An Economic Evaluation of the Nutrient Assimilation Potential for Commercial Oyster Aquaculture in the Chesapeake Bay

The Chesapeake Bay states continue to struggle to achieve the water quality goals set out in the Chesapeake Bay Agreement. While policy efforts to combat eutrophication tend to focus on reducing nutrient loads at point and nonpoint sources, waters of the Bay can be improved through an increase in the assimilative capacity of the ecosystem, which would remove nutrients (called nutrient assimilation services) from ambient waters. The filtering capacity of the native oyster, C.virginica, is a widely recognized means to enhance water quality. With an increase in the number of oysters in the Bay, and no decrease in wild stocks, oyster aquaculture has the potential to also increase the nutrient assimilation capacity of the ambient environment.

Yet the expansion of commercial aquaculture in the Bay has been limited by financial constraints. Increased water quality services might be forthcoming if oyster aquaculturists received financial compensation for the nutrient removal services they provide. Based on previous research, this study develops a procedure for estimating annual nutrient removal from a given size oyster aquaculture facility. Next, a firm level bio-economic simulation model was constructed to estimate the amount of compensation needed by a commercial oyster aquaculture firm to make a new investment in oyster aquaculture. The amount of compensation needed is interpreted as the cost of providing nutrient removal by oyster aquaculture. Results indicate that under many circumstances, nutrient removal services can be provided by oyster aquaculture facilities at a per unit cost comparable with some non-point and point source nutrient removal technologies. Finally, a select number of funding resources were identified as potential outlets for creating payments and demand for nutrient assimilation services.