Cost-Benefit Analysis of Pollution Prevention Practices at the Brunswick River Terminal

Background

The Missouri Department of Natural Resources (MoDNR) is interested in preventing land and water pollution at agricultural chemical dealerships in Missouri. The Tennessee Valley Authority designed a model demonstration project which incorporates best available technology for reducing the risk of chemical contamination at the Brunswick River Terminal (BRT) in Brunswick, Missouri. Greater adoption of pollution prevention practices by agricultural chemical dealerships requires better information about the potential benefits and costs of such practices.

Objectives

1. Estimate the private and social costs and benefits of the pollution prevention facilities/practices being utilized at BRT
2. Evaluate the effectiveness of alternative incentives for stimulating the adoption of pollution prevention facilities/practices at agrochemical dealerships
3. Develop guidelines which agrochemical dealerships can use to assess the effectiveness of pollution prevention facilities/practices

Due to insufficient data, it was not possible to estimate the costs and benefits of the pollution prevention facilities/practices installed at the BRT. Instead, an analysis was done of how to: a) estimate the private and social costs and benefits of investments in pollution prevention practices/facilities at agrochemical dealerships, such as the BRT; and b) evaluate the effectiveness of alternative incentives for adopting pollution prevention facilities/practices at agrochemical dealerships.

Methods

• Principles of cost-benefit analysis were used to identify private and public benefits and costs of pollution prevention facilities/practices at agricultural chemical dealerships.
• Effectiveness of various incentives in stimulating the adoption of pollution prevention facilities/practices was evaluated by comparing the potential onsite benefits and costs of the BRT project with and without incentives. Incentive considered include cost sharing of construction and/or maintenance costs of containment facilities, tax incentives for capital investments made for pollution prevention facilities, and technical assistance in designing and implementing facilities and practices.

Major Findings

The environmental benefits of pollution prevention are often more difficult to measure than the costs. Nevertheless, every attempt should be made to include environmental benefits in benefit-cost analyses. Potential benefits of pollution containment facilities include the onsite benefits from reduced physical losses in fertilizers and chemicals and the offsite benefits of reducing the risk of environmental pollution. Net private benefits of pollution containment facilities are likely to be negative. For this reason, agrochemical dealers are not likely to construct pollution containment facilities without subsidies and/or regulations. Subsidization and regulation should only be undertaken when onsite plus offsite benefits exceed the total cost of constructing and maintaining the facilities.

Investigators: Feng Xu and Tony Prato

Funding Amount: $13,963

Funding Source: Missouri Department of Natural Resources (MoDNR)

Project Duration: July 1993 - December 1993

Publication

Xu, Feng and Tony Prato. Cost-Benefit Analysis of Pollution Prevention Practices at Agrochemical Dealerships. Center for Agricultural, Resource and Environmental Systems, University of Missouri-Columbia, MO, April 1994.