Abstract
The High Plains region in West Texas has been the focus of water conservation policies for the last two decades because of rapid depletion of groundwater in this region. Groundwater is the only source of irrigation in this region of Texas with Ogallala serving as the major aquifer. In recent times however, attention has been drawn on nitrate pollution of the Ogallala aquifer, though no study or research report has come up with a joint management solution to cope with both of these problems. This research attempts to fill in this gap, taking the rural county of Castro as a case study. I use simulated data generated through Cropman (a Crop Simulation Model developed by Gerrick et.al., 2003) to derive estimates for the response functions and nitrogen percolation equations which I use in a dynamic optimization model to determine the optimal levels of nitrogen fertilizer and irrigation water used, taking into account the stock of nitrate concentration and the height of the water table. Results show that while the nitrate levels are moderately high, irrigated agriculture does pose some problem of water depletion in Castro. I propose an endogenous tax rate on fertilizer application by imposing a constraint on the level of fertilizer application. Findings point towards a favorable impact on groundwater quality without the tax being a burden to the farmers. I conclude with a permit market approach coupled with a tax policy to reach a second best economic outcome towards groundwater conservation.
Keywords: Extraction, concentration, permit, tax
See more of: Policy/Regulatory/Economics
See more of: Topical Sessions
