Baltimore Ecosystem Study Institute of Ecosystem Studies

2017 BES Annual Meeting Presentation and Poster Abstracts

Price based policies for managing residential development and impacts on water quality
Newburn, David
Co-Authors: Doug Wrenn, Allen Klaiber

Abstract: Title: PRICE BASED POLICIES FOR MANAGING RESIDENTIAL DEVELOPMENT AND IMPACTS ON WATER QUALITY Abstract: We link an instrumental variable (IV) duration model of residential development addressing price endogeneity with a water quality model to examine trade-offs in urban development and water quality outcomes. Our IV model uses a control function approach to instrument for housing prices using spatial equilibrium linkages in the land market. We combine the IV model with a water quality model to simulate how price-based land use policies affect nitrogen and phosphorus loads. Our results indicate that the non-IV model substantially underestimates the magnitude of residential development and water quality impacts. Policy simulations also reveal trade-offs between objectives for managing residential development and water quality. A uniform tax on development significantly reduces acreage developed, but surprisingly increases nitrogen and phosphorus loads relative to the baseline scenario. A green tax for development on forested parcels is the most effective to mitigate water quality impacts, albeit with the lowest reduction of acreage developed.