Transaction Costs of Policies to Reduce Agricultural Phosphorous Pollution in the Minnesota River

This study measured the magnitude of transaction costs associated with policies to reduce agricultural nonpoint source pollution. Interviews with staff from governmental agencies were conducted to estimate transaction costs associated with four policies to reduce agricultural phosphorous pollution in the Minnesota River. The tax on phosphate fertilizers had the lowest transaction costs ($0.94 million), followed by educational programs on best management practices ($3.11 million), the requirement for conservation tillage on all cropped land ($7.85 million), and expansion of a permanent conservation easement program ($9.37 million). Taxes, thus, may have advantages with respect to transaction costs and abatement costs. (JEL Q15; Q25)