Role of Conservation Adoption Premiums on Participation in Water Quality Trading Programs

Marzieh Motallebi,Dana Hoag,Caela O’Connell,Deanna Osmond

doi:10.3390/w8060245

Marzieh Motallebi, Dana Hoag + Show 2 more

Open Access

https://doi.org/10.3390/w8060245

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Abstract

Over half of lakes, reservoirs, and ponds in the United States are threatened or impaired, mostly by nutrients. One policy to improve water quality is water quality trading (WQT). While the concept is appealing, adoption of conservation practices in these programs has been anemic at best. Using a case study in the newly-formed WQT market in Jordan Lake, North Carolina, we propose that part of the problem is a large adoption premium (AP) for this program. AP is the amount that farmers require over and above direct adoption costs to participate. In this study, farmers were asked at in-person interviews about their willingness to accept (WTA) a payment to adopt a particular conservation practice (riparian buffers) in order to generate and sell credits. We compared farmers’ WTA to their direct cost of participation, which allowed us to estimate an AP. On average, the AP more than doubles the cost of purchasing credits. The AP sums all of the known indirect costs already cited in the literature, and more, into a single value and is relatively simple to estimate. Knowing the AP would improve the ability of policy makers to accurately estimate what is needed to boost adoption rates in WQT programs and other conservation programs as well.

Highlights

Degradation of water quality by nutrients is a concern facing communities all over the world.In the United States, in 2006, 60% of assessed lakes, reservoirs, and ponds were threatened or impaired for their designated uses, mostly due to nutrients [1]
Most of the farmers in this study indicated a higher willingness to accept (WTA) than the conservation practice installation cost; they were asked: “In your opinion, why would other farmers be willing to accept less than the cost of installation?”
Many conservation programs seem attractive on paper, but the success of these programs depends on a large set of complicated, real-world factors that affect the acceptability of the program by the involved parties

Summary

Introduction

Degradation of water quality by nutrients is a concern facing communities all over the world. In the United States, in 2006, 60% of assessed lakes, reservoirs, and ponds were threatened or impaired for their designated uses, mostly due to nutrients [1]. Many different policies have been used to improve water quality, including water quality trading (WQT). Water quality trading is a market-based approach that allows sources with high pollution abatement cost to meet their regulatory obligations by buying pollution reductions from sources with a lower pollution reduction cost. Water quality can be improved at a lower cost using WQT than command and control policies such as regulation [2]. The number of successful applications has been limited.

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