261 – Agricultural water pollution

Agriculture is a major source of pollution in many rivers, lakes and coastal waters. The problems are nutrients, mainly nitrogen (N) and phosphorus (P), and sediment, causing eutrophication and turbidity.

I’ve been involved in various pieces of economic analysis looking at possible strategies to reduce these problems, including work on the Gippsland Lakes in eastern Victoria, rivers in central Victoria, Lake Karapiro in New Zealand and currently the Great Barrier Reef.

What have we learnt?

Firstly, reducing pollution to low levels can be very expensive. Even if the cost is moderate per hectare of agricultural land, it adds up if changes are needed over large areas, as they often are. For example, we estimated that it would cost at least a billion dollars over 25 years to reduce phosphorus flows into the Gippsland lakes by 40 per cent (Roberts et al., 2012).

lake_karapiroSecondly, there is a lot of heterogeneity in the cost of reducing pollution. There is heterogeneity between the costs of different methods of pollution reduction, and heterogeneity in the cost of some methods in different parts of the catchment.

This means that it can really pay off to have a system or a policy that targets pollution reduction to the cheapest options in the cheapest places (‘cheapest’ meaning best bang for the buck, not just lowest cost irrespective of effectiveness). If a policy doesn’t account well for cost heterogeneity, it will achieve much less pollution reduction than it potentially could for a given budget.

There is a tendency for the most cost-effective interventions to be relatively close to the water body, rather than further away. This is not always true, but it is a trend.

Next, we generally observe increasing marginal costs as the pollution reduction target gets more ambitious. Small reductions can often be achieved quite cheaply, but costs increase at an increasing rate as the pollution-reduction target goes up.

Life gets even more complicated if you are trying to manage more than one pollutant at a time. For example, Doole et al. (2013) looked at strategies to reduce both phosphorus and sediment. The two are somewhat correlated, but even so, if you just targeted sediment reductions, you probably wouldn’t achieve worthwhile reductions in P. This is partly because, in the region we studied, it’s much cheaper to reduce sediment than phosphorus.

Also, the most cost-effective strategy to reduce P is different from the most cost-effect strategy for sediment, so it’s important to understand the relative importance of the two pollutants (or three, in some cases).

The challenge for environmental managers is how to factor these insights into the planning of their strategies. The environmental benefits of doing so can be really substantial, compared with designing strategies on the basis of biological and physical considerations only, although that is quite common in practice (i.e. just focusing on biology and ignoring the economics). What’s required is systematic analysis that also factors in project costs (including maintenance costs and compliance costs) and likely farmer behaviour in response to the policy or project.

The work we did on the Gippsland Lakes is a good example of an approach that is reasonably simple (it’s spreadsheet-based) but comprehensive enough to do a good job. 

Further reading

Doole, G., Vigiak, O., Roberts, A.M. and Pannell, D.J. (2013). Cost-effective strategies to mitigate multiple pollutants in an agricultural catchment in North-Central Victoria, Australia, Australian Journal of Agricultural and Resource Economics 57(3), 441-460. Journal web site ◊ IDEAS page

Doole, G. and Pannell, D.J. (2012). Empirical evaluation of nonpoint pollution policies under agent heterogeneity: regulating intensive dairy production in the Waikato region of New Zealand, Australian Journal of Agricultural and Resource Economics 56(1), 82-101. Journal web site ◊ IDEAS page

Roberts, A.M. Pannell, D.J. Doole, G. and Vigiak, O. (2012). Agricultural land management strategies to reduce phosphorus loads in the Gippsland Lakes, Australia, Agricultural Systems 106(1), 11-22. Journal web site ◊ IDEAS page

 

10 Comments

  • Juan Altuve
    4 March, 2015 - 12:33 pm | link

    Prof. Pannell i really enjoyed this topic, i don´t know if trough your research you can use some geochemical tools for correlation the polutants behavior at that area. Maybe this could be and additional clue for decide best strategies to reduce problems, think in other locations and why not rebuild your results.

  • MARGARET WANGARI NGATIA
    9 July, 2016 - 8:38 pm | link

    Prof.Dave,I really thank you for that topic.In my village remote Kenya more is happening in water pollution in the rivers and dams. Sometimes it happens when the small holder farmer is not aware of the social cost.I really wonder who will come to the rescue of the innocent who do not even understand what is water pollution.Thanks once more for taking me through that educative part.

  • Emanueli Ndossi
    22 July, 2016 - 6:17 pm | link

    Prof.Dave, thanks for the well presented scenario of the situation on the agriculture practices effects in relation to water quality. Along the Barrier Reef in Australia for example, I know some various efforts to reduce diffuse impacts have been implemented, however knowing the value of the Reef as World Heritage site I may find so obvious that government is supporting the initiative. How is other sites i.e. Gippsland lakes and other like in New Zealand? Do you see the same zeal from the government support (willingness)?. Are there some positive results from Australian government efforts to control upstream diffuse sources along GBR?

    Your opinions can help to shad some light on the other potential sites around the world which are also commonly get pollution from upstream from diffuse sources.

    • 23 July, 2016 - 9:52 am | link

      The efforts with the GBR so far have been a start, but deficient in some respects. The amount of money dedicated is much less than would be needed to achieve the target of really protecting the reef. The way the money has been spent has not been sufficiently well targeted or sufficiently based on holistic analysis. There have been some improvements in the latter recently (my team has been involved), but further improvements needed.

      The Gippsland Lakes have not been nearly as well supported (financially) as they need. New Zealand is generally doing a much better job with its policies and initiatives to reduce water pollution than Australia.

  • Elias John
    1 November, 2016 - 7:45 am | link

    Good governing policies and strategies will guide and pave the way forward to overcome the key challenges facing agriculture sector.

  • Adams
    28 December, 2016 - 7:48 pm | link

    Prof Dave,
    it is refreshing to read your insightful perspective on water population and the examples therein. It is very sad especially if you visit Northern part of Ghana where a lot of agriculture activities are ongoing. All dams and reservoirs have been heavily silted due to sediments from agriculture activities. Meanwhile, irrigation schemes have been constructed on lakes and rivers without any buffer zones and this is really disturbing the ecosystems around.

  • Mau
    31 January, 2017 - 3:32 pm | link

    Sir,

    I’d like to ask why is massive indoor farming as a primary means for crop production not pursued when it somehow mitigates resource scarcity and degradation? I know that the capitalis relatively big and the tech is not as fully developed as field machineries, still, dont you think that these potentially loop holed systems should receive incentives or lower social costs to encourage farmers to adopt it? It’s a farfetched vision, still, i’d like to hear your opinion about it.

    • 7 March, 2017 - 9:27 pm | link

      The problem is just the cost. It doesn’t seem likely to be economically viable on the scale required when you look at global supply and demand.

  • Dinara
    3 February, 2017 - 1:41 pm | link

    Thank you so much for this article!
    I was wondering if you could bring examples of specific economic analysis of existing projects in agriculture or any natural resources management acitivies. It is quite difficult to account for all externalities, and incorporate them into the spreadsheets to see the ERR. However this analysis is important to justify regional and global effort in pollution reduction, or climate change mitigation.

    • 7 March, 2017 - 9:26 pm | link

      I can, though the studies tend to be behind pay walls at academic journals. Here are some that I was involved in:
      Doole, G., Vigiak, O., Roberts, A.M. and Pannell, D.J. (2013). Cost-effective strategies to mitigate multiple pollutants in an agricultural catchment in North-Central Victoria, Australia, Australian Journal of Agricultural and Resource Economics 57(3), 441-460.
      Roberts, A.M. Pannell, D.J. Doole, G. and Vigiak, O. (2012). Agricultural land management strategies to reduce phosphorus loads in the Gippsland Lakes, Australia, Agricultural Systems 106(1), 11-22.
      Doole, G. and Pannell, D.J. (2012). Empirical evaluation of nonpoint pollution policies under agent heterogeneity: regulating intensive dairy production in the Waikato region of New Zealand, Australian Journal of Agricultural and Resource Economics 56(1), 82-101.
      Doole, G., Ramilan, T. and Pannell, D.J. (2011). Framework for evaluating management interventions for water quality improvement across multiple agents, Environmental Modelling and Software 26(7), 860-872.

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