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This is a decision teaching case study, where the Program Manager, Michigan Agriculture Environmental Assurance Program (MAEAP) is faced with the problem of determining the future direction of the MAEAP going forward from 2010. During the case discussion students should be able to: 1. Identify and model various motivations for participation in voluntary environmental programs. 2. Recognize motivational conflicts among various participants/stakeholders. 3. Appreciate the political economy of self-regulation. 4. Analyze design tradeoffs in VEPs. 5. Analyze implications of VEP evolution. 6. Analyze the role of VEPs in environmental labeling and green marketing strategies.

This is a decision teaching case study, where the Program Manager, Michigan Agriculture Environmental Assurance Program (MAEAP) is faced with the problem of determining the future direction of the MAEAP going forward from 2010. During the case discussion students should be able to: 1. Identify and model various motivations for participation in voluntary environmental programs. 2. Recognize motivational conflicts among various participants/stakeholders. 3. Appreciate the political economy of self-regulation. 4. Analyze design tradeoffs in VEPs. 5. Analyze implications of VEP evolution. 6. Analyze the role of VEPs in environmental labeling and green marketing strategies.

The Michigan Agriculture Environmental Assurance Program (MAEAP) is a voluntary environmental program (VEP) initiated in 1999 by a coalition of state government agencies and agricultural, environmental and conservation groups in Michigan. We survey Michigan livestock producers and conduct discussion group sessions with state environmental regulators to assess the incentives, motivations, and barriers for participating in MAEAP. Economic theory identifies two major motivations for firms’ participation in voluntary environmental programs: ‘regulatory preemption’ and ‘signaling.’ Under a ‘regulatory preemption’ scenario’, firms engage in voluntary pollution reduction through VEPs to reduce the risk of future regulations. Under a ‘regulatory preemption’ scenario’, theory posits that firm participation will be greatest among those most likely to be affected by anticipated future stringent regulations. Survey findings suggested that producers anticipate future expansion of stringent environmental regulation and expected that MAEAP certified farms would be perceived and treated as ‘environmentally’ more responsible. Alternatively, DEQ officials appeared to view MAEAP using the ‘regulatory pre-emption’ lens. Regulators’ and producers’ views were influenced by past political maneuvering of the MAEAP program.

The Michigan Agriculture Environmental Assurance Program (MAEAP) is a voluntary environmental program (VEP) initiated in 1999 by a coalition of state government agencies and agricultural, environmental and conservation groups in Michigan. We survey Michigan livestock producers and conduct discussion group sessions with state environmental regulators to assess the incentives, motivations, and barriers for participating in MAEAP. Economic theory identifies two major motivations for firms’ participation in voluntary environmental programs: ‘regulatory preemption’ and ‘signaling.’ Under a ‘regulatory preemption’ scenario’, firms engage in voluntary pollution reduction through VEPs to reduce the risk of future regulations. Under a ‘regulatory preemption’ scenario’, theory posits that firm participation will be greatest among those most likely to be affected by anticipated future stringent regulations. Survey findings suggested that producers anticipate future expansion of stringent environmental regulation and expected that MAEAP certified farms would be perceived and treated as ‘environmentally’ more responsible. Alternatively, DEQ officials appeared to view MAEAP using the ‘regulatory pre-emption’ lens. Regulators’ and producers’ views were influenced by past political maneuvering of the MAEAP program.

In the United States' Northeastern region, there is an increasing interest in the public benefits from agriculture. These benefits are frequently referred to as multifunctional attributes. The policy challenge is to find an effective way to reflect these public demands so that multifunctional agriculture can be profitable. There is a significant research agenda that accompanies this challenge. Research topics include assessing and understanding consumer demand for multifunctional attributes, estimating the long-run returns to those production systems which supply these attributes, and designing and evaluating institutional arrangements to supply them.

POWERPOINT PRESENTATION

After much debate and many legislative proposals, the Clean Air Act was amended in 1990 to allow more flexibility in meeting emissions standards for SO2. Specifically, an SO2 emissions allowance trading program was implemented. Firms can meet emission standards by any pollution control method, including buying emission allowances from other firms. Analysts have concluded that, with the changes in the Clean Air Act, SO2 emissions have been reduced by 50 percent and at an estimated $7 billion less than the anticipated cost of the regulatory command-and-control system. Not surprisingly, policy analysts have explored the opportunities for implementing similar market-based systems for water pollution control. Because much of the on-going impairment of surface water has been attributed to nonpoint sources of pollution, trading programs which incorporate both point and nonpoint discharges are of particular interest. However, despite as many as six efforts across the nation to implement point-nonpoint effluent credit trading programs to reduce nutrient discharges to water, there have been few trades to date. This research was undertaken to answer the following question: Do current barriers to effluent credit trading programs arise because of fundamental differences between air and water media or because of differences between institutions affecting air and water use, such as the Clean Air Act and the Clean Water Act? Economic theory offers the situation, structure, conduct, and performance (SSCP) framework, developed by industrial organization economists and extended by institutional and environmental economists, within which to address this research question. In the language of the SSCP framework, the research question can be reframed as: are there fundamental differences in the situation and structure of emission allowance markets and effluent credit markets which result in conduct and performance differences? A comparative analysis of situation and structure suggests that barriers to effective nutrient discharge credit markets are not a result of fundamental differences in the air and water media or the materials being discharged into air and water. Rather, the barriers exist because of structural differences differences in institutional structure, program design and program implementation. Many of the structural barriers result from the Clean Water Act and its implementation. More flexibility in water pollution prevention would effectively remove many of these barriers.

After much debate and many legislative proposals, the Clean Air Act was amended in 1990 to allow more flexibility in meeting emissions standards for SO2. Specifically, an SO2 emissions allowance trading program was implemented. Firms can meet emission standards by any pollution control method, including buying emission allowances from other firms. Analysts have concluded that, with the changes in the Clean Air Act, SO2 emissions have been reduced by 50 percent and at an estimated $7 billion less than the anticipated cost of the regulatory command-and-control system. Not surprisingly, policy analysts have explored the opportunities for implementing similar market-based systems for water pollution control. Because much of the on-going impairment of surface water has been attributed to nonpoint sources of pollution, trading programs which incorporate both point and nonpoint discharges are of particular interest. However, despite as many as six efforts across the nation to implement point-nonpoint effluent credit trading programs to reduce nutrient discharges to water, there have been few trades to date. This research was undertaken to answer the following question: Do current barriers to effluent credit trading programs arise because of fundamental differences between air and water media or because of differences between institutions affecting air and water use, such as the Clean Air Act and the Clean Water Act? Economic theory offers the situation, structure, conduct, and performance (SSCP) framework, developed by industrial organization economists and extended by institutional and environmental economists, within which to address this research question. In the language of the SSCP framework, the research question can be reframed as: are there fundamental differences in the situation and structure of emission allowance markets and effluent credit markets which result in conduct and performance differences? A comparative analysis of situation and structure suggests that barriers to effective nutrient discharge credit markets are not a result of fundamental differences in the air and water media or the materials being discharged into air and water. Rather, the barriers exist because of structural differences - differences in institutional structure, program design and program implementation. Many of the structural barriers result from the Clean Water Act and its implementation. More flexibility in water pollution prevention would effectively remove many of these barriers.

The rapidity of change has left scant opportunity for investigation of the consequences of biotechnology adoption on long-term ecosystem or economic system functioning. Economic theory suggests that, if the "Biotechnology Revolution" is left to market forces alone,there will be neglected public goods. Theory and limited empirical evidence suggests that there are significant incentives for private firms to discount and neglect certain environmental impacts and to develop products that meet only the needs of those able and willing to pay. Negative distributional impacts on rural societies and economies will not normally enter the private calculus nor will the long-term problems of insect and plant resistance. Thus, there is a strong case for enhanced public roles with respect to the use of transgenic crops. The adoption of the precautionary approach in public policies addressing transgenic crops is one alternative to better reflect public concerns.

The rapidity of change has left scant opportunity for investigation of the consequences of biotechnology adoption on long-term ecosystem or economic system functioning. Economic theory suggests that, if the "Biotechnology Revolution" is left to market forces alone,there will be neglected public goods. Theory and limited empirical evidence suggests that there are significant incentives for private firms to discount and neglect certain environmental impacts and to develop products that meet only the needs of those able and willing to pay. Negative distributional impacts on rural societies and economies will not normally enter the private calculus nor will the long-term problems of insect and plant resistance. Thus, there is a strong case for enhanced public roles with respect to the use of transgenic crops. The adoption of the precautionary approach in public policies addressing transgenic crops is one alternative to better reflect public concerns.

This paper addresses the potential of the Environmental Quality Incentives Program to become the first true green payment program, one which is not directly linked to farm income goals as all conservation programs have been in the past, even in contrast to the Conservation Reserve Program and the now obsolete Agricultural Conservation Program. EQIP is thus discussed as a new generation of conservation programs which are General Agreement on Tariffs and Trade-legal (no payments to farmers which may influence trade) and more targeted to actual agro-environmental problems than the traditional conservation programs. In the next sections, the paper raises two important questions: First, to what extent should green payments substitute for traditional commodity payments, as they are being phased out? If taking water quality problems into account, EQIP does not reach the geographic areas of the highest commodity program payments, although substitution was never intended and has inherent problems. The paper then looks at EQIP as a green payment program, discussing to what extent EQIP reflects the desired characteristics of a GATT-legal green payment program. Three such characteristics are discussed as hurdles for a successful EQIP implementation: a program has to be targeted, tailored and transparent. Additionally, rent-seeking by various private interests, lack of science-based data, agency and farmer inertia and the complexity of the program are all challenges which must be faced. The study concludes with a discussion of the future of green payments.

The Porter Hypothesis relates the effects of environmental regulation on (a) technological innovation and (b) economic performance. Specifically, it asserts that innovation offsets can occur. These are a type of technological change that will "partially or more than fully offset the costs of complying with environmental regulation" (Porter and van der Linde, 1995, p. 98). The hypothesis has been highly debated, in part, because nomenclature has been careless. Also, the role of property rights in defining innovation offsets has been neglected. If the Porter Hypothesis has validity in agriculture, its policy implications are important. Recent changes in agro-environmental legislation provides an opportunity to more thoroughly investigate the hypothesis and its implications.

Implementation of the Food Quality Protection Act (FQPA) is fraught with difficulty due to the divergent perspectives and demands of stakeholders in the process. In "Part I: Agricultural Producer Concerns," the authors reviewed the concerns of food producers about potential FQPA threats to farm profitability, international competitiveness, consumer perceptions, and the development of pest resistance to remaining pesticides. Fortunately, lessons from past environmental policy and economic theory offer useful principles for how to implement the FQPA. This paper, "Part II: Implementation Alternatives and Strategies" addresses ways to accommodate producer concerns while meeting the policy mandate of reducing risk from pesticide exposure, especially for infants and children. In so doing, the authors are neither advocating nor criticizing this FQPA policy mandate; rather, they are providing policy analysis of alternative implementation strategies.

The Food Quality Protection Act of 1996 (FQPA) transforms the regulation of pesticide residues on food in the United States. Three changes are prominent. First, under the FQPA, the U.S. Environmental Protection Agency (EPA) is authorized to develop uniform pesticide residue tolerances for both fresh and processed foods. These tolerances must be based on a conservative standard appropriate for infants and children, rather than the adult-based tolerances that prevailed previously for fresh-market produce. Second, under the FQPA, pesticide registration will be based upon aggregate risk to the most susceptible consumers from all pesticides sharing a common biochemical mode of action in humans. Third, the FQPA expands the scope of health effects included in risk assessment decisions to include potential endocrine and reproductive effects of pesticidal chemicals. As the EPA has moved to develop implementation guidelines for the FQPA, agricultural producers and input suppliers have become concerned about its impact on them. Even if the FQPA's implementation results only in a restriction of the pesticides used on some crops, producers still have four major concerns: (1) the potential loss of farm profitability, especially for farms specializing in fruit and vegetable production; (2) unfair competition if foreign competitors can use pesticides forbidden to domestic producers; (3) the impact of the FQPA on consumer purchases, (i.e., if reduced pesticide use results in more blemishes or lower quality product, will consumers refuse to purchase the product?); and (4) excessive reliance on a few remaining pest control weapons, possibly resulting in accelerated pest resistance. Because these uncertainties potentially impact producers' livelihoods, many argue for a go-slow, long transition for any major changes in the way they farm or the pest control products they use. Competing with these agricultural concerns, however, are a parallel set of concerns, expressed by consumer and environmental groups, that the FQPA's promise to protect infants and children from pesticide risks will be sabotaged by lax or ineffective implementation. There are many uncertainties with respect to the impacts related to alternative FQPA implementation strategies. Research to resolve these concerns is fragmentary and frequently inconclusive. The common element that emerges from this review of producer concerns is: Impacts on producers will depend on how the FQPA is implemented.

This paper addresses the potential of the Environmental Quality Incentives Program to become the first true green payment program, one which is not directly linked to farm income goals as all conservation programs have been in the past, even in contrast to the Conservation Reserve Program and the now obsolete Agricultural Conservation Program. EQIP is thus discussed as a new generation of conservation programs which are General Agreement on Tariffs and Trade-legal (no payments to farmers which may influence trade) and more targeted to actual agro-environmental problems than the traditional conservation programs. In the next sections, the paper raises two important questions: First, to what extent should green payments substitute for traditional commodity payments, as they are being phased out? If taking water quality problems into account, EQIP does not reach the geographic areas of the highest commodity program payments, although substitution was never intended and has inherent problems. The paper then looks at EQIP as a green payment program, discussing to what extent EQIP reflects the desired characteristics of a GATT-legal green payment program. Three such characteristics are discussed as hurdles for a successful EQIP implementation: a program has to be targeted, tailored and transparent. Additionally, rent-seeking by various private interests, lack of science-based data, agency and farmer inertia and the complexity of the program are all challenges which must be faced. The study concludes with a discussion of the future of green payments.

The Porter Hypothesis relates the effects of environmental regulation on (a) technological innovation and (b) economic performance. Specifically, it asserts that innovation offsets can occur. These are a type of technological change that will "partially or more than fully offset the costs of complying with environmental regulation" (Porter and van der Linde, 1995, p. 98). The hypothesis has been highly debated, in part, because nomenclature has been careless. Also, the role of property rights in defining innovation offsets has been neglected. If the Porter Hypothesis has validity in agriculture, its policy implications are important. Recent changes in agro-environmental legislation provides an opportunity to more thoroughly investigate the hypothesis and its implications.

Implementation of the Food Quality Protection Act (FQPA) is fraught with difficulty due to the divergent perspectives and demands of stakeholders in the process. In "Part I: Agricultural Producer Concerns," the authors reviewed the concerns of food producers about potential FQPA threats to farm profitability, international competitiveness, consumer perceptions, and the development of pest resistance to remaining pesticides. Fortunately, lessons from past environmental policy and economic theory offer useful principles for how to implement the FQPA. This paper, "Part II: Implementation Alternatives and Strategies" addresses ways to accommodate producer concerns while meeting the policy mandate of reducing risk from pesticide exposure, especially for infants and children. In so doing, the authors are neither advocating nor criticizing this FQPA policy mandate; rather, they are providing policy analysis of alternative implementation strategies.

The Food Quality Protection Act of 1996 (FQPA) transforms the regulation of pesticide residues on food in the United States. Three changes are prominent. First, under the FQPA, the U.S. Environmental Protection Agency (EPA) is authorized to develop uniform pesticide residue tolerances for both fresh and processed foods. These tolerances must be based on a conservative standard appropriate for infants and children, rather than the adult-based tolerances that prevailed previously for fresh-market produce. Second, under the FQPA, pesticide registration will be based upon aggregate risk to the most susceptible consumers from all pesticides sharing a common biochemical mode of action in humans. Third, the FQPA expands the scope of health effects included in risk assessment decisions to include potential endocrine and reproductive effects of pesticidal chemicals. As the EPA has moved to develop implementation guidelines for the FQPA, agricultural producers and input suppliers have become concerned about its impact on them. Even if the FQPA's implementation results only in a restriction of the pesticides used on some crops, producers still have four major concerns: (1) the potential loss of farm profitability, especially for farms specializing in fruit and vegetable production; (2) unfair competition if foreign competitors can use pesticides forbidden to domestic producers; (3) the impact of the FQPA on consumer purchases, (i.e., if reduced pesticide use results in more blemishes or lower quality product, will consumers refuse to purchase the product?); and (4) excessive reliance on a few remaining pest control weapons, possibly resulting in accelerated pest resistance. Because these uncertainties potentially impact producers' livelihoods, many argue for a go-slow, long transition for any major changes in the way they farm or the pest control products they use. Competing with these agricultural concerns, however, are a parallel set of concerns, expressed by consumer and environmental groups, that the FQPA's promise to protect infants and children from pesticide risks will be sabotaged by lax or ineffective implementation. There are many uncertainties with respect to the impacts related to alternative FQPA implementation strategies. Research to resolve these concerns is fragmentary and frequently inconclusive. The common element that emerges from this review of producer concerns is: Impacts on producers will depend on how the FQPA is implemented.

Many business firms both in the U.S. and abroad are practicing corporate environmental management. They are committed to improving the efficiency of material use, energy use and water use; to recycle; to make safer products and processes and to reduce their overall impact on the environment. In pursuing corporate environmental management, some businesses have found that the presumed tradeoff between profits and environmental quality does not always apply. Instead, by innovating and redesigning their products, processes, corporate culture, and organizational strategy, these firms have been able to improve environmental performance and add to profits. These improved profits are sometimes referred to as "innovation offsets" because they result from technological changes to reduce pollution which also reduce production costs (and/or improve productivity) and thereby "offset" the costs of compliance. The necessary technological innovation is pursued when firms take a dynamic investment perspective rather than presume a static tradeoff between profits and environmental quality.

Many business firms both in the U.S. and abroad are practicing corporate environmental management. They are committed to improving the efficiency of material use, energy use and water use; to recycle; to make safer products and processes and to reduce their overall impact on the environment. In pursuing corporate environmental management, some businesses have found that the presumed tradeoff between profits and environmental quality does not always apply. Instead, by innovating and redesigning their products, processes, corporate culture, and organizational strategy, these firms have been able to improve environmental performance and add to profits. These improved profits are sometimes referred to as "innovation offsets" because they result from technological changes to reduce pollution which also reduce production costs (and/or improve productivity) and thereby "offset" the costs of compliance. The necessary technological innovation is pursued when firms take a dynamic investment perspective rather than presume a static tradeoff between profits and environmental quality.

This article was stimulated by a 1997 American Agricultural Economics Association annual meeting preconference designed by Batie and Ervin. The authors felt that there was considerable interest and activity in business-led environmental management (also caLLed corporate environmental management)-but most of the interest was found outside of the agricultural sector and the profession. The conference was a means to investigate the extent, motivation, and consequences of business-led poLLution prevention activities. The DuPont and the StahLbush Island Farms examples used in this article were drawn from discussions that took place at the conference and which were published in the proceedings. In the article, the authors draw lessons for agriculture informed by the experiences of nonagricultural businesses. They identify and distiLL from these experiences the major roles for the public sector to enable agricultural business-led initiatives to flourish and to be successful.

This article was stimulated by a 1997 American Agricultural Economics Association annual meeting preconference designed by Batie and Ervin. The authors felt that there was considerable interest and activity in business-led environmental management (also caLLed corporate environmental management)-but most of the interest was found outside of the agricultural sector and the profession. The conference was a means to investigate the extent, motivation, and consequences of business-led poLLution prevention activities. The DuPont and the StahLbush Island Farms examples used in this article were drawn from discussions that took place at the conference and which were published in the proceedings. In the article, the authors draw lessons for agriculture informed by the experiences of nonagricultural businesses. They identify and distiLL from these experiences the major roles for the public sector to enable agricultural business-led initiatives to flourish and to be successful.

No abstract available.

Reducing costs of controlling nonpoint source (NPS) pollution will be a high public priority in the next century. Compliance and transaction costs of reducing nitrogen runoff from dairies in the Lower Susquehanna Watershed by 40% are estimated for perfectly targeted and uniform performance standards. The perfectly targeted standard reduces compliance and transaction costs by almost 75% compared with the uniform standard. Future NPS control policies should use spatial information to target policy resources to priority concerns, areas, and farms. Further research is needed to lower the costs and increase the accuracy of spatial information.

As contractual agriculture expands, contract design offers a non-regulatory opportunity to reduce non-point source pollution. A risk programming analysis of seed corn contract designs illustrates a tractable empirical principal-agent model, and shows that grower risk preferences affect contract acceptability and efficiency at reducing nitrate leaching.

Ten alternative seed corn contract specifications are evaluated with respect to nitrate leaching and profitability for the processor firm (principal) and contracted grower (agent). A whole-farm optimization and feasibility analysis suggest that contract terms can be used to reduce non-point source pollution.

The U.S. House of Representatives and Senate have written farm bills that contain major revisions in farm commodity programs. Differences in these bills, House bill HR 2854 and Senate bill S 1541, must now be resolved by a Conference Committee, approved by a final vote of both houses of Congress, and signed by the President. Though differences in the bills do exist, the bills contain many similar provisions that appear likely to be included in the final version of the bill. This paper summarizes the major provisions of these bills and identifies areas where differences must be resolved by the Conference Committee.

Ten alternative seed corn contract specifications are evaluated with respect to nitrate leaching and profitability for the processor firm (principal) and contracted grower (agent). A whole-farm optimization and feasibility analysis suggest that contract terms can be used to reduce non-point source pollution.

The Federal Agriculture Improvement and Reform Act contains major revisions in farm commodity programs. This paper summarizes the major provision of legislation. Because many program implementation rules must be developed, program participants are advised to consult their local office of the USDA Farm Service Agency for final program provisions.

The Federal Agriculture Improvement and Reform Act contains major revisions in farm commodity programs. This paper summarizes the major provision of legislation. Because many program implementation rules must be developed, program participants are advised to consult their local office of the USDA Farm Service Agency for final program provisions.

Commodity programs will again be at the center of the debate as consideration of the 1995 farm bill begins. A wide range of alternatives will be proposed as 1995 approaches. Each of these proposals would affect Michigan farmers, regardless of whether they participate in existing farm programs. Given the diversity of Michigan agriculture, few states have as much at stake in the upcoming farm bill debate as does Michigan.

The current debate surrounding the reauthorization of the omnibus farm legislation has refocused policy makers' attention on an expanding set of public goals envision for the Farm Bill. Whereas early Farm Bills mainly addressed farm income goals, recent Farm Bills have given major attention to the environmental quality concerns.