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The Interest for Group Performance Based Instruments to Manage Nonpoint Source Pollution

Congress: 2008
Author(s): Patrick RIO

Keyword(s): water quality, nonpoint source pollution, group performance based instruments
AbstractNonpoint source pollution is characterized by the inobservability of individual emissions at a reasonable cost. The regulator cannot use traditional instruments as taxes, standards or tradable permits market to manage this kind of pollution. Consequently, innovative instruments have been designed to manage nonpoint source pollution by circumventing the issues associated with the control and monitoring of individual pollution. In these approaches, the regulator takes advantage of easily observable variables such as inputs, outputs or ambient pollution measured at a well identified and defined receptor point. In this paper, we analyse instruments based on ambient pollution. Instead of trying to manage individual emissions, the regulator controls global pollution at a receptor point, having pre-set an ambient norm not to be exceeded. Collective mechanisms have been designed to solve group moral hazard issues (Holmstrom, 1982), and have been applied to the context of nonpoint source pollution by Meran and Schwalbe (1987) and Segerson (1987). These authors proposed a tax/subsidy incentive scheme based on the difference between actual ambient pollution and a pre-determined objective. Following these seminal papers, authors looked at collective mechanisms to manage nonpoint source pollution (Xepapadeas, 1991 ; Cabe et Herriges, 1992 ; Bystrom and Bromley, 1998 ; Shortle and Horan, 2001 ; Pushkarskaya, 2003 ; Taylor, 2003). Group performance based instruments have largely been tested by experimental economics (Spraggon, 2004; Cochard et al. 2005; Vossler et al. 2006). However, while these studies confirm the efficiency of such instruments, they still haven’t been implemented. This paper provides a synthesis on group performance based instruments to manage nonpoint source pollution. It provides some explanations on the lack of implementation of such mechanisms to manage nonpoint source pollution, including their non-budget balancing nature, the ‘punish the innocent’ dilemma and political difficulties.
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