Most of my work in this area was motivated by issues relating to water quality problems in Maryland, including the Chesapeake Bay and groundwater. But I've also been doing a fair amount of work in this area with some Finnish collaborators.
Some highlights of my research in this area are:
Promoting adoption of BMPs has been the centerpiece of efforts to meet water quality goals in the Chesapeake Bay for over a quarter of a century. The 1998 Maryland WQIA accelerated those efforts by requiring nutrient management plans for commercial farm operations. Compliance with TMDL water quality regulations is likely to require even more widespread use of BMPs and may require expansion of existing policies or development of new policies. This report provides an overview of current use of BMPs and characteristics of nutrient management plans in Maryland a decade after implementation of the WQIA.
Lichtenberg, Erik, Doug Parker, and Sarah Lane, “Best Management Practice Use and Nutrient Management in Maryland: A 2010 Snapshot”, Center for Agricultural and Natural Resource Policy, Department of Agricultural and Resource Economics, University of Maryland, College Park, February 2012.
We examine whether subsidies for conservation on working farmland induce farmers to expand cultivation on more vulnerable land, potentially offsetting reductions in environmental spillovers, using a switching regression model with endogenous switching and censored endogenous variables applied to Maryland farm-level data. We find no indication that cost share awards are targeted toward water quality improvements. Receipt of cost sharing increases conservation practice adoption but not the shares of land allocated to conservation, implying little adverse selection in awards. Cost sharing decreases the share of land allocated to vegetative cover, so that environmental quality improvements from conservation are likely offset to some degree.
Lichtenberg, Erik and Ricardo Smith-Ramirez, “Slippage on Conservation Cost Sharing”, American Journal of Agricultural Economics 93(1), 113-129 (January 2011).
Spatially differentiated policy instruments are efficient when landscapes are heterogeneous. But these policies are generally not self-enforcing, so ensuring compliance is costly. We examine the design of agri-environmental policies designed to achieve reductions in fertilizer application rates and installation of riparian buffers through the use of incentive-based instruments. We derive monitoring strategies capable of ensuring perfect compliance from risk neutral farmers given realistic limits on penalties for non-compliance. We then apply that framework empirically using a parametric model reflecting Finnish agricultural and environmental conditions. The results of our simulations indicate that subsidies for installing and maintaining buffer strips, used alone, are the most cost effective means of reducing nitrogen runoff from crop production. This policy is also the most attractive politically, in that it reduces farm income less than the alternatives considered.
Jussi Lankoski, Erik Lichtenberg, and Markku Ollikainen, "Agri-Environmental Program Compliance in a Heterogeneous Landscape", Environmental and Resource Economics 47(1), 1-22 (September 2010).
Potential earnings from permits sales may provide an incentive for farmers to accept water quality regulation. We show that it is optimal to adjust point/nonpoint effluent trading ratios for heterogeneity in marginal environmental damage and degradation/retention of the pollutant across locations in a watershed. A simulation based on data from the Kymi River Valley, Finland indicates that farmers are the greatest suppliers of permits, as expected, but that gains from trading vary substantially. Some farmers may become net buyers of permits and thus net losers from regulation. The benefits of effluent trading are distributed unevenly among point sources as well.
Lankoski, Jussi, Erik Lichtenberg, and Markku Ollikainen, "Point/Nonpoint Effluent Trading with Spatial Heterogeneity", American Journal of Agricultural Economics 90(4), 1044-1058 (November 2008).
Nutrient management planning has been advocated as a means of improving efficiency and reducing environmental problems but these gains may not be realized if plans overstate fertilizer requirements. Using data from a survey of Maryland farmers, we find that nutrient management planning was adopted more frequently by larger operations raising grain or cattle but not by those on more environmentally sensitive land. Independent crop consultants and fertilizer dealers were more likely to recommend increases in fertilizer use, consistent with fears about bias. Farmers preparing their own plans were more likely to recommend decreases in fertilizer use, suggesting the presence of hidden information.
Lawley, Chad, Erik Lichtenberg, and Doug Parker, “Biases in Nutrient Management Planning”, Land Economics, 85(1), 186-200 (February 2009).
Many notable pollution problems occur in industries where production is carried out under vertical contractual arrangements that are characterized by conditions of double moral hazard. In this paper we derive optimum pollution taxes under such conditions. In contrast to situations characterized by full information, we show that imposing a Pigouvian tax equal to the marginal cost of pollution on either the upstream or the downstream agent or the industry as a whole does not lead to the first best level of pollution. On the contrary, the industry should pay for less than the full cost of environmental damage. In addition, we find that under conditions of double moral hazard both agents should be taxed. This is because imposition of a tax in this setting affects equilibrium contract terms and the incentives that each agent faces at the margin. Thus imposing the tax on one agent alone cannot replicate the optimum.
Aggarwal, Rimjhim and Erik Lichtenberg, “Pigouvian Taxation under Double Moral Hazard”, Journal of Environmental Economics and Management 49, 301-310 (2005).
Maryland farmers' adoption of some best management practices is highly responsive to adoption costs, suggesting that cost sharing can induce substantial increases in adoption. Several practices appear to be complements.
Lichtenberg, Erik, “Cost-Reponsiveness of Conservation Practice Adoption: A Revealed Preference Approach”, Journal of Agricultural and Resource Economics 29, 420-435 (December 2004).
The sustainability of agriculture and prospects for improving its environmental performance are inherently limited. Agriculture's high degree of variability makes direct regulation inefficient. Subsidies for improving environmental performance can have perverse consequences. Pollution taxes are likely the most efficient and effective form of policy. Interdisciplinary research is needed to provide models for performance evaluation.
Lichtenberg, Erik, “Some Hard Truths about Agriculture and the Environment”, Agricultural and Resource Economics Review 33, 24-33 (April 2004).
Subsidies for conservation on working farmland can worsen environmental problems by inducing farmers to expand the amount of land cultivated and by increasing cultivation intensity.
Lichtenberg, Erik, "Are Green Payments Good for the Environment?", Agricultural and Resource Economics Review 33, 138-147, (April 2004).
Prevention is not always more cost effective and precautionary than ex post treatment. A greater degree of precaution can result in less reliance on prevention. An empirical case study indicates that treatment alone is the most cost effective means of dealing with nitrate in most Maryland community water system wells. The incremental cost of precaution is substantial.
Lichtenberg, Erik and Tony M. Penn, “Prevention versus Treatment Under Precautionary Regulation: A Case Study of Groundwater Contamination Under Uncertainty”, American Journal of Agricultural Economics 85, 44-58 (February 2003).
An overview of the agricultural economics literature on nonpoint source pollution, including policy implications of heterogeneity among emitters, randomness, hidden information/adverse selection problems, and moral hazard. Impacts of agricultural policies on nonpoint source pollution problems.
Lichtenberg, Erik, “Agriculture and the Environment”, in Bruce L. Gardner and Gordon C. Rausser (ed.), Handbook of Agricultural Economics. Amsterdam: Elsevier, 2002.
Corn and soybean growers in the Mid-Atlantic are willing to spend more on pesticides that won't leach into groundwater. Growers who have experienced adverse health effects from pesticides (either directly or indirectly) have heightened concern about environmental and occupational safety problems arising from pesticide use and are more likely to use certain non-chemical control practices.
Lichtenberg, Erik and Rae Zimmerman, “Farmers’ Willingness to Pay for Groundwater Protection”, Water Resources Research 35, 833-841 (March 1999).
Lichtenberg, Erik and Rae Zimmerman, “Adverse Health Effects, Environmental Attitudes, and Pesticide Usage Behavior of Farm Operators”, Risk Analysis 19, 189-211 (April 1999).
Upstream states may force downstream states to clean up more pollution than is socially optimal. Long run equilibrium levels of a stock pollutant will also tend to be higher, especially if the pollutant degrades slowly. An empirical example using parameters relating to phosphorus pollution of the Chesapeake Bay illustrates the magnitudes of these effects.
Lichtenberg, Erik, and Lars J. Olson, “Noncooperative and Cooperative Management of an Accumulative Water Pollutant”, in Richard E. Just and Sinaia Netanyahu (ed.), Conflict and Cooperation in Transboundary Water Resources. Boston: Kluwer Academic Publishing, 1998.
Corn and poultry production are positively correlated with elevated nitrate concentrations in Maryland community water system wells.
Lichtenberg, Erik and Lisa K. Shapiro, “Agriculture and Nitrate Concentrations in Maryland Community Water System Wells”, Journal of Environmental Quality 26, 145-153 (January-February 1997).
Most environmental regulations require providing an adequate level of protection with a sufficient margin of safety against uncertainty. A formal theoretical model of cost-effective regulation under this approach shows that some regulatory measures may be undertaken mainly to reduce uncertainty while others increase protection on average. A higher the margin of safety increases the total cost of regulation but lowers the marginal cost. An empirical study of drainage management in California shows that the incremental cost of increasing the margin of safety can be quite high.
Lichtenberg, Erik, "Determination of Regional Environmental Policy Under Uncertainty: Theory and Case Studies", in Ariel Dinar and David Zilberman (ed.), Issues in the Economics and Management of Agricultural Drainage Water. Norwell, MA: Kluwer Academic Publishing, 1991.
Lichtenberg, Erik, David Zilberman and Kenneth T. Bogen, "Regulating Environmental Health Risks Under Uncertainty: Groundwater Contamination in California", Journal of Environmental Economics and Management 17, 22-34 (July 1989).
Lichtenberg, Erik and David Zilberman, "Regulation of Marine Contamination Under Environmental Uncertainty: Shellfish Contamination in California," Marine Resource Economics 4, 211-225 (1988).
Lichtenberg, Erik and David Zilberman, "Efficient Regulation of Environmental Health Risks", Quarterly Journal of Economics 49, 167-178 (February 1988).
Farmers in the Northern High Plains tend to use center-pivot irrigation systems on low-quality land (sandy soils) that is more vulnerable to groundwater contamination. Commodity price supports may exacerbate problems of groundwater quality.
Just, Richard E., Erik Lichtenberg and David Zilberman, "Effects of the Feed Grain and Wheat Programs on Irrigation and Groundwater Depletion in Nebraska", in Richard E. Just and Nancy Bockstael (ed.), Commodity and Resource Policies in Agricultural Systems. New York: Springer-Verlag, 1991.
Lichtenberg, Erik, "Land Quality, Irrigation Development and Cropping Patterns in the Northern High Plains", American Journal of Agricultural Economics 71, 187-194 (February 1989).