Taxing nutrient loads

Excerpt

Environmental service fees, like the sewer surcharge signed by Governor Erlich, can enhance the cost effectiveness of pollution control efforts, as well as simply finance infrastructure investments. But to do so, they need to be designed explicitly to create incentives for individuals and businesses to adopt more cost-effective approaches to reducing nutrient loads. There is growing recognition that use of economic incentives in environmental management programs can help increase the cost effectiveness of pollution control. They can also help create a management system that adjusts automatically as conditions change, for example as population increases.

We look at ways environmental fees, service charges, and taxes have been used to create incentives to reduce pollution from urban and rural sources, increase the cost-effectiveness of pollution control and promote innovation in pollution control strategies. We start with an overview of what has been learned from economic theory about the way environmental service fees function and how they should be structured. We then look at three examples of how fees have been used to improve water quality: sewer surcharges, a surcharge on property taxes on agricultural land in the Florida Everglades, and a nutrient load fee for farms in the Netherlands. We …