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Renewable portfolio standards have been promoted and implemented as market-based incentives for encouraging renewable generation. Markets for RECs in Massachusetts and Connecticut do not consistently behave according to hypothesized fundamentals. Regardless of the reason for this divergence, one must be skeptical that the two state programs have created an efficient, fundamental-driven market.

It is difficult to control agricultural Non-point Source (NPS) pollution, caused by overusing of chemical fertilizer, through laws alone. An agricultural extension program is an alternative way to reduce fertilizer input. This paper estimates the average change in fertilizer use of farmers, which is attributable to their participation in the agricultural extension program. The Inverse-Probability Weighted matching method is used to evaluate the average treatment effect for the farmers who engaged in the program and, to a limited extent, evaluate the impact of individual elements of the program. Surprisingly, we find that farmer-to-farmer training may have had a counterproductive effect while the posters may be the most effective program element in reducing fertilizer use in the context.

Uncertainties inherent in fisheries motivate a precautionary approach to management, meaning an approach specifically intended to avoid bad outcomes. Stochastic dynamic optimization models, which have been in the fisheries literature for decades, provide a framework for decision making when uncertain outcomes have known probabilities. However, most such models incorporate population dynamics models for which the parameters are assumed known. In this paper, we apply a robust optimization approach to capture a form of uncertainty nearly universal in fisheries, uncertainty regarding the values of model parameters. Our approach, developed by Nilim and El Ghaoui (Oper Res 53(5):780-798, 2005), establishes bounds on parameter values based on the available data and the degree of precaution that the decision maker chooses. To demonstrate the applicability of the method to fisheries management problems, we use a simple example, the Skeena River sockeye salmon fishery. We show that robust optimization offers a structured and computationally tractable approach to formulating precautionary harvest policies. Moreover, as better information about the resource becomes available, less conservative management is possible without reducing the level of precaution.

The 1990 amendments to the Clean Air Act created a trading program in sulfur dioxide (SO2) emissions that has served as the seminal example of how an emissions trading program could be designed. Yet despite its success, the trading program was essentially brought to an end by a series of regulatory and judicial actions. We begin with a brief discussion of the theoretical and historical antecedents to the SO2 trading program. We then describe the events that led to the program’s effective end in 2011. We argue that the SO2 trading program had two key vulnerabilities: SO2 emissions cause multiple environmental impacts, some with local consequences, and internal conflicts within the Clean Air Act. Because of these vulnerabilities, in the end, the program was unsustainable. We close with a discussion of the lessons that can be drawn from this history for future emissions trading programs.

This paper analyzes the economic, political and environmental factors that contribute to the consumption and under- or over-use of pesticides. Using unbalanced panel data analysis, we study how pesticide over- or under-use varies for countries with different per capita Gross Domestic Product (GDP) and foreign direct investment (FDI) stock. We begin by controlling for climatic and agricultural variables that should lead to variation in pesticide application rates. The residual from the regression provides an indication of a nation's deviation in pesticide use relative to the mean. The more negative the residual, the more likely it is that that nation is under-using pesticides. The more positive it is, the more likely it is that pesticides are being over-used. We study the correlation of this residual with important economic and political variables. We find that at low levels of per capita GDP, there is evidence of pesticide under-use and that at the highest income levels, there may be increasing over-use. We also look at the correlation of pesticide use with foreign direct investment stock, farm size, mechanization and democracy and, in most cases find significant correlation with these variables.

Newburn, David A. and Richard T. Woodward, 2011. An Ex Post Evaluation of Ohio’s Great Miami Water Quality Trading Program. Journal of the American Water Resources Association (JAWRA) 48(1): 156-169. DOI: 10.1111/j.1752-1688.2011.00601.x Abstract: Market-based approaches to address water quality problems have resulted in only limited success, especially in trading programs involving both point and nonpoint sources. We analyze one of the largest point-nonpoint trading programs – the Great Miami Trading Program in Ohio, administered by the Miami Conservancy District (MCD). Our evaluation focuses on the economic and institutional aspects of the program, including cost effectiveness, efficiency of bidding, transaction costs, trading ratios, and innovation. We use a unique dataset consisting of all bids from agricultural nonpoint sources and interviews of soil and water conservation district (SWCD) agents in the watershed. We find that the MCD’s reliance on county-level SWCD offices to recruit and advise farmers has been essential to achieve relatively high rates of farmer participation. Additionally, the MCD is able to partly free ride on the administrative costs that SWCD offices receive to assist federal conservation programs, which is helpful to lower costs for a fledgling trading program. However, the involvement of SWCD offices reduced the potential cost savings from the reverse auction structure because some agents were able to learn about the threshold price over the six rounds of bidding and help farmers bid strategically. Overall, the program structure serves as an effective model for future trading programs in other regions that seek to involve agricultural nonpoint sources.

Fisheries managers use licenses as a method of capping the size of a fishing industry, but as management goals change and the size of fishery stocks fluctuate, managers may be faced with the decision to buy back licenses. The vast majority of economic literature on license buyback programs focuses on the changes to economic efficiency of the fleet, often citing changes to the composition of fleet size. However, managers have little guidance in deciding how to structure a buyback auction, despite the fact that the auction structure plays a key role in determining which licenses are retired and in the composition of the remaining fleet. With the Texas Park and Wildlife Department's Inshore Shrimp License Buyback Program as a basis for auction design, this research uses three experimental treatments to analyze how individuals respond to various reverse auction structures. In terms of the quickest license expiration, our experiments suggest that fisheries managers should select a binding auction with...

National government-funded payments for environmental services (PES) programs often lack sustainable financing and fail to target payments to providers of important environmental services. In principle, these problems can be mitigated by supplementing government financing with contributions from leading environmental service users. We use original survey data and official statistics to analyze user financing in Costa Rica’s renowned national PES program, focusing on the amounts and sources of user financing, the drivers of contributions, and contributors’ perceptions of the PES program. We find that user financing has supported less than three percent of the acres enrolled in the program and that hydroelectric plants are the largest private sector contributors. Large hydroelectric plants tend to contribute while small ones do not. The weight of evidence suggests that in addition to ensuring the provision of forest environmental services, hydroelectric plants’ motives for contributing to the PES program include improving relations with local communities and government regulators — common drivers of participation in all manner of voluntary environmental programs. These findings raise questions about the potential of user financing to improve the efficiency and financial sustainability of national PES programs.

Using stated choice survey data we report on subjects’ perceptions of the risks of hurricanes and intended relocation decisions when faced with such risks. All of the subjects were displaced by either Hurricane Katrina or Rita, in New Orleans and other Gulf Coast areas in 2005. Results here suggest that subjective perceptions of risk are quite high as compared to scientific estimates of risk, and relocation decisions revealed from a discrete choice experiment are significantly determined by levels of hurricane strike risks.

NutrientNet is an Internet-based environment in which a class can simulate a market-based approach for improving water quality. In NutrientNet, each student receives a role as either a point source or a nonpoint source polluter, and then the participants are allowed to trade water quality credits to cost-effectively reduce pollution in a watershed. The authors provide an overview of the content and structure of this Web site. They focus on the features that make NutrientNet an effective teaching tool for instructors and a rich learning environment for students.

Instream flows may be essential in protecting aquatic species that are threatened or endangered. An economic model of the optimal allocation of water under pure uncertainty is developed, with particular attention paid to the situation when a species characterized by critical depensation is affected by instream flows. We adopt the notion of pure uncertainty that Frank Knight and Daniel Ellsberg intended, which applies when decision makers cannot reduce their uncertainty to a unique probability distribution. Following recent work by Hansen, Sargent, and others, we employ robust control as a way to deal with this problem. Copyright 2008, Oxford University Press.

The number of studies quantify the value of wetlands and the services provided by these ecosystems is rapidly expanding. The time is ripe for an assessment of what has been learned from this literature. Using results from 39 studies, we evaluate the relative value of different wetland services, the sources of bias in wetland valuation and the returns to scale exhibited in wetland values. While some general trends are beginning to emerge, the prediction of a wetland's value based on previous studies remains highly uncertain and the need for site-specific valuation efforts remains large.

There is rapidly growing interest in the use of market-based (MB) instruments in environmental policy. The papers in this session discuss three relatively new areas for such policies: groundwater contamination, nonpoint source surface-water pollution and carbon sequestration. The papers point out the potential for MB policies in these areas, but significant challenges remain. This comment highlights challenges related to five issues: monitoring and enforcement, trading ratios, baselines, transaction costs, and risk and uncertainty. All these issues must be addressed before MB policies can take the full step from economic theory to regulatory reality.

This article highlights important issues for graduate students seeking academic employment in agricultural economics. Emphasis is placed on developing a strategy to provide clear and reliable signals that the candidate will be a successful assistant professor, not just a successful graduate student. Publishing, teaching, and grant writing are identified as three important areas in which credible signals must be delivered. Advice regarding the interview process is also provided.

The management of common-pool resources (CPR) like fisheries has long been discussed in economics. The association of CPR with degradation and poor economic performance is well known due to excess harvests and poor management. The incentives faced by a CPR user create a dilemma. Users who limit their catch, if others do not; lose. And if no one limits his catch, everyone loses. Hardin’s (1958) “Tragedy of the Commons” still applies in many situations today. However, contrary to Hardin, there exists evidence that common management or self-governance can overcome these incentives. Under self-governance, user groups take control of the CPR to improve the economic viability of the resource (Ostrom 1990; Dietz et al. 2003). The self-governance of a CPR is successful if the users develop solutions by themselves, aligning extraction rates with resource productivity to achieve a common benefit, and developing resource-specific rules that overcome the problems of free riders and opportunistic behavior (Ostrom 2005). CPR users, due the daily use of the resource, have a “solid” knowledge of the situation, which is critical for successful management. Successful cases of self-governance have been documented around the world (see Ostrom 1990; Townsend and Sutton 2008). Study of these cases has been useful to identify the characteristics of “successful” CPR management regimes. However, our ability to predict when and where self-governance is most likely to be successful is still limited. This research reviews the theoretical framework regarding the conditions required for successful self-governance for the management (SGM) of a CPR. Then we propose a method to assess the potential for SGM based on the perceptions of the CPR users’ group and their predisposition toward SGM. Finally, we test our approach in a small-scale fishery in the north side of Mexico, offering insights about whether or not a change in governance is feasible and desirable in the study site. Knowing ex-ante the likelihood that SGM will succeed may save resources and direct the effort to an efficient management of the CPR. Governments and private entities spend effort and scarce resources to regulate environmental issues, and in many cases the implementation of policies is not effective. For example, fisheries have a long history of overexploitation that has reduced the ocean's capacity to provide food, preserve water quality and recover from perturbations (Worm et al. 2009). In many cases, SGM may offer an improvement over traditional regulatory approaches. An ex-ante assessment of the potential for SGM would provide valuable information for policy makers seeking strategies for CPR management. Our model is based on the six conditions (OCs) identified by Ostrom (1990). (1) ‘most users’ conclude that they will be harmed if they do not adopt new rules. (2) ‘most. users’ conclude that they will be affected in a similar way by the new rules, (3) ‘most users’ highly value continuing the activity, (4) users share generalized norms of reciprocity and trust, (5) users face low monitoring and enforcement cost, (6) users are a small and stable group. The basic proposition is that the probability of a community successfully adopting SGM is a function of the six conditions over all the CPR users’ communities. Each of the OCs, however, is actually a function of the perspectives of the users that make up the community. The challenge for ex-ante evaluation is that OCs can´t be directly observed. To overcome this challenge we developed a series of questions, used to create an index that is a function of the responses to such questions question on each condition. To arrive at a valid set of questions, each OC is expressed the language of the CPR user in a survey administered in the summer of 2010. It was pretested in two focus groups, one with students of Universidad Juarez of Durango and another with fishers of Francisco Zarco, another lake in the region. A group of biology students were hired as enumerators to conduct most of the surveys. To increase the response rate, each fisher received a compensation of 50 Mexican pesos (about 4 US dollars), and a prize from a random drawing at the end of the survey. From a total of 148 fishers registered in the three cooperatives, only about 100 were active at the time of the survey. We interviewed 111 individuals, and then our survey is basically a census. After checking for validity and reliability, the final database was reduced to 74 observations. Using the responses of 74 of the LCR fishers, we evaluate the predisposition of the LCR fishers toward SGM based on the six OCs. Our result indicates a high predisposition towards SGM. We find a predisposition of the LCR fishers toward SGM. The strongest measure was that indicating the extent to which users believe that rules affect all fishers similarly. The weakest indicator was regarding the size stability of the fishers’ group. Overall, our measures were consistent with the additional interviews and opinions of leaders and stakeholders of the three LCR fishing communities. Several limitations should be emphasized. The most significant is the lack of a true validity measure. We do not observe ex-post whether SGM was pursued or successful, therefore we do not have strong evidence that answering OCs favor SGM or not. Although Ostrom and others have studied the idea of predicting outcomes for the management of CPR, we are unaware of any attempt to make a systematic ex-ante assessment based on Ostrom’s six conditions. Hence, there has not been an opportunity to compare a measure of a community’s predisposition toward SGM to the outcome over time, which is what would be needed to establish the true validity of such an ex-ante measure. Because of our inability to test for validity, our approach does not yield clear guidance for policy. Fishers’ perspectives might lead to a favorable environment for SGM, but it does not indicate they will adopt self-governance. Finally, as expected in ex-ante analysis, at the time of the survey we did not have specific rules to show fishers the form that SGM might take in the fishery. It increases the level of uncertainty and may affect the responses of the fishers. Despite these caveats, this approach could be valuable. In some cases CPR users have received help from the government officials by giving technical inputs and/or speeding and control the early stages of the process (Townsend 2008). In other cases CPR users and government share the management. In either case, having an indication of whether the policy can work and the dimensions that might require the most attention could save time and money, valuable inputs in the policy making process. The approach that we propose is built on the solid foundation of Ostrom’ work, which distills the experiences in a large set CPRs around the globe. An ex-ante assessment would not only help communities and policy makers in each application, but as it is replicated in more systems, it will provide a valuable baseline that can greatly help in our understanding of the relationship between ex-ante conditions and ex-post success for the management of common-pool resources.