RISK INDEXES FOR ECONOMIC AND WATER-QUALITY TRADEOFFS - AN APPLICATION TO GREAT-PLAINS AGRICULTURE

Agricultural nonpoint source pollution is a multidimensional problem e ncompassing several forms of contaminants and several environments (e, g., surface water and groundwater). Environmental risk indices can acc ount for differences in chemical attributes and aggregate environmenta l outcomes across several forms of contaminants and environments. The objective of this analysis is to develop three environmental risk indi ces and use the indices to compare the environmental risk and economic returns associated with alternative production systems in the Oklahom a Panhandle region of the Central High Plains. Three environmental ris k indices are developed that incorporate different information concern ing the environmental effects of pesticide use. The first index-the en vironmental impact quotient (EIQ)-incorporates only chemical propertie s into the environmental risk assessment, while the two other indices- chemical environmental index (CINDEX) and chemical concentration index (CONC) also factor in estimates of expected annual runoff and percola tion loadings and concentrations, respectively, Both statistical and g raphical comparisons indicate that the three indices provide similar r ankings of alternative production systems based upon their potential e nvironmental consequences. The CONC index is characterized by greater volatility than the other indices, and its rankings of the production activities are least correlated with those derived from the two other indices. Results suggest some potential for reduction in environmental risk without large reductions in net returns, Application of the EIQ index, which does not explicitly incorporate chemical loading or conce ntration estimates, provides the highest estimate of income reductions . Environmental risk can be reduced by the greatest amount without sig nificant income losses when CONC is used as the risk measurement. Ther efore, although the three indices generate similar rankings of alterna tive production activities, their application can provide very differe nt estimates of the economic consequences of attaining environmental o bjectives.