Context and capacity: The potential for performance-based agricultural water quality policy

Figures & data

Table 1. Water quality trading approaches to agricultural water quality management.

	Case
	South Nation River Watershed phosphorus (P) trading program, Ontario	United States water quality trading (WQT) programs (several states)
Defining characteristic: Measurement	Modeled based on measured performance of practices in other regions, calculated per hectare or per head for livestock	Either site-specific calculations to estimate nutrient losses or reductions using variables such as soil type, slope and other input rates, or pre-determined nutrient reductions for practices that assign a nutrient reduction credit based on estimated average nutrient reductions
Defining characteristic: Payment	The South Nation Conservation group retained the funds paid for P credits and used those funds for grants to agricultural producers to implement best management practices (BMPs). Grant amounts were based on projects and not amount of P reduction	Credits based on an emission unit purchased through three mechanisms: (1) bilateral negotiations, (2) clearinghouses or (3) exchange markets
Enabling conditions: Institutional	The Ontario Ministry of Environment created water quality guidelines with maximum allowable concentrations of pollutants Regulatory measures for drinking water implemented under the Ontario Safe Water Drinking Act South Nation Conservation community group established to manage natural resources in the watershed	Previous success of sulphur dioxide trading under the US Clean Air Act US Clean Water Act gave individual states authority to regulate non-point source pollution US Environmental Protection Agency's Watershed Protection Approach created capacity to use unique approaches to achieve ecological goals
Enabling conditions: Social	Agricultural producers were well organized and effective in lobbying for policies that affirm strong property rights
Drivers: Institutional	P concentration limit enforced in watershed Program viewed as a market-based approach to mitigate impacts of wastewater emissions Removal of legal liability for agricultural producers through Statement of Roles and Responsibilities	US Environmental Protection Agency and United States Department of Agriculture have promoted water quality trading through funding initiatives and policy provisions Several state-specific regulations to encourage trading Implementation, or imminent implementation, of nutrient caps for water bodies based on total maximum daily load (TMDL) for pollutants
Drivers: Social	Stakeholder buy-in achieved through the use of a locally trusted organization, created a sense of security and trust Use of a trusted organization, the South Nation Conservation group, as a broker for credits
Outcomes	Water quality improved, estimated reduction in emissions of approximately 10,000 kg per year More cost effective than improving wastewater treatment Watershed residents perceived other benefits, including soil and livestock health benefits, reduced risk to human health, improved opinions of the South Nation Conservation group, increased property values	Economic benefits, lower cost to reduce pollutant loads Where trades have not occurred, attributed to lack of institutional drivers
References	OMOE (1994); O'Connor (2002); Allaway (2003); OFEC (2006); Boutz (2007); Selman et al. (2009); Driedger (2010); O'Grady (2011)	McGinnis (2001); Woodward et al. (2002); Woodward (2003); Fang et al. (2005); Abdalla et al. (2007); Selman et al. (2009)

Table 2. Differentiated payments for ecosystem goods and services approaches to agricultural water quality management.

	Case
	Performance-based Environmental Policies for Agriculture (PEPA), Hewitt Creek Watershed, Iowa, United States	Privately-sponsored payments for Ecosystem Services (PES), Vittel Company, France	Group payments for Ecosystem Services (PES), Cullers Run Watershed, West Virginia, United States
Defining characteristic: Measurement	Suite of indices to estimate nutrient and sediment losses calculated for individual fields	Estimated the total reduction of nitrogen emissions required to maintain acceptable water quality standard, based on site-specific research. Management practices identified that could achieve nitrogen reduction requirement	Measurement of water quality was direct, background levels of nitrogen were accounted for by measuring water quality in an additional "index watershed" that was similar in size and location but not impacted by agricultural activities
Defining characteristic: Payment	Variety of incentive payments; some are based on nutrient testing or fixed payments for specific practices, while others are incremental and increase based on degree of reduction in pollutants as estimated by indices	Contracts negotiated based on actions required from each farmer	Payments to whole group, distributed equally and based on water quality, volume
Enabling conditions: Institutional	Listed as impaired watershed under the US Clean Water Act		Impaired watershed listed under the US Clean Water Act
Enabling conditions: Social
Drivers: Institutional	Impending regulation as a result of impaired watershed listing Financial support of local farm bureaus	Company required actions at the farm level to maintain viability Political will to retain company in the region
Drivers: Social	Fear of government intervention Civic responsibility and peer pressure	Company employed many people in the region, providing a strong incentive for farmers to work with the company; stakeholder buy-in	Researcher interest in assessing feasibility of using a group-based PES approach to managing water quality
Outcomes	Social successes were considered important. Stakeholders formed cohesive structure, shared knowledge and ideas Water quality improved, estimated reduction of nitrate pollution by 23%; phosphorus pollution reduced by 14%	Water quality maintained at an acceptable level for company to continue to operate, no jobs lost Farmers negotiated contracts that have been satisfactory, no ill will	Social successes included increased interest in acquiring information about water quality, increased participation and pressure to participate from other farmers. Trust among researchers and farmers developed throughout the project
References	Morton et al. (2006); Hewitt Creek Watershed Improvement Association Inc. (2008); Morton (2008); Winsten (2009); Winsten et al. (2011)	Perrot-Maȋtre (2006)	Maille et al. (2009)

Table 3. Reverse auction approaches to agricultural water quality management.

Characteristics	Case
	Conservation Reserve Program, United States	Conestoga Watershed, Pennsylvania, United States	Great Barrier Reef, Australia
Defining characteristic: Measurement	Use of an Environmental Benefits Index (EBI) to estimate the site-specific environmental outcomes of retiring land, and may be used to weight them according to the priorities of the program	The expected reduction in phosphorus runoff estimated using a combination of site-specific variables and research estimates of effectiveness of various best management practices (BMPs)	Used models with site-specific data to estimate the amount of agricultural emissions mitigated by each bid proposal, resulting in an environmental benefit index score
Defining characteristic: Payment	Bidding by landowners for land retirement payments. Bids selected based on EBI score	Used a cost-effectiveness strategy to select bids for specific and appropriate BMPs	From the EBI and the proposed bid amount, cost-effectiveness was determined and bids were selected on this basis
Enabling conditions: Institutional	History of land retirement programs during periods of low commodity prices; significant area of land designated as highly erodible	Watershed listed as impaired under the US Clean Water Act	Previously successful reverse auctions for conservation
Enabling conditions: Social	Desire to support agricultural landowners
Drivers: Institutional	Enactment of the Food Security Act with a legislated land base target United States Congress authorized use of cost-benefit targeting to select bids		Government concern about misallocation of resources; trial auctions were perceived as a method to better estimate opportunity costs for agricultural producers to make changes to practices and reduce potential of over-payment
Drivers: Social		Researcher interest in demonstrating the potential cost efficiencies using a performance-based approach as compared to a conventional input-based approach
Outcomes	Estimated increase in environmental benefits but no measurement Criticisms of program for lack of objectivity, inflexibility to respond to changing environmental conditions	The difference in phosphorus pollution reduction and costs were substantial: the conventional program required $26.19 lb^–1, while the reverse auction paid out an average of $5.06 lb^–1	These trials highlighted the variability in producers' costs and the importance of using a cost-effectiveness strategy in assessing bids
References	Reichelderfer and Boggess (1988); Claassen et al. (2008)	Selman et al. (2008)	Rolfe and Windle (2011)

Table 4. Emissions charges approach to agricultural water quality management.

Characteristics	Case: MINAS^* program, The Netherlands
Defining characteristic: Measurement	Individual farm accounting of inputs and outputs related to phosphorus
Defining characteristic: Payment	Nutrient surpluses subject to incremental levy
Enabling conditions: Institutional
Enabling conditions: Social	Intensive agriculture industry including livestock production, resulting in excess manure which contributed pollutants to water bodies
Drivers: Institutional	Failed attempts to manage agricultural sources of water contamination through input-based regulations
Drivers: Social Outcomes	Some water pollutants reduced (nitrates), but phosphorus remained a concern and actually increased. Program considered unsuccessful Eventually discontinued as a result of incompatibility with European Union directives
Reference	van Grinsven et al. (2005)

* MINeral Accounting System (MINAS).

Table 5. Cross-compliance approach to agricultural water quality management.

	Case: Nitrate Vulnerable Zones (NVZs), United Kingdom
Defining characteristic: Measurement	No measurement of individual farm contribution to water quality. However, beyond the initial assessment of a watershed as an NVZ, reviews must be undertaken every four years to assess water quality and revise the NVZ based on direct water quality monitoring
Defining characteristic: Payment	Where producers within these zones comply with required practices, income support payments are provided in full. Otherwise, reductions to, or denial of, income support payments and agri-environmental payments occurs
Enabling conditions: Institutional	Previous water quality directives and legislation Previous zonal designations for water protection (Nitrate Sensitive Areas) and implementation of the Common Agricultural Policy reforms of 1992 created institutional capacity
Enabling conditions: Social	Growing social belief that agricultural producers should not receive payments unless they comply with basic environmental requirements
Drivers: Institutional	World Trade Organization pressure to reduce income support payments and fit payments within “green box” requirements (decoupled payments from production)
Drivers: Social Outcomes	Mixed environmental outcomes: some NVZs (31%) showed improvement in surface water quality; some remained the same; and some (17%) became more polluted over a 12-year period Focus on inputs was not an effective strategy to reduce nitrate pollution Social outcomes showed a mismatch between farmers’ attitudes and public expectation of environmental benefits. Farmers were distrustful and felt penalized. However, considered an effective way to induce a change in practices and improved environmental outcomes in the face of a lack of interest by landowners
References	Osborn and Cook (1997); Hall et al. (2004); Amin-Hanjani and Todd (2005); Macgregor and Warren (2006); Baylis et al. (2008); WTO (2008); Barnes et al. (2009); Nielsen et al. (2009); Worrall et al. (2009); European Commission (2010); McVittie et al. (2010)

Figure 1. The performance-based measures framework (PMF) for organization of performance-based approaches to agricultural water quality management.

Figure 2. Performance classifications of policy approaches to manage water quality for agricultural landscapes.

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