi-pollutant load allocation (Nikoo et al. 2016), considering hydrological variation for effluent trading systems (Chen et al. 2016;Corrales et al. 2017), water quality and quantity management based on water resources allocation with a pollution trading mechanism under uncertainties (Zeng et al. 2016), assessment of different factors such as trading-ratio, transaction cost, and trading cost on success of water quality trading programs (Motallebi et al. 2017), uncertainty analyses in effluent trading systems through Bayesian theory (Zhang et al. 2017), and the use of nutrient assimilation credits compared to BMPs approach in a pollution trading program (Stephenson and Shabman 2017). ...
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The objective of this paper is to provide an efficient framework for effluent trading in river systems. The proposed framework consists of two pessimistic and optimistic decision-making models to increase the executability of river water quality trading programs. The models used for this purpose are (1) stochastic fallback bargaining (SFB) to reach an agreement among wastewater dischargers and (2) stochastic multi-criteria decision-making (SMCDM) to determine the optimal treatment strategy. The Monte-Carlo simulation method is used to incorporate the uncertainty into analysis. This uncertainty arises from stochastic nature and the errors in the calculation of wastewater treatment costs. The results of river water quality simulation model are used as the inputs of models. The proposed models are used in a case study on the Zarjoub River in northern Iran to determine the best solution for the pollution load allocation. The best treatment alternatives selected by each model are imported, as the initial pollution discharge permits, into an optimization model developed for trading of pollution discharge permits among pollutant sources. The results show that the SFB-based water pollution trading approach reduces the costs by US$ 14,834 while providing a relative consensus among pollutant sources. Meanwhile, the SMCDM-based water pollution trading approach reduces the costs by US$ 218,852, but it is less acceptable by pollutant sources. Therefore, it appears that giving due attention to stability, or in other words acceptability of pollution trading programs for all pollutant sources, is an essential element of their success.
... Furthermore, in our study, there is still insufficient information that concerns trading costs in the river basin. A recent review of the literatures shows a focus on the emerging water quality trading markets which are crucial for water quality improvement [63,64]. Several literatures have taken into account cost-effective solutions for combating eutrophication of coastal ecosystem in spatial and dynamic management [65][66][67]. ...
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In South Korea, the Soyang Lake is an important source of drinking water to the metropolitan areas including Seoul. However, water quality problems in the Soyang Lake have still remained due to chemical contaminations attributed to conventional farming practices in the upstream areas. Based on a downstream consumer survey using a contingent valuation method, this study estimated the expected willingness to pays (WTPs) for water quality improvement through the conversion to environmentally friendly farming (EFF). The results showed that the estimated annual mean WTP is KRW 36,115 per household. The aggregated WTPs of downstream respondents in the Soyang Lake are sufficient to compensate for the income losses of upstream EFF farmers in highland farming areas. In addition, we found that the downstream citizens who recognize the label for EFF products and who intend to purchase EFF products in the future have a significant impact on WTPs for water quality improvement.
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Multiple rivers flowing into the same bay can be correlated in water quality management and together determine the environmental status of the bay. Nonpoint source pollution management for multi-watershed aiming to alleviate environmental contamination can be under additional challenges and yield considerable economic and environmental benefits. In this study, a Bayesian simulation-based multi-watershed effluent trading designing model (BS-METM) is established for multi-watershed nonpoint source pollution management through incorporating techniques of water quality simulation, uncertainty analysis with Bayesian inference, optimal design for effluent trading, as well as mechanism analysis. BS-METM is capable of reflecting parameter uncertainties in nutrient simulation, disclosing the detailed optimal trading schemes under the impact of uncertainties and vital factors, and identifying optimal effluent trading mechanisms through revealing interaction among trading processes of multiple watersheds. BS-METM is applied to a real case of adjacent coastal watersheds (i.e. Daguhe and Moshuihe watersheds), which are identified as major sources of total phosphorus and ammonia nitrogen loadings to Jiaozhou Bay, China. Effluent trading optimization under multiple mechanisms, including intra-watershed trading, cross-watershed trading and non-trading, are conducted. The optimized industry scales and trading processes are obtained. The effects of vital factors on the trading process (i.e. environmental allowance-violation risk level and water availability level) are investigated. The interactions between water availability level and trading mechanism are also analyzed. It is proved that non-trading mechanism would be recommended under low water availability level and cross-watershed trading mechanism would be recommended under medium and high water availability level. The results provide a solid scientific basis for nonpoint source pollution management as well as effective sustainable development for multi-watershed region.
Thesis
A paradigm shift in global trends for natural resources has supported the concept of ecosystem services (ES) for sustainable management. With increasing recognition of relationships between ecosystem functions and human activity, the concept of ES plays a crucial role in the identification of trade-offs between human well-being and ecosystem services. The newly established paradigm is based on an ecosystem approach to decision-making as reciprocity of environment-human linkages, unlike classical approaches for conservation, which feature unidirectional flow of benefit from ecosystems. The concept of ES highlights a holistic and integrated approach for sustainable ecosystem-based management. This underlines appreciation of whole ecosystem process and functions which contribute to human well-being and emphasizes multi-scale benefits of ES provided by tangible and intangible forms. However, a multidisciplinary approach for integrated ecosystem assessments has significant challenges to a pragmatic view of policy decision-making. Moreover, the concept of ES can be particularly useful as a policy instrument to reduce environmental pollution and degradation. Nevertheless, a lack of mechanisms for policy instruments in multi-scale approaches is a critical research gap and a lack of information about economic values for ES likewise remains an important knowledge gap in existing researches. This thesis aims at estimating the economic value of ecosystem services, focusing on water quality issues with specific applications such as drinking water supply. The papers attempted to reduce the aforementioned gaps by analyzing how benefits from ES influence the decision-making of both upstream farmers in farm management and downstream water consumers. With respect to the standing lack of information about economic valuation for ES in Asia (especially South Korea), this study focused on upstream regions (Gangwon Province) and downstream areas (Seoul, along South Korea’s Soyang watershed). As water quality degradation occurs by intensive agricultural production in the upstream area, water quality protection is essential for the preservation of a main drinking water source between upstream farm and downstream households. In the first paper, multinational logistic modelling was used to identify the key factors affecting farmers’ choices regarding the adoption of farming methods, based on interviews with conventional, partially converted and environmentally friendly farm households. In the second paper, contingent valuation methods were used to estimate the willingness to pay (WTP) for water quality improvement through the adoption of environmentally friendly farming. Lastly, in the third paper I used choice experiment method specifically stated preference techniques for the estimation of WTP based on three attributes: water quality, biodiversity levels and agricultural profits. The results from paper 1 showed that education level and subsidy positively and significantly influenced the probability of farmers’ choice on partially converted and environmentally friendly farming, relative to conventional farming. The results from paper 2 showed that the expected annual mean WTP for water quality improvement through the adoption of environmentally friendly farming was KRW 36,115 per household. The results indicated that the estimated annual aggregate WTP might fully offset total income loss of the entire highland farmland which is affecting the water quality. The results of paper 3 indicated that the estimated annual marginal WTP of the upstream farm household for each water quality attribute ranged from KRW 3,484,673 to KRW 9,616,920 while the annual marginal WTP of downstream consumers for water quality ranged from KRW 1,773,511 to KRW 5,420,074. In the results of the papers, both upstream farm households and downstream water users placed substantial values on the water quality improvement of Soyang watershed in South Korea. In conclusion, the results of this study demonstrated the importance of water quality conservation in Soyang watershed in relation with agriculture. Evaluation of the economic benefits which emphasizes dual role relationships between both upstream farmers and downstream consumers are critically needed. As awareness of the value of ecosystems and the concept of ecosystem services are increasing, methods for valuing the benefits from ecosystems should be developed respectively. Our empirical case study could be extended with spatial modeling, such as InVEST, GIS, and Agent-based modeling to measure the multi-scale benefits from ES for an integrated water resource management.
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Eutrophication of Lake Okeechobee in southern Florida has been a great concern for decades. Previous studies in the Lake Okeechobee Watershed indicate that net phosphorus (P) import was primarily in the form of pasture fertilizers and dairy feeds, whereas total P export was primarily in the form of milk, cows, and crops. This study is an update of P import and export analyses in the Lake Okeechobee Watershed. The net import P coefficient obtained from the budget analysis was applied to the appropriate land use area for calculating a basin-wide P budget using a Geographic Information System (GIS). The runoff P was estimated with the Watershed Assessment Model (WAM). The P loads to the lake were simulated at discharge structures from each basin. On-site P storage and wetland assimilation values were estimated using a mass balance approach for each basin. Overall, there was a 25% decrease in net P imports and a 29% decrease in onsite P storage, as compared to the previous analyses. The differences in the net P coefficients relative to previous P budgets may be partially the result of better available information. The net P imports for improved pasture increased by 15%, primarily due to the land application of residuals, which had not been included in the previous P budgets. The increase in P import for citrus production may have resulted from changed coefficients in the Lake Istokpoga and Upper Kissimmee regions where citrus was previously found to be a net P exporter. These results indicate that nutrient management practices may have played a role in reducing P loads to the Lake.
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Applying a trading ratio system similar to that proposed by Hung and Shaw (2005), we estimate the potential cost savings of a phosphorus emissions trading program that meets overall total maximum daily load allocations among 22 wastewater treatment plants (WWTPs) in the Passaic River watershed (United States) to be a modest 2-3% relative to a no-trade baseline. These results may be typical of those in relatively small watersheds such as the Passaic, where there are limited numbers of potential traders and relatively homogeneous abatement technologies across WWTPs. More substantial gains from trade may accrue to a concentrated group of WWTPs, suggesting that watershed managers should focus on a targeted set of traders within a watershed. Under certain conditions, additional gains may be achieved by aggregating WWTPs into zones within which there can be one-to-one allowance trading.
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Accelerated cultural eutrophication of Lake Okeechobee, FL by excessive phosphorus (P) loading has generated a need to determine P sources and sinks in the watershed. Average annual P budgets were estimated for each of the 19 tributary basins in the northern Lake Okeechobee watershed for the period 1985–1989. Net P imports were estimated based on P usage by land use type, and land use area with a geographic information system (GIS) model. Off-site P losses, from uplands to wetlands, were estimated from literature values of P runoff concentrations for selected land use types. The P loads from each basin were measured at the discharge to the lake. For the north Okeechobee watershed, total net P imports were estimated at 2380 t P yr−1; rainfall P = 300 t P yr−1; off-site P load = 760 t P yr−1; and lake P load = 300 t P yr−1. An estimated 90% of imported P was retained in the basin. Of the P loaded to the streams and wetlands, 60% was retained. The intensity of phosphorus use, indicated by net P imports, explained 70% of the variability in basin P loads to the lake. Basin characteristics extracted from the GIS database, including: area of emergent wetlands; area of selected soil associations; area of developed land; and total length of canals were correlated significantly with tributary P loads. Other physical characteristics, such as basin shape, length, size, and distance to the lake, had no significant explanatory power.
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Nitrogen (N) losses from agriculture are negatively impacting groundwater, air, and surface water quality. National, state, and local policies and procedures that can mitigate these problems are needed. Market-based approaches where waste treatment plants (point sources) can purchase nutrient credits from upstream agricultural operations (non-point sources) to meet their National Pollutant Discharge Elimination System permit requirements within the Clean Water Act are being explored. This paper reviews these market-based approaches for enhancing air and water quality at a lower cost than simple command-and-control regulation, and describes new tools that are being developed, such as Nitrogen Trading Tool (NTT), that can be used to assess nitrogen losses to the environment under different management scenarios. The USDA-NRCS, EPA and several other state and local agencies are interested in these new tools. The NTT, though primarily designed for water quality markets, also estimates savings in nitrous oxide (N2O) emissions that can be traded in carbon markets. For example, an analysis using NTT shows that for 100ha of crop land, a C sequestration equivalent of approximately 25–38MgCy−1 for a farm in Ohio, and 13–21MgCy−1 for a farm in Virginia could be achieved with better nitrogen management practices. These numbers across a watershed could be much larger with improved N and conservation management practices that contribute to better water quality and lower global warming potential. There is a need to further develop, calibrate, and validate these tools to facilitate nitrogen and carbon trading future markets around the globe to increase environmental conservation across agro-ecosystems worldwide.
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Horan, Richard D. and James S. Shortle, 2011. Economic and Ecological Rules for Water Quality Trading. Journal of the American Water Resources Association (JAWRA) 47(1):59-69. DOI: 10.1111/j.1752-1688.2010.00463.x Abstract: Emissions trading in textbook form uses markets to achieve pollution targets cost-efficiently. This result is accomplished in markets that regulators can implement without knowing pollution abatement costs. The theoretical promise of emissions trading, along with real-world success stories from air emissions trading, has led to initiatives to use trading for water pollution control. Yet, trading, particularly when it involves nonpoint sources of pollution, requires significant departures from the textbook concept. This paper explores how features of water quality problems affect the design of markets for water pollution control relative to textbook emissions markets. Three fundamental design tasks that regulators must address for pollution trading to achieve an environmental goal at low cost are examined: (1) defining the point and nonpoint commodities to be traded, (2) defining rules governing commodity exchange, and (3) setting caps on the commodity supplies so as to achieve an environmental target. We show that the way in which these tasks are optimally addressed for water quality markets differs significantly from the textbook model and its real-world analogs. We also show that the fundamental appeal of emissions trading is lost in the case of realistic water quality markets, as market designs that reduce the costs of achieving water quality goals may no longer be implementable without the regulatory authority having information on abatement costs.
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Nutrient loading from beef pastures located within the northern Lake Okeechobee watershed in Florida, has been identified as a source of phosphorus contributing to the accelerated eutrophication of the lake. Since 1989 within the watershed, 557 agricultural drainage sites, mainly beef pasture, have been monitored for compliance under a regulatory program. Of those sites, 154 were actively monitored for phosphorus concentrations from October 1, 1998, to September 30, 1999. Of these 154 sites, 77 were considered to be out of compliance (OOC). An OOC site is defined as having runoff with a 12-month average phosphorus concentration exceeding the permitted discharge limit. The average annual phosphorous load from the 77 OOC sites for an eight-year study period from October 1, 1991, to September 30, 1999, was estimated using measured concentration values and simulated runoff obtained from an agricultural nonpoint source pollution model, CREAMS-WT. The 77 OOC sites produced an estimated average annual 46 metric tonnes of phosphorus load, of which an estimated 22 tonnes of phosphorus reached Lake Okeechobee on an average annual basis. The remaining estimated average annual 24 tonnes of phosphorus load was retained by streams and wetlands in the discharge transport system between the sites and the lake. The estimated average annual load reaching Lake Okeechobee from the OOC sites represented 11 percent of the phosphorus load above a five-year average annual target load for the lake. However, the OOC site drainage areas represented only 3 percent of the northern watershed that drains into the lake. Of the 77 OOC sites, 12 sites had an average annual phosphorus loading rate equal to or greater than 3.0 kg/ha and were placed on the priority list for the Critical Restoration Project in the Lake Okeechobee watershed. To estimate the possible phosphorus load reductions from the 77 sites, two scenarios were modeled. The first scenario reduced phosphorus concentrations in runoff to the permitted discharge limits under the Lake Okeechobee regulatory program. The second scenario changed current land uses to native rangeland with an estimated annual offsite total phosphorus areal loading rate of 0.114 kg/ha. These two scenarios are hypothetical with assumed concentration values and loading rate. Model results showed that the first management scenario reduced the average annual phosphorus load to the lake by an estimated 15 tonnes. The second scenario reduced the average annual phosphorus load to the lake by an estimated 21 tonnes.
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The use of transferable discharge permits in water pollution, what we will call water quality trading (WQT), is rapidly growing in the U.S. This paper reviews the current status of WQT nationally and discusses the structures of the markets that have been formed. Four main structures are observed in such markets: exchanges, bilateral negotiations, clearinghouses, and sole source offsets. The goals of a WQT program are environmental quality and cost effectiveness. In designing a WQT market, policy makers are constrained by legal restrictions and the physical characteristics of the pollution problem. The choices that must be made include how trading will be authorized, monitored and enforced. How these questions are answered will help determine both the extent to which these goals are achieved, and the market structures that can arise. After discussing the characteristics of different market structures, we evaluate how this framework applies in the case of California's Grassland Drainage Area Tradable Loads Program.
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There has been a great deal of interest in addressing water quality issues through the use of Transferable Discharge Permit (TDP) systems. Unfortunately, the attempts to start up permit markets that are able to exploit abatement cost differences between sources have not met with the success expected. Two of the reasons for the lack of success have been the problem of transaction costs and in the case of non-point sources (NPS), undefined property rights. The composite market design is a proposal for a TDP system that specifically includes agricultural non-point source (NPS) discharges and addresses both property rights and transaction cost problems. The composite market consists of three interrelated markets each serving a particular function. The two primary markets are coordinated through price information that makes it possible for a catchment-based authority to issue (sell) permits based on the marginal cost of abatement. When the composite market is mature, the total number of permits issued corresponds to a cap on discharges allowed in the catchment. The structure of the composite market allows this system to be phased in over time with existing institutions and limited demands on financing.
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Eutrophication of Lake Okeechobee, Florida, has been accelerated by excessive phosphorus (P) loading to the lake from land use practices involving phosphorus-containing materials. Average annual P budgets were estimated for each of the 25 tributary basins in the northern Lake Okeechobee watershed for current land uses and land use practices. Phosphorus import, export, and net import coefficients in terms of kg P ha−1 per year were determined for each land use being practiced in the watershed based on landowner surveys and literature data. The net P coefficient for each land use was applied to the appropriate land use area with a Geographic Information System (GIS) to obtain a basin-wide P budget. Phosphorus runoff load was estimated based on measured data and literature values of P concentrations and runoff estimates for each land use. The P loads to the lake were measured at discharge structures from each basin. On-site P storage and wetland assimilation values were estimated using a mass balance approach for each basin. For the northern Lake Okeechobee watershed, total net P imports from land use activities were estimated at 1717 metric tonnes (t) per year, which is about 28% lower than the previous P budget conducted in 1991. Other P import, export, and storage components were obtained, and results were compared with the previous budget data. Linear regression was performed to determine which basin/landscape characteristics influence lake loading. Runoff phosphorus, the amount of developed land, and net P imports had the strongest correlation when related to lake loading. Using multiple linear regression, the annual changes in P retention correlated well with net P import intensity and stream/canal density, and the net P import and length of streams/canals correlated well with lake loading.
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We examine the extent to which various environmental policy instruments meet major evaluation criteria, including cost-effectiveness, distributional equity, minimization of risk in the presence of uncertainty, and political feasibility. Instruments considered include emissions taxes, tradable emissions allowances, subsidies for emissions reductions, performance standards, technology mandates, and research and development subsidies. Several themes emerge. First, no single instrument is clearly superior along all the criteria. Second, significant trade-offs arise in the choice of instrument; for example, assuring a reasonable degree of distributional equity often will require a sacrifice of cost-effectiveness. Third, it is possible and sometimes desirable to design hybrid instruments that combine features of various instruments in their “pure” form. Fourth, for many pollution problems, more than one market failure may be involved, which may justify (on efficiency grounds, at least) employing more than one instrument. Finally, potential overlaps and undesirable interactions among environmental policy instruments are sometimes a matter of concern.
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Delivery coefficients have long been used in economic analysis of policies that seek to address environmental problems like water pollution. However, the derivation and validity of delivery coefficients have not been examined carefully by empirical analyses. We derived estimates of delivery coefficients and then evaluated them as a bridge between complex simulation models and economic policies like water quality trading. We found that the allocations achieved outcomes that differed from intended water quality targets by less than 10% in most cases. For the least-cost allocation with heterogeneous costs, cost savings significantly outweighed deviations from water quality targets.
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If stochastic nonpoint pollution loads create socially costly risk, then an economically optimal point/nonpoint trading ratio—the rate point source controls trade for nonpoint controls—is adjusted downward (a risk reward for nonpoint controls), encouraging more nonpoint controls. However, in actual trading programs, ratios are adjusted upward in response to nonpoint uncertainties (a risk premium for nonpoint controls). This contradiction is explained using a public choice model in which regulators focus on encouraging abatement instead of reducing damages. The result is a divergence of public and social risk perceptions, and a trading market that encourages economically suboptimal nonpoint controls.