An efficient cost-sharing program to reduce nonpoint-source contamination: theory and an application to groundwater contamination

Abstract

This research evaluates the economics of cost-sharing improved irrigation technologies to reduce agricultural, nonpoint-source contamination. Irrigation and fertilization inefficiencies are modeled within a nonjoint production process to evaluate both private and public costs of technology adoption and its effect on groundwater nitrate-contamination levels. A central Nebraska application indicates that even without a current government subsidy, a farmer is economically better off switching from gravity-flow to surge-flow irrigation rather than a center-pivot system. An annual government subsidy of $22.50 (US$) per hectare per year is required over the life of a center-pivot system to make the farmer financially indifferent. However, cost-sharing center-pivot adoption improves the groundwater contamination level, while other irrigation systems result in continued deterioration of groundwater quality.