Optimal Regional Regulation of Animal Waste

Large animal facilities generate manure in excess of their production needs leading to excessive nutrient loading. Differences in manure contents of phosphorus and nitrogen relative to crop requirements exacerbate loading of the more abundant nutrient, frequently phosphorus. Current regulations that restrict manure utilization and animal production, but not at crop lands leads to suboptimal resource allocation and under utilization of manure in crop production. The transboundary character of nutrient loading further complicates the management of manure phosphorus and nitrogen. Due to differences in environmental characteristics, upstream and downstream regions may have differing objectives towards controlling nitrogen and phosphorus surpluses. We consider optimal management of manure in a stylized two-agent, two-nutrient and two-region model. We show that trade-offs in managing manure phosphorus and nitrogen, inability to regulate manure applications outside animal farms’ field areas and regional differences in environmental targets can severely impede the effectiveness of regulation. Depending on the environmental and economic characteristics, tightening upstream regulation with respect to the loading of one nutrient might increase the downstream loading of the other and might even decrease the total welfare.