Farm runoff

Runoff from a soy field fills a farm ditch on Maryland’s Eastern Shore.

The first step to fixing a problem is recognizing that you have one.

This is a familiar motivator for many self-help programs. It is also applicable to the Chesapeake Bay Program.

The well-recognized problem in the Chesapeake Bay is excess nutrient loads (pounds of nitrogen and phosphorus) that degrade Bay water quality. The obvious fix — reducing nutrients — has been an objective of federal and state policy makers since the 1980s.

Much progress has been made in reducing nutrients from point sources, such as wastewater treatment plants. But, the water quality problem remains, largely due to nonpoint sources — typically runoff from the land. Agriculture has long been recognized as a leading cause of nonpoint source nutrient loads to the Bay. Yet, despite decades of effort and billions of dollars spent, recent analyses of nutrient levels in rivers flowing into the Bay show little to no improvement from nonpoint source control efforts.

Unlike the regulatory programs used to reduce point source loads, the Bay states rely primarily on voluntary compliance programs to reduce agricultural nonpoint source loads. These programs provide subsidies and technical assistance to agricultural producers to voluntarily adopt best management practices (BMPs) such as cover crops, stream buffers, stream fencing and nutrient management. The ineffectiveness of this approach is often attributed to insufficient funding and the lack of political will to increase it.

But what if funding isn’t the only problem? Put another way, would an increase in funding, funneled through existing agricultural programs, achieve the needed reductions?

We doubt it.

The Bay Program estimates nonpoint source nutrient reductions based on large geographic averages. Nonpoint source reductions are calculated based on multiplying estimates of nutrient runoff (pounds per acre) by a percent reduction assigned to a BMP (percent removal) and the number of acres served by the BMP. The amount of nutrients running off land is a computer-generated average over thousands of acres, and the BMP removal efficiencies typically applies to the entire watershed. In reality, though, the effectiveness of BMPs varies from place to place.

This approach discourages the identification and treatment of areas of the landscape that produce the largest nonpoint source loads. At the same time, state and federal cost-share programs that fund agricultural BMPs also limit interest in seeking high-loss areas and low-cost treatment options both in the agencies that administer the programs and the agricultural producers who receive the cost share.

A few illustrations: Consider the lack of incentive to identify and treat high-loss areas. Suppose that 80% of nutrient losses on a 250-acre farm is coming from only 15 acres. Research shows that disproportionality of this kind is common. Do the Bay Program crediting system and the technical/financial assistance programs work together to direct the cost share so that the producer will target those 15 acres? Not really. If the 250 acres is in the same land use (say crop production), Bay Program crediting gives the same reduction credit whether the BMP is placed on any of the 235 low-loss acres, or the 15 high-loss acres.

Now, consider an innovative BMP that could achieve thousands of pounds of nutrient reductions at a significantly less cost per pound than the existing BMPs. The BMP, however, requires substantial upfront capital investment, ongoing operation and maintenance expenditures, and provides no direct benefit to the agricultural producer. In short, the innovation produces large quantities of inexpensive, high-quality nutrient removal services but at little benefit to the farmer. In this case, the producer has to pay part of the cost of installation and maintenance. Beyond altruism, why would a producer install and operate such a technology? From a strictly financial perspective, they would not. The structure of our cost-share programs does not directly pay producers for what we want: nutrient reductions.

Consider the incentives facing agencies who manage nonpoint source programs and the technical service providers who recruit and work with agricultural producers to implement BMPs. Suppose a technical service provider can work with two neighboring producers. One producer has low nutrient loss and is interested in adopting additional BMPs. The other producer has high nutrient losses and is reluctant to participate in government programs. Why would the technical service provider spend time with the second producer?

Service providers are overloaded with work and staff are numbers declining. Because of the Bay Program BMP crediting system, agencies can claim the same reduction credit for a BMP installed by either producer. The actual amount of nutrient reduction achieved, however, will differ depending on who implements the BMP and where. Additional BMPs on land with low nutrient loss will produce much less nutrient reductions than BMPs applied to land with high nutrient loss. This is not a criticism of agency staff but rather is another example of how the structure of nonpoint source incentive programs shapes behavior.

To be clear, increased funding for nonpoint source programs would be helpful, but the Chesapeake Bay partners need new ways of choosing and rewarding who does what, and where.

The Bay Program acknowledges that nutrient nonpoint source loads differ by region, but one critical need is to incorporate finer-scale approaches for identifying high-

nutrient-loss areas and for crediting systems aimed at reducing nutrient loss in those areas.

Bay Program partners also need new policies to better motivate and direct behaviors. Existing cost-share programs have the effect of paying people to install practices but not necessarily achieve nutrient reductions. Other voluntary incentive systems that pay directly for nutrient reduction outcomes, such as “pay for performance” systems, can create new avenues to achieve more reductions for every dollar spent. Targeted regulation that requires the treatment of high-nutrient-runoff areas, perhaps combined with a more generous cost share, could earn acceptance by producers and generate more nutrient reductions.

Changing crediting and incentive systems will require setting up new programs alongside existing ones and revising program rules and regulations. It might require targeted experimentation. There is no single change that will improve nonpoint source program outcomes, and no change will come easily.

But the first step in any self-help program is acknowledging that a problem exists.

Kurt Stephenson and Zach Easton are professors of agricultural and applied economics and biological systems engineering, respectively at Virginia Tech. Leonard Shabman is a senior fellow at Resources for the Future, in Washington, DC. James Shortle is a professor of agricultural and environmental economics at Penn State.

The views expressed by opinion columnists are not necessarily those of the Bay Journal.

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