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Comparing the Baltic Sea and Chesapeake Bay Provides Lessons for More Cost-Effective Policies

Posted by Marc Ribaudo, Economic Research Service in Conservation
Apr 28, 2015
Ducks on a lake with sunset
USDA's Economic Research Service, and other researchers, analyzed the similarities and differences of the Chesapeake Bay and the Baltic Sea to help preserve the water quality of each.

Situated on two different continents and separated by thousands of miles, the Chesapeake Bay on the East Coast of the United States and the Baltic Sea in northern Europe face remarkably similar problems. Both are relatively shallow basins of brackish water. Both marine areas suffer from eutrophication--pollution caused by introduction of chemical nutrients. For both water bodies, agriculture is the single most important source of those nutrients, and governments have implemented policies to reduce nutrient loads and improve marine ecosystems.

Researchers at the Natural Resources Institute Finland, USDA's Economic Research Service, and the University of Helsinki have analyzed the similarities and differences between the institutional settings and protection policies of the Chesapeake Bay and the Baltic Sea. The aim was to identify avenues for reducing the cost of meeting water quality objectives. The very different political and institutional histories of the jurisdictions within the respective watersheds provide both contrasts and similarities. The six U.S. States in the Chesapeake watershed have a common political history and operate under Federal environmental law. The Baltic watershed is made up of 14 nations whose intergovernmental relations are strongly influenced by Cold War legacies. Yet current policies in both watersheds rely heavily on voluntary approaches to control agricultural runoff.

Examining the policies and programs in place yields lessons for designing and implementing future policies to control nutrient pollution. First, flexible, market-like policy instruments promote innovation and are the most likely to achieve cost-effective pollution control. Water quality trading to meet pollution control goals is an example. Second, actively targeting agri-environmental programs to farms that can provide the biggest improvement in water quality per dollar spent can significantly reduce program costs. Third, a bidding process or auction to provide program payments, as in the Conservation Reserve Program, could also reduce pollution abatement costs.

Also among the researchers’ findings was that efficiency can be improved by rewarding results-- nutrient reductions--rather than compensating farmers for the cost of implementing conservation practices. Although pollutant losses from agricultural lands cannot be easily measured, new field-scale modeling tools enable conservation payments to farmers to be based on estimated reductions in pollutant loads.

To design effective policies, program managers need to understand how on-farm management choices affect the nutrients reaching surface waters. And they need to understand what influences farmers’ management choices. As we improve our ability to make accurate predictions about how conservation measures work in different (and even distant) settings through research, we will be able to improve the cost-effectiveness of pollution abatement programs.

Check out our article for a fuller discussion of the Baltic Sea and Chesapeake Bay. ERS has recently released a report on policies for reducing agricultural pollutants to the Chesapeake Bay.

Category/Topic: Conservation