Researchers examine economic impacts of aquatic dead zones

A West Virginia University researcher is working to understand and estimate environmental cleanup costs associated with agricultural runoff that causes polluted “dead zones” in downstream coastal systems.

Levan Elbakidze, professor of resource economics and management at the WVU Davis College of Agriculture and Natural Resources in the Division for Land-Grant Engagement, WVU doctoral candidate Taiwo Akinyemi and postdoctoral fellow Yeulu Xu are collaborating with researchers from Texas Soil and Water Research Laboratory and Iowa State University to study coastal hypoxic zones, also known as “dead zones.”

Algae bloom in these areas as a result of nitrogen in agricultural fertilizer, and when the algae die, the decomposition process consumes the oxygen supply in the water, killing marine life and making it further uninhabitable.

“The Gulf of Mexico algal bloom is a really big problem,” Elbakidze said. “Nitrogen from agriculture gets into the downstream systems and results in excess nutrients in those waters, which in turn support periodic algal blooms in coastal systems like the Gulf of Mexico. Algae consume dissolved oxygen as they die off and decompose, resulting in oxygen deficit, or hypoxia. Because of this, fish die or migrate away from the hypoxic area, creating dead zones in the Gulf.”

The researchers completed a four-year study funded by the National Science Foundation in which they designed an economic model that looks at nitrogen fertilizer and its role in the demand and supply of corn, wheat, sorghum and soybeans.

By estimating how much fertilizer each of these crops uses and how much is planted and produced, the team can subsequently determine how much nitrogen reaches systems like the Gulf of Mexico — which President Donald Trump has renamed the Gulf of America through an executive order — Lake Erie and the Chesapeake Bay.

They also examined the impacts of fertilizer prices and international trade barriers on nutrient runoff.

Despite the Environmental Protection Agency’s goal of reducing the size of the Gulf dead zone by 2035, little progress has been made. EPA studies found that nitrogen runoff to the Gulf needs to be reduced by about 45% to meet the intended objective. Reducing dead zones and algal blooms in coastal areas should also improve upstream water quality in watersheds like the Mississippi River Basin, as nitrogen runoff also damages local streams. Elbakidze’s model predicts how reducing runoff will influence the levels of nitrogen in a particular local area upstream.

“The benefits of reducing nitrogen pollution are likely to be really large upstream and downstream,” he said. “But suppose we achieve the objective somehow. Suppose we tax nitrogen fertilizers, make fertilizers really expensive or regulate fertilizer use in some way. What will happen to the markets? What will happen to the price of commodities, like corn and soybeans? What will be the impact on consumers and producers? These are some of the questions we address.” 

A second concern is pollution leakage. If nitrogen runoff to the Gulf is reduced by 45%, some of the sources of pollution — the agriculture that requires fertilizer — may migrate to another area.

“A lot of corn is produced in the Mississippi River Basin,” Elbakidze said. “If we significantly limit corn production there, then prices for corn may go up, simply because that area is really large and represents a big market share. And if corn prices increase, then producers in other areas that are less regulated may have an incentive to increase production. So, corn production, and nitrogen runoff, can move to other areas.”

To that end, the researchers found a 45% decrease in runoff to the Gulf will result in a 4%-5% increase in runoff to Lake Erie and the Chesapeake Bay.

While restricting runoff to all coastal areas is an option, Elbakidze said the cost of such co-management needs to be considered.

“Economists typically think about the costs of such objectives in terms of consumer costs due to higher prices and lower consumption, and producer costs due to decrease in production that may or may not be offset by higher prices. We estimate that the cost of achieving a 45% reduction in agricultural nitrogen runoff to the Gulf is about $7 billion annually. However, I suspect that the benefits of reducing nitrogen runoff are likely to exceed these costs, especially if we count the values of reducing the dead zone in the Gulf as well as the values of improved upstream ecosystems in the Mississippi River Basin.”

In the next phase of the study, funded by the U.S. Department of Agriculture, the researchers aim to expand the crops included in the model. This will add accuracy to the model and allow them to see what happens in other commodity markets.

“Right now, if you reduce nitrogen runoff, we can see what will happen to soybean, wheat, corn and sorghum prices,” Elbakidze said, adding that the new model will look at more crops. The researchers will also include phosphorus in the model, which is a bigger problem in Lake Erie than nitrogen. Curtailing nitrogen in the Gulf may have a harmful effect on phosphorous levels in the lake, an example of cross-nutrient leakage.

“The idea of pollution leakage is not new in principle,” he said. “However, in our setting, integrated models that account for human behavior and natural system dynamics jointly are needed to estimate costs, benefits and impacts. Such quantitative evaluations are critical for informed policy development aimed at managing environmental externalities like nutrient runoff from agriculture. More research is needed to quantify benefits and costs.”