RESEARCH ISSUES IN NONPOINT POLLUTION-CONTROL

Research on nonpoint pollution control instruments has focused primari ly on incentives applied either to production inputs that affect nonpo int pollution, or to ambient pollution concentrations. Both approaches may in theory yield an efficient solution. However, input-based incen tives will generally have to be second-best to make implementation pra ctical. Design issues include which inputs to monitor and the rates to apply to them. The limited research indicates that second-best, input -based incentives can be effective in adjusting input use in environme ntally desirable ways. Alternatively, ambient-based incentives have th eoretical appeal because efficient policy design appears to be less co mplex than for input-based incentives. These incentives have no track record nor close analogues that demonstrate potential effectiveness, h owever. Research on how households and firms might react in response t o ambient-based incentives is needed before these instruments can be s eriously considered.