GREEN PAYMENT PROGRAMS FOR NONPOINT SOURCE POLLUTION CONTROL: HOW IMPORTANT IS TARGETING FOR COST-EFFECTIVENESS?
By: Baerenklau, Kenneth A.
Baerenklau, Kenneth A., GREEN PAYMENT PROGRAMS FOR NONPOINT SOURCE POLLUTION CONTROL: HOW IMPORTANT IS TARGETING FOR COST-EFFECTIVENESS?, Journal of Agricultural and Resource Economics, Volume 27, Issue 2, December 2002, Pages 406-419
Mechanism design theory is used to examine the case of a cost-minimizing regulator who uses input-reduction subsidies to meet an exogenously imposed ambient standard for nonpoint source pollution. A general result claimed for a welfare-maximizing equilibrium. Numerical results suggest the ability to directly target contracts reduces costs significantly for the regulator. But in the absence of this ability, indirect targeting reduces costs only slightly.