Non-point Source Pollution Control
The focus of this research is the application of experimental economic laboratory methods to the evaluation of alternative policies/institutions for non-point source pollution control. We are particularly interested in the design of non-point tradable emissions permit institutions that adequately capture the interdependencies between non-point information problems.
Background
Non-point source pollution is an environmental externality which is characterised by interdependent information problems. These problems include moral hazard, adverse selection, stochastic environmental effects, and imperfect knowledge about pollutant generation, transport, and fate. Studies undertaken in Australia suggest pollution from non-point sources are a major source of water quality impairment and an important contributor to observed declines in ecosystem health (see for example the National Land and Water Resources Audit (2001); the Productivity Commission's report on Industries in the Great Barrier Reef Catchment and Measures to Address Declining Water Quality (2003); and the South East Queensland Water Quality Management Strategy (2000)).
Information problems have complicated the design and application of environmental policies for non-point source pollution control. Historically, regulatory and voluntary approaches have been the most common type of non-point policies, however these policies have met with limited success. More recently increasing interest is being shown towards the use of market-based instruments (MBIs) such as taxes/subsidies and tradable emissions permit schemes. MBI's have the advantage of providing flexibility to individual landholders and industries in achieving water quality targets by taking advantage of the inherent differences in the production characteristics of firms. Properly designed economic incentives are often more cost-effective than traditional regulatory approaches, not only by providing incentives for firms to undertake pollution abatement, but also by encouraging technological innovation, reducing compliance costs for firms, and promoting improved social welfare. The application of economic incentives such as water pollution credit trading markets to achieve water quality targets is widely practiced overseas, particularly in the United States. Despite the increased acceptance of economic incentives for managing water extraction and allocation in Australia, their application to water quality management is in its infancy with a strong emphasis here on 'command-and-control' regulation.
Our Research
Institutional testing is carried out both in the laboratory with university students and in the field with agricultural enterprises (non-point firms). Our research aims to evaluate the non-point institutional designs in both repeated static and dynamic experiments.
Institutional variables being evaluated include:
Research Outcomes
