FREC 424--Resource Economics

Pollution Policies I: Water Pollution

This lecture will discuss policies for controlling pollution of surface water and groundwater. A general review of federal pollution control policies illustrates the old adage "The road to hell is paved with good intentions." In general, these policies have targeted ambitious environmental quality standards; they have relied almost exclusively on complex and impractical regulations rather than economic incentives (emissions charges or marketable permits); they have largely ignored the economic costs of these regulations; and they have mostly fallen far short of achieving their stated environmental quality objectives.

Water contamination is caused by pollutant discharges from point sources into streams (e.g., factories and sewage-treatment plants) and surface runoff into streams or leaching into groundwater from non-point sources (e.g., cropland and urban storm-water). Point sources are generally far easier to identify and regulate than non-point sources.

Many fund pollutants are bio-degradable in aerobic waterways, but deplete dissolved oxygen (DO) levels and disrupt aquatic ecosystems. DO indexes stream quality at various points. Biodegradable pollutant loadings are commonly gauged via biochemical oxygen demand (BOD). Oxygen sags are downstream points with low DO readings. Other fund pollutants include thermal pollution from industrial cooling systems; excess plant nutrients (nitrates and phosphates) which generate excess aquatic weeds and turn waterways eutrophic; persistent chemical pollutants such as DDT which bioaccumulate in species which are high in the food chain; and infectious organisms which may thrive in water systems.

Stock pollutants include heavy metals which may bioaccumulate in the food chain. Surface waters can assimilate various pollutants which groundwater cannot. Thus some contaminants which are fund pollutants in surface waters are essentially stock pollutants in aquifers.

Environmental officials may set ambient standards specifying minimum DO levels for all receptors along a stream, or they may set effluent standards for maximum BOD's from individual sources.

Control of surface water quality in the US has traditionally been a concern of individual states. The Federal Water Pollution Control Act, as amended in 1972, requires all point sources to obtain discharge permits, and industrial point sources to implement "best practicable technologies" (BPT's) by 1977, "best available technologies" (BAT's) by 1983, and eliminate all discharges by 1985. The 1972 FWPCA was a total failure (and control of point sources was supposed to be the easy part!). The EPA quickly got bogged down in the complexities of defining effluent standards, BPT's and BAT's; the states were supposed to enforce whatever standards the EPA did promulgate, but generally didn't; and the implementation deadlines were never met. The 1977 amendments to the FWPCA postponed these deadlines, and focused more effort on toxics.

The FWPCA's ultimate zero-discharge goal for all pollutants has proved unattainable. First, the zero discharge objective is economically inefficient for more benign pollutants. Second, as harsher and harsher penalties are established for non-compliance, the public and the courts view the law as increasingly unreasonable. The FWPCA's very tough language actually impaired its effectiveness!

Focusing on BPT's rather than actual pollution abatement is a mistake. Even if other abatement technologies are cheaper and more effective, firms adopt the BPT's specified by the EPA so they can avoid liability when the BPT fails to control effluents adequately. Firms don't have use BPT's effectively.

The Delaware Estuary Study compared the economic efficiencies of achieving target DO levels via (1) uniform effluent treatment standards; (2) uniform effluent charges; (3) zoned effluent charges reflecting ambient quality in different zones; and (4) a least cost system of variable effluent charges based on ambient quality at each discharge point. The effluent charges were much more cost-efficient than the uniform treatment standards, and zoned charges were close to least-cost. These results are consistent with the experiences of various European countries which use effluent charges. Nevertheless, the US has generally stuck with inefficient standards.

Control of non-point water pollution sources is still largely left to the states. Does the fact that non-point sources are harder to control, justify even more intensive controls on point sources? Only if the marginal damages from non-point sources are lower, or the marginal costs of non-point controls are higher.

The USDA's Conservation Reserve Program is the principal non-point program at the federal level (as well as being an important agricultural price support program): farmers retire environmentally sensitive cropland in exchange for annual rental payments.

Groundwater pollution problems reflect diverse land uses and complex physical properties of soils and aquifers. The EPA's federal groundwater quality standards are easily met in some areas and impossible to meet in others. Toxics (mainly from point sources such as industrial waste sites and landfills) are controlled under CERCLA (see below); controlling other groundwater contaminants (mainly from non-point agricultural sources) requires changes in agricultural practices and land uses hich state and local governments have been slow to implement.