As Scioto Analysis’s newest member, I had the opportunity to conduct my first cost-benefit analysis about water quality in Ohio over the past few months. Here are five key takeaways from the project.
1: Ohio’s water quality is quite poor
For any policy analysis, it is important to begin by defining the problem we are trying to solve with policy. Using data made available by the University of Vermont, we can see that water pollution costs the average Ohio resident $219 compared to only $139 for a resident of the average state. These costs include lower property values, decreased recreation, and higher costs associated with water treatment. This means Ohioans have less recreational opportunities, lower property values, and higher water treatment costs than other states due to surface water degradation.
2: The H2Ohio program has helped reduce agricultural pollution
In their fiscal year 2022 report, the H2Ohio program reported that over 200,000 fewer pounds of phosphorus are loaded into the Western Lake Erie basin annually because of its programming. As the H2Ohio program continues to operate and grow, Ohioans could see fewer harmful algal blooms as a result. There is still a long way to go, but the H2Ohio program has been a first step in reducing phosphorus runoff into Ohio’s lakes and rivers.
3: The social benefits of improved water quality are significant
Strong economies are able to give people access to the things they want despite the fact that resources are limited. Clean water is an extremely valuable resource that often gets overlooked in a country where drinking water is often easily accessible. Research on the willingness to pay to prevent water pollution has shown that one excess kilogram of phosphorus due to runoff from livestock waste causes nearly $75 of economic losses.
4: Expanding successful programs is difficult
We’ve talked in the past about the problems associated with scaling programs, and H2Ohio is no exception. In this cost-benefit analysis, we chose to model these diminishing returns by assuming that future reductions in phosphorus would be as much as 50% lower. Fortunately, even with this conservative assumption, the program still has positive net benefits the majority of the time.
5: Subsidies are effective at fixing market failures
One of the most well-known drawbacks of classical economic markets is that they often have external costs levied on people not involved in a given market transaction. However, if policymakers understand these externalities, they can use their ability to levy taxes and increase spending on subsidies to push markets towards more efficient outcomes. Taxes and subsidies are often the simplest tool policymakers wield for correcting market failures.