An Analysis of the Economic Incentives for Nonpoint to Point Nutrient Credit Trading in Pennsylvania

Open Access
Rice, Tony Weston
Area of Honors:
Agribusiness Management
Bachelor of Science
Document Type:
Thesis Supervisors:
  • Stanley Ernst, Thesis Supervisor
  • David Abler, Honors Advisor
  • Nutrient Trading
  • Water Quality
  • Conservation Agriculture
Nutrient credit trading in the Chesapeake Bay watershed provides agricultural producers an opportunity to implement conservation practices on their farms and receive economic benefits for nitrogen and phosphorus pollution reduction into the Bay watershed. This thesis explores the history of the trading program and synthesizes research gathered on the effectiveness of nutrient abatement efforts from nonpoint sources. Recent changes to the nonpoint-point trading ratios have disincentivized nonpoint source participation in the program. These changes were precipitated over concerns that the calculation methodology for nonpoint nitrogen and phosphorus reductions was insufficient in capturing true reductions from agricultural sources. Until new calculation procedures are developed, a 3:1 trading ratio has been implemented in the interim. Producer participation data indicates that the change has reduced enrollment in the trading program. In supplement to the nutrient trading initiative, cost-share conservation programs provide additional funding for agricultural producers to benefit from nutrient emission reduction efforts. This thesis further explores the effectiveness of cost-share programs, particularly when implemented on an agricultural operation also generating tradable nutrient credits. While the trading program is undergoing structural changes, it is likely that cost-share programs are more cost-effective in limiting nutrient runoff into the Bay watershed. Included are recommendations for greater funding for conservation cost-share programs to fuel farmer integration of best management practices from which they may economically benefit.