2ND-BEST TAX POLICIES TO REDUCE NONPOINT-SOURCE POLLUTION

Control of nonpoint source pollution often requires regulation of inpu ts, but first-best solutions are unattainable. Because inputs are moni tored by different agencies and regulatory coordination can be costly, It may be more practical to regulate single inputs. A cost-effectiven ess approach to determining the best single-input tax policy is develo ped and applied to the question of reducing nitrate leaching from lett uce production in California. Water is the best single input to regula te, and efficiency losses from this second-best approach appear not to be great. Conditions for the welfare ranking of policies to be invari ant to heterogeneity in production or leaching are identified.