Dr. Kevin J. Egan

Cost-Effective Economic Policies to Achieve Cleaner Water: reducing Harmful Algal Blooms in Lake Erie, invited presentation sponsored by the Tri-State Watershed Alliance, Defiance, Ohio, 2017; invited presentation sponsored by The Rotary Club of Port Clinton, Ohio, Port Clinton, Ohio, 2017.

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Presentation Summary

Kevin's research areas focus on the value of improving water quality and the cost effective economic policies we can enact to achieve cleaner water. One currently untried cost-effective economic policy is a corrective fee on fertilizer sales. The corrective fee works by using the very simple law of demand principle: quantity demanded for a good decreases as the price of that good increases. Citizens’ application of fertilizer (farmers and anyone with a lawn who applies fertilizer) leads to fertilizer run-off and access nutrients in Lake Erie causing harmful algal blooms. The corrective fee on fertilizer incentivizes all purchasers to use the fertilizer more carefully and reduce the run-off. In particular, purchasers will not only purchase less fertilizer but rationally take more actions to ensure the purchased more expensive fertilizer stays on the field or lawn.

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One issue with any corrective fee is what is done with the extra government revenue raised from the fee? There are many options. One option is a full rebate of the revenue back to the agricultural community in some way, such as a lump-sum payment to all farmers (farmers are the vast majority of fertilizer purchases). Since the majority of farms are ‘small farms’ the result would be that the majority small farms would receive back a rebate check greater than the amount they spend extra for fertilizer.

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Another option is to use part of the revenue to fully fund conservation programs already in place such as the Environmental Quality Incentives Program (EQIP) https://www.nrcs.usda.gov/wps/portal/nrcs/main/national/programs/financial/eqip/

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In this way the dollars are still being funneled back to the agriculture community as efficient subsidies to help farmers take actions on their private land to improve our water quality.

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"Using Benefit-cost Analysis to Estimate the Value of Wetlands to Society," invited presentation, Ohio Wetlands Science Summit, Ohio Wetlands Association, "H2-OH! Ohio Wetlands Work for Water Quality," Westerville, OH, October 14, 2017.