Salinity Pollution Control in the Presence of Farm Heterogeneity — An Empirical Analysis

The expansion of intensive agriculture has created substantial pollution loads in many water basins worldwide. Irrigation generates percolation and leaching of salts and other damaging substances from soils into water bodies. These pollution emissions from irrigated agriculture are non-point, precluding the identification of the polluter, the location of the source, and the amount of the emission loads. There is a large body of literature analyzing different instruments to deal with non-point pollution problems. However, the implementation of the regulations is not an easy task due to the particular characteristics of this type of emissions. Most of the regulations are based on the assumption that emission damage functions are the same for all farms and receiving media; however, different pollution damage functions are the more likely scenario. In this paper, we empirically analyze the welfare losses from using a uniform instrument to control non-point salinity pollution loads coming from farms with different soils and related biophysical processes. The paper shows how, in the presence of differentiated pollution damage functions, a uniform economic instrument for all users can lead to sizable welfare losses. The results highlight that no regulation, in presence of farms heterogeneity and when differentiated instruments cannot be implemented, could be a better option in terms of social welfare compared with the implementation of a uniform instrument. This finding clearly calls for deeper knowledge of and better information about the related biophysical processes before implementing non-point pollution regulations.