Modeling state-level water quality management: the case of the Neuse River Basin

This research considers how the perceived costs of achieving water quality objectives are sensitive to three issues surrounding model structure and policy design. These issues include: (i) the extent of the regulated market, (ii) the responsibility of the regulated market for background pollution, and (iii) the use of alternative policy instruments. A large-scale process model is used to evaluate and compare the costs of nutrient reduction in the Neuse River Basin in North Carolina under various instruments, including a plan currently being considered by state regulators. The results emphasize the importance of flexibility in both model structure and policy design.