University of California Water Resources Center

The objective of this project was to examine the economic properties of input taxes and alternative production technologies as instruments for controlling non-point source pollutants. A theoretical analysis demonstrates that input taxes have the economic properties of residuals charges. The use of alternative production technologies is not a promising method for controlling effluents when compared with pollution taxes. Even though inputs may be used more efficiently with new production technologies, controlling technology does not control the quantity of inputs used. The empirical research on nitrate-nitrogen controls in the southern San Joaquin Valley confirms the interchangeable nature of input taxes and residuals charges. Some evidence supporting the second hypothesis was also found since the social costs of requiring sprinkler irrigation were nearly twice the social cost of an equivalent sprinkler penalty. Furthermore, the results indicated that nitrate losses from cropping activities in some parts of the Central Valley may not be very large.