Awards issued prior to january 20, 2025, were funded under previous administrations and may not reflect the priorities and policies of the current administration.** agricultural nonpoint source…

Awards issued prior to january 20, 2025, were funded under previous administrations and may not reflect the priorities and policies of the current administration.** agricultural nonpoint source pollution, as with many other agri-environmental interactions, is heavily influenced by random events such as weather. Prior economic work has emphasized the importance of designing policy instruments to address uncertainty due to this randomness, and this uncertainty has also been a significant issue in practice. Although the same random events also influence farm productivity and hence farm income, prior work has devoted little attention to this issue, which is likely to become more important due to climate change. Our proposed analysis will focus on understanding the importance of jointly determined environmental and farm production risk in the design of environmental policies, and how policies can be designed to better address these joint risks to (1) maximize economic values associated with agri-environmental service provision, and (2) support farm income through the provision of these services. A particular focus will be on risk linkages in the context of water quality management, especially in the face of climate change, using compensation programs such as government subsidies and point-nonpoint source trading programs in which point sources pay nonpoint sources for abatement. We will examine these policy design issues in theory, and numerically using simulations for the chesapeake BAY watershed – an important water resource that has been harmed by nutrient pollution. We will also examine what opportunities or challenges correlated environmental and farm production risk poses for designing environmental policies that can improve risk management in ways that benefit both the environment and farmers.