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The Economics of Non-point-Source Pollution

Anastasios Xepapadeas. Annual Review of Resource Economics, (2011), 3, 355–373.


Non-point-source (NPS) pollution refers to a form of pollution in which neither the source nor the size of specific emissions can be observed or identified with sufficient accuracy. In NPS pollution the ambient concentration of pollutants associated with the individually unobserved emissions is typically observed. NPS pollution due to agricultural runoff is a major source of water pollution, eutrophication, and hypoxia. Due to informational asymmetries and stochastic effects, the use of traditional environmental policy instruments such as emissions taxes or tradable quotas to regulate NPS pollution is very difficult. This article reviews the main theoretical approaches, up to the present, to the regulation of NPS pollution—input-based schemes, ambient schemes, and endogenous monitoring—and discusses issues associated with NPS pollution regulatio

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Keywords: diffused source pollution, input-based schemes, ambient schemes, endogenous monitoring, moral hazard, uncertainty

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