Using Monte Carlo Analysis to Assess Outcome-based Payment for Environmental Services for Denitrifying Bioreactors in the Chesapeake Bay

dc.contributor.authorMcKibben, Paige Alexandraen
dc.contributor.committeechairStephenson, Stephen Kurten
dc.contributor.committeememberEaston, Zachary M.en
dc.contributor.committeememberBosch, Darrell J.en
dc.contributor.departmentAgricultural and Applied Economicsen
dc.date.accessioned2022-01-06T09:00:20Zen
dc.date.available2022-01-06T09:00:20Zen
dc.date.issued2022-01-05en
dc.description.abstractConventional nonpoint source pollution policies encourage the adoption of conservation practices to reduce nonpoint source pollutants by paying a portion of the cost to install best management practices. Alternative financial incentive programs, such as payment for environmental services (PES) programs, aim to improve program effectiveness by paying directly for the quantity of environment services provided, but implementing PES programs to reduce nonpoint source pollution has been challenging given the costs and technical feasibility of measuring pollutant outcomes. Bioreactors, engineered sinks that convert biologically available forms of nitrogen into an inert form (N_2), have recently been proposed to treat and remove legacy nitrogen from springs (Easton et al., 2019). Since nitrogen removal can be directly measured, there is potential to implement an outcome-based PES program. Little information exists on the costs and risks sellers face under such a program or the impact of contractual conditions. This research applies Monte Carlo simulation to a case study bioreactor in the Chesapeake Bay Watershed to estimate the financial risks and rewards to N removal service providers under different outcome-based PES contractual conditions. Results indicate that under a fifteen-year contract term and price of $25/lb/yr of nitrogen removal, outcome-based PES for denitrifying bioreactors has a high chance of generating positive financial outcomes for a commercial size case study bioreactor that removes an average of 1,279 lbs of N annually.en
dc.description.abstractgeneralConventional policies to reduce diffuse water pollutants encourage the adoption of conservation practices to reduce diffuse water pollutants by paying a portion of the cost to install remedial practices or technologies. Payment for environmental services (PES) programs, an alternative to conventional policies, aims to improve program effectiveness by paying directly for the quantity of environment services provided. However, implementing PES programs to reduce diffuse water pollution has been challenging given the costs and technical feasibility of measuring pollutants and outcomes of remedial efforts. Bioreactors, engineered sinks that convert the diffuse water pollutant nitrogen into a non-pollutive form, have recently been proposed to remove legacy nitrogen from springs (Easton et al., 2019). Using bioreactors, nitrogen removal can be directly measured, so there is potential for an outcome-based PES program. Little information exists on the costs and risks sellers face under such a program or the impact of contractual conditions. This research applies financial simulation to a case study bioreactor in the Chesapeake Bay Watershed to estimate the financial risks and rewards to N removal service providers under different outcome-based PES contractual conditions. Results indicate that under a fifteen-year contract term and price of $25/lb/yr of nitrogen removal, outcome-based PES for denitrifying bioreactors has a high chance of generating positive financial outcomes for a commercial size case study bioreactor that removes an average of 1,279 lbs of N annually.en
dc.description.degreeMaster of Scienceen
dc.format.mediumETDen
dc.identifier.othervt_gsexam:32913en
dc.identifier.urihttp://hdl.handle.net/10919/107419en
dc.language.isoenen
dc.publisherVirginia Techen
dc.rightsIn Copyrighten
dc.rights.urihttp://rightsstatements.org/vocab/InC/1.0/en
dc.subjectDenitrifying bioreactoren
dc.subjectpayment for environmental servicesen
dc.subjectChesapeake Bayen
dc.titleUsing Monte Carlo Analysis to Assess Outcome-based Payment for Environmental Services for Denitrifying Bioreactors in the Chesapeake Bayen
dc.typeThesisen
thesis.degree.disciplineAgricultural and Applied Economicsen
thesis.degree.grantorVirginia Polytechnic Institute and State Universityen
thesis.degree.levelmastersen
thesis.degree.nameMaster of Scienceen

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