- Options Paper for cost effective supply of nutrient pollution reduction from riparian forest buffers: Using Chesapeake Bay Model coefficients, a standard for evaluating cost effectiveness of pollution reduction from riparian forest buffers was proposed.
- Efficiency Pricing - Next Steps: This Project builds upon earlier research on expected nutrient load reductions under a "per pound reduced" pollution payments scheme (i.e., efficiency pricing).
- Least-Cost Supply of Nitrogen Reduction from Two Important Agricultural Non-Point Source Best Management Practices in Maryland: By comparing expected load reductions under current and least-cost approaches it is possible to show how much nutrient pollution reduction is being foregone under current policies.
- Measuring Cost Efficiencies for Pollution Mitigation Practices in the Chesapeake Bay Drainage: Main Street Economics teamed with Professor Doug Parker, (University of Maryland, Department of Agricultural and Resource Economics) to refine cost estimates for pollution mitigation practices (BMPs) aimed at protecting and restoring the Chesapeake Bay.
- Feasibility Study for Providing Hatchery Products for Oyster Aquaculture: In 2007, Main Street Economics received funding to assess the feasibility of a program to assist local watermen in producing oysters for harvest.
- Supply and Management of Oyster Harvests in the Chesapeake Bay: This Project began in 2005 as a one year effort to consider the effect of harvests and harvest management in a way that would illuminate important economic implications of the non-native oyster introduction and its alternatives.
- Estimating Values of Maryland's State-Owned Forestland: In the fall of 2005, Main Street Economics began research aimed at estimating four different aspects of value generated by state-owned forestland.
Options Paper for cost effective supply of nutrient pollution reduction from riparian forest buffers (Completed)
In the Fall of 2011, Main Street Economics prepared an options paper for the US Forest Service addressing cost effectiveness of nutrient pollution reduction from riparian forest buffers (RFB) in the Chesapeake Bay drainage. A marginal cost curve showing the sorted set of potential supply of nitrogen reduction from RFB in Maryland, from least to most expensive, was proposed. This marginal cost curve provides a standard against which one can measure the cost effectiveness of different approaches to extend and expand nutrient pollution reduction from RFB. The paper provided background for the Forest Service's response to the 2010 Executive Order with regard to innovative ways to improve cost effectiveness in the achievement of Chesapeake Bay restoration goals. The Options Paper can be seen here.
Efficiency Pricing - Next Steps (Completed)
This Project built upon earlier research on expected nutrient load reductions under a "per pound reduced" pollution payments scheme (i.e., efficiency pricing). A central goal was to extend research results with particular reference to the increased nutrient load reduction that could be achieved at any given budget under efficiency pricing. Given the need for additional nutrient load reductions under the Chesapeake Bay TMDL, it was expected that a means for improving cost efficiency should have interest to planners and policy-makers.
In addition to extending current research results, the project also sought to develop a model to address the question, if nutrient pollution reduction pays better on acres with higher loads, will adopters then change production practices to ensure greater residual nutrients in order to capture higher rents from implementing the BMP? In effect, we examined price effects of a unit pricing scheme on nutrient pollution production. This research was done by Professors Darrell Bosch and James Pease, Virginia Polytechnic Institute Department of Agricultural and Applied Economics.
The Project also examined institutional aspects of a shift to unit pricing. Prototypes of pricing tools that are practical and easy to use were developed and field tested. A review of administrative barriers to efficiency pricing was undertaken.
Least-Cost Supply of Nitrogen Reduction from Two Important Agricultural Non-Point Source Best Management Practices in Maryland (Formerly, Implications of Nutrient Pollution Loading Caps for Load Sources in Maryland) (Completed)
In a classic example of circuitous science, this Project shifted from its original purpose, which was to estimate the economic impact of Maryland's pollution loading cap on load source sectors. Uncertainty about how nutrient load reductions would be obtained undermined the Project's original purpose. If reductions were obtained in a least-cost manner, then sectoral effects would be quite different than if they are not. In general, current policies achieve the latter result.
Main Street Economics researchers adapted to this problem by analyzing expected outcomes and showing nutrient pollution reduction expectations given current policies and given a pricing policy based on a mass measure estimate of load reductions per acre per year. Using Chesapeake Bay Model (version 5.3) outputs and cost estimates from previous work (see: Measuring Cost Efficiencies for Pollution Mitigation Practices in the Chesapeake Bay Drainage), we estimated nutrient load reductions under current policies. We then estimated supply curves based on the marginal cost of additional pounds of Nitrogen reduction.
By comparing expected load reductions under current and least-cost approaches it is possible to show how much nutrient pollution reduction is being foregone under current policies. This should be of interest to policy-makers who are trying to achieve additional nutrient pollution load reductions for the new Chesapeake Bay TMDL.
The Project team included Professor Doug Parker and Will Gans, UMD Department of Agricultural and Resource Economics and Jessica Rigelman, J7, LLC, as well as Robert Wieland, Main Street Economics.
The paper can be seen, here.
The Project was funded by the University of Maryland's Harry R Hughes Center for Agro-Ecology under a CSREES Grant from USDA.
Measuring Cost Efficiencies for Pollution Mitigation Practices in the Chesapeake Bay Drainage (Completed)
Main Street Economics teamed with Professor Doug Parker, (University of Maryland, Department of Agricultural and Resource Economics) to refine cost estimates for pollution mitigation practices (BMPs) aimed at protecting and restoring the Chesapeake Bay. The project developed cost estimates for BMPs on a per acre basis using a general accounting approach. The resulting per acre costs were then used to estimate unit (lbs/year) nutrient pollution reduced per dollar cost for most of the targeted BMPs.
Cost estimates in the study were based on either or both constructed costs, using input prices and information about the production process, and program costs, using actual payment histories from programs that aim to expand BMP implementation. Cost efficiencies were then calculated using these estimated costs in tandem with Chesapeake Bay Program (CBP) nutrient loading rates and technical efficiencies defined in research undertaken by the Mid-Atlantic Water Program (UMD). Each BMP targeted under the study was shown to have a range of unit cost efficiencies; depending on how the practice is implemented and on which sorts of acres it is implemented. It was noted that, sorting these cost efficiencies measured in $/lb N reduced from smaller to larger numbers, one identifies a precursor for a supply curve for pollution reduction from a BMP over a range of prices paid.
In order to complete an estimate for industry-wide supply of N reduction, it was necessary to estimate the total available supply of land on which the BMP could be implemented. This was done for the cover crop BMP. While the resulting supply calculation has theoretical meaning, it is merely academic until policy-makers decide to start buying non-point source pollution reduction by the pound.
The Project was funded by the NOAA Chesapeake Bay Office through the Maryland Department of Natural Resources and was completed in June of 2009. The Project paper is posted here.
Feasibility Study for Providing Hatchery Products for Oyster Aquaculture (Completed)
In 2007, Main Street Economics received funding to assess the feasibility of a program to assist local watermen in producing oysters for harvest. That program envisioned providing to local watermen either seed oysters or eyed larvae for remote setting. The study focused on commercial prospects for on-bottom versus contained oyster aquaculture. It examined the products produced by hatcheries in Maryland and Virginia and the ways in which different oyster production methods are beginning to change demand for those products.
In analyzing different oyster production methods with respect to costs and returns, it was shown that the "contained systems" (i.e., cages and floats) showed some promise for providing returns to capital and management. Spat-on-shell on the bottom was shown to require ongoing infusions of funds for continued operation.
Demand for hatchery produced oyster seed stock is clearly rising robustly in Virginia. Much of the aquacultural production that generates this demand utilizes contained aquaculture systems, primarily on-bottom cages. Moreover, much of this production occurs in mesohaline reaches of Virginia's waters, at salinities similar to those found lower in Maryland's tributaries. Successful aquacultural production in Virginia might be expected to have a demonstration effect for potential aquaculturalists in Maryland.
The major Maryland supplier of hatchery produced oyster seed stock, HPH, has narrowed its focus to producing larvae for local setting on whole shell. With no other large-scale suppliers in the State, it is not clear that there will be sufficient availability of oyster seed stock set on micro-cultch for any nascent contained aquaculture industry. While some producers in Maryland have shown a capability to produce their own larvae for setting on micro-cultch, it is not likely that self-supply of seed stock will be widespread.
This Project was funded by Morgan State University Estuarine Research Center.
Supply and Management of Oyster Harvests in the Chesapeake Bay (Completed)
This Project began in 2005 as a one year effort to consider the effect of harvests and harvest management in a way that would illuminate important economic implications of the non-native oyster introduction and its alternatives. Because there was no information about costs in the harvest industry, the Project focused initially on an empirical effort to estimate operating costs in the oyster fishery. A survey instrument was developed, a sample frame enumerated and a report titled Operating Costs in the Chesapeake Bay Oyster Fishery was submitted August 30, 2006 (revised March 10, 2008).
A second Project component focused on management policy in the Chesapeake Bay oyster fishery and, more narrowly, oyster management in the Maryland portion of the Bay. Data on harvests, restoration efforts and management policy was gathered over the summer and fall of 2006. That data was assessed in light of standard economic theory concerning open-access management regimes and a report titled Managing Oyster Harvests in Maryland's Chesapeake Bay was submitted in February, 2007 (revised March, 2008).
Given the apparent economic and biological failure in the public oyster fishery, alternative production systems were also considered. The project examined costs and returns for two different technologies for contained oyster aquaculture and a third technology for the on-bottom hatchery-based methods employed primarily by the Oyster Recovery Partnership in Maryland. A report titled Costs and Returns to Oyster Aquaculture in the Chesapeake Bay was submitted in November, 2007 (revised March, 2008).
A fundamental goal of the project was to develop an economic model capable of defining an optimal path for oyster management (regardless of species), with respect to commercial and environmental returns to the resource. This goal was constrained by several factors, some of which were overcome by the project. However, the key requirement - a growth function for Chesapeake Bay oyster stocks in the presence of disease - remained elusive. An alternative to using the demographic growth model to predict stock change was developed under the project.
The rate of change implied by this treatment was then used with limiting stochastic events in a harvest (net present value) optimization model. Using historical average product prices and cost estimates from the earlier project paper on operating costs in the fishery, Project researchers applied an optimization procedure to determine optimal harvest rates over a fixed time horizon. A report titled Estimating Net Present Value in the Northern Chesapeake Bay Oyster Fishery was submitted in July, 2008.
The Project extended to three years and was funded by the NOAA Chesapeake Bay Office under its Non-Native Oyster Research Program.
Estimating Values of Maryland's State-Owned Forestland (Completed)
In the fall of 2005, Main Street Economics began research aimed at estimating four different aspects of value generated by state-owned forestland. In the execution of the Project, two of these, Commercial Timber Value, and Carbon Sequestration Value were combined to show an implied relationship between timber management and carbon sequestration. Teaming with researchers from Versar, Inc. (funded separately under Maryland's Power Plant Research Program), the Project contributed to the development of an improved mass balance accounting of the fate of carbon in forest biomass and market storage with respect to subtractions and contributions to atmospheric carbon dioxide. This improved accounting entailed estimating non-linear rates of timber growth (biomass accumulation) and carbon sequestration under existing State Forest conditions over long time horizons. Applying this accounting approach indicated that timber and carbon sequestration are complimentary products of current management.
A third aspect of forestland value that was estimated under the study is Recreational Value. Using a travel cost approach, Main Street Economics researchers surveyed samples of forest and park visitors at three different parks and forests around the state. The researchers then used the resulting data to estimate demand functions for recreation at those facilities. From those demand functions and Park Service visitation data, the researchers estimated annual consumer surplus - a dollar denominated measure of recreational benefits - at the targeted facilities. This dollar value does not represent money actually paid for recreation but is, rather, an estimate of the imputed value of the utility derived from visiting the state's parks and forests.
A fourth aspect of forestland value estimated under the study was the Existence Value of state-owned forestland. This value tracks citizens' desire to know that the forestland is there. It was estimated through a group-format, contingent valuation survey of a >400 person sample of Marylanders. A scenario suggesting a shift from current harvest rates to slightly higher rates on state-owned forestland was tested in both open-ended and a closed-ended approaches. Results suggested that increasing harvest rates as proposed would not generate sufficient benefit to off-set the price in terms of existence value. The study also addressed some fundamental aspects of this value with data from a survey question about how forest management should be based.
The Project did not develop a "whole value" measure for state-owned forests, but rather provided managers with another means for comparing management options while taking multiple uses and forest values into account. It was funded by a USDA-CSREES special grant to the University of Maryland's Harry R. Hughes Center for Agro-Ecology.