Empirical Evaluation of Nonpoint Pollution Policies Under Agent Heterogeneity: Regulating Intensive Dairy Production in the Waikato Region of New Zealand

20 Pages Posted: 4 Jan 2012

See all articles by Graeme J. Doole

Graeme J. Doole

The University of Western Australia - School of Agricultural and Environment

David J. Pannell

University of Western Australia

Date Written: January 2012

Abstract

Models used for policy evaluation rarely consider firm heterogeneity, despite its importance for instrument design. This study considers agent heterogeneity explicitly in the evaluation of policies for nonpoint pollution control through the integration of decomposition and calibration procedures for programming models. The application concerns the regulation of nitrate leaching from intensive dairy production in the Waikato region of New Zealand. Failing to represent firm heterogeneity leads to widely different estimates of mitigation costs, relative to where heterogeneity is considered. Variation in baseline emissions and the slopes of abatement cost curves between firms renders a differentiated policy less costly than a uniform standard. However, the relative values of these policies are not broadly different, as firms required to do the most abatement – intensive farms with large baseline pollutant loads – can do so more cheaply, on average.

Keywords: differentiated instruments, environmental policy, heterogeneous agents

Suggested Citation

Doole, Graeme J. and Pannell, David J., Empirical Evaluation of Nonpoint Pollution Policies Under Agent Heterogeneity: Regulating Intensive Dairy Production in the Waikato Region of New Zealand (January 2012). Australian Journal of Agricultural and Resource Economics, Vol. 56, Issue 1, pp. 82-101, 2012. Available at SSRN: https://ssrn.com/abstract=1979265 or http://dx.doi.org/10.1111/j.1467-8489.2011.00565.x

Graeme J. Doole (Contact Author)

The University of Western Australia - School of Agricultural and Environment ( email )

Nedlands, Western Australia 6907
Australia

David J. Pannell

University of Western Australia ( email )

35 Stirling Highway
Crawley, Western Australia 6009
AUSTRALIA
(08) 9844 8659 (Phone)
(08) 9844 8659 (Fax)

HOME PAGE: http://www.general.uwa.edu.au/u/dpannell/welcome.html

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