Regulating water quantity and quality in irrigated agriculture

This paper largely applies the theoretical model formulated in an earlier paper by the authors, of an input based approach to control an agricultural non-point-source pollution. The empirical problem includes a groundwater aquifer being polluted by several agricultural producers. In order to prevent degradation of the quality and depletion of the quantity of the water in the aquifer, a regulatory agency must intervene. The regulatory agency does not have all the information needed for decision making. The producers» use of water from a surface supply is recorded and additional water is pumped from the ground aquifer, the amount of which is unknown to the agency. The agency also does not know the physical characteristics of the production process that is factored into the pollution process. The model evaluates two monitoring regimes (central and individual) and two regulatory tools (taxes and quotas) associated with each regime. Individual monitoring was found to be superior to central monitoring, both in terms of the physical characteristics of the problem (water quality and quantity) and in terms of regional income. For both the central and the individual monitoring regimes, the optimal paths of the state variables reach steady-state values relatively early, with values in the individual monitoring reaching the steady-state earlier than in the case of central monitoring. The optimal path of investment in monitoring equipment suggested investment in monitoring equipment as early as possible.1998 Academic Press