The Chesapeake Bay is a valuable resource. The Bay is home to a variety of species, such as blue crab and striped bass, provides jobs for local fishing communities, and serves as a place to interact with nature. About a quarter of the land in the Chesapeake Bay watershed is devoted to agriculture. The crops and livestock produced in this region provide food and fiber for millions of Americans. But these agricultural lands do more than produce food—they can play a role in improving the Bay’s water quality.
In 2010, the Environmental Protection Agency (EPA) worked with the Bay states to set water quality goals for the Chesapeake Bay and to develop Watershed Improvement Plans, or “WIPs,” for each of the states.
In a recent study funded by the USDA Office of the Chief Economist (OCE), Penn State University researchers evaluated the economics of applying targeted conservation efforts within the agricultural sector. Dr. Jim Shortle, one of the report’s authors and a Distinguished Professor of Agricultural and Environmental Economics at Penn State, stressed the importance that this information can have in terms of lowering costs of cleaning up the Bay.
“We found the cost of implementing the agricultural best management practices (BMPs) in WIPs between 2011 and 2025 to be about $3.6 billion (in 2010 dollars). The annual cost of the WIP BMPs from 2025 onwards is about $900 million. Importantly, our results show that significant cost savings can be realized through attention to the cost effectiveness of BMPs in the selection and location of BMPs in the watershed,” Jim said. “Among the states in the Bay Watershed, cost-savings relative to the WIPs in this case range from 27% (Virginia) to 86% (New York and West Virginia).”
This concept of “targeting,” or putting dollars to install BMPs where they have the most benefit, could help states save money while meeting water quality goals.
Although these large cost savings are estimates, “basic messages are powerful and important. One clear message is that attention to [BMP] costs and effectiveness can save significant costs to agriculture of achieving Chesapeake Bay clean-up goals,” Jim commented.
The research showed that even bigger savings can be achieved by using water quality trading markets. The potential for cost savings using markets and trading is one reason why OCE’s Office of Environmental Markets is continuing to provide support for states, producers, and others involved in the development of water quality markets—which may one day lead to a healthier Bay.