The Relevance of Lags in Water Quality Trading Models for the Chesapeake Bay
Open Access
- Author:
- Mcphail, Lindsay Grace
- Area of Honors:
- Community, Environment, and Development
- Degree:
- Bachelor of Science
- Document Type:
- Thesis
- Thesis Supervisors:
- Theodore Roberts Alter, Thesis Supervisor
David Shapiro, Thesis Honors Advisor
James Samuel Shortle, Faculty Reader
Theodore Roberts Alter, Thesis Honors Advisor - Keywords:
- water quality trading
Chesapeake Bay
lag time
TMDL
pollution reduction - Abstract:
- This thesis analyzes the impact of incorporating a lag component into a basic water quality trading model. Water quality trading (WQT), also often referred to as water nutrient trading, is a potentially cost-effective and voluntary solution that provides incentives for pollution control. The ecological health of the Chesapeake Bay and its watershed has been suffering for several decades from the effects of pollution and conversion of land to more intensely developed uses. Since the early 1980s, policy makers, researchers, and local community groups have strived to combat pollution and its detrimental effects, but with limited progress. Nitrogen and phosphorous are the two main pollutants that contribute to eutrophication of the Bay. These plant nutrients are naturally occurring elements that are essential to life, but when concentrated at excessive levels result in large algae blooms that deplete oxygen necessary for aquatic life when they decay. Floating mats of algae also block sunlight essential to submerged aquatic vegetation that is crucial to the health of the Bay’s aquatic resources. Such pollutants come from fertilizers applied to farms, effluent and waste from wastewater treatment plants, and atmospheric deposition. Nutrient loads from agricultural lands contribute to nearly eighty percent of Bay pollution and are also the more difficult type of pollution to control. The Chesapeake Bay watershed is comprised of six states, with a human population that is expected to grow by 2 million people within the next 20 years. Water quality trading is a mechanism that has the potential to assist the jurisdictions within the watershed to meet the pollution reduction targets of the Chesapeake Bay Total Maximum Daily Load (TMDL). A literature review on water quality trading demonstrates both the benefits and complexities of the water quality trading mechanisms in addition to concerns with implementation. Conceptual economic models that incorporate a lag component are utilized to predict future equilibrium prices of pollution reduction credits across time periods under varying reduction targets and discount rates.