Table of Contents

Handbook of Water Economics

Handbook of Water Economics

Edited by Ariel Dinar and Kurt Schwabe

Water scarcity, whether in the quality or quantity dimension, afflicts most countries. Decisions on water management and allocation over time, space, and among uses and users involve economic considerations. This Handbook assembles research that represents recent thinking and applications in water economics. The book chapters are written by leading scholars in the field who address issues related to its use, management, and value. The topics cover analytical methods, sectoral and intersectoral water issues, and issues associated with different sources of water.

Chapter 17: Model-based regulation of nonpoint source emissions

Kenneth A. Baerenklau and Jingjing Wang

Subjects: economics and finance, environmental economics, environment, water


Nonpoint source (NPS) pollution is characterized by both incomplete and asymmetric information: regulators are unable to observe emissions by individual polluters and also do not fully understand how ambient pollution levels are determined by those emissions. Largely for these reasons, NPS pollution remains a persistent environmental problem, often despite the expenditure of significant public resources aimed at reducing it. In light of this, researchers recently have called for new policy approaches that might prove more effective. The purpose of this chapter is to provide an overview of one such approach: model-based emissions regulation. Such regulations target estimated (modeled) emissions, rather than directly observed inputs or pollutant loads. Recent and ongoing advances in biophysical modeling of economic–environmental systems continue to improve our ability to predict environmental outcomes under uncertainty. Bringing such modeling to bear on an NPS pollution problem effectively approximates it as a point source problem and thus creates opportunities to utilize well-known policy instruments on estimated emissions that would otherwise be unobservable. This chapter presents a brief overview of NPS water pollution control with a focus on agricultural sources; emerging research directions; advantages and disadvantages of model-based regulation, including conditions under which the benefits should outweigh the costs; an example of a potentially beneficial application of this approach; and provides recommendations for policy implementation in practice.

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