The Importance of Site-Specific Information in the Design of Policies to Control Pollution

The presence and concentration of pollutants in groundwater are influenced by geophysical processes and the behavior of economic agents. The purpose of this paper is to assess the importance of spatial variability in physical parameters in the design of efficient pollution regulations. Alternative tax policies are evaluated in terms of effects on farm profit utilizing a spatially distributed, dynamic simulation model which links economic behavior with the geophysical processes that determine groundwater quality. The empirical focus is the control of groundwater nitrates arising from irrigated agriculture in Malheur County, Oregon. Results indicate that a detailed accounting of spatial variance in physical parameters had little effect on selection of a cost-minimizing tax policy to control groundwater nitrate concentration. This result implies that relatively simple tax schemes and models to evaluate these tax schemes may be adequate in some settings.