Second best taxes and quotas in nitrogen regulation

This paper investigates second best policies to regulate nitrogen leaching. When the policy maker controls the total nitrogen use, an overall tax is superior to an action equivalent overall quota. When the goal is to regulate the expected level of nitrogen leaching, expected profit of a risk neutral farmer is greater under an overall tax than under an overall quota under a reasonable condition. Results suggest that an overall tax is probably a superior policy to an overall quota to regulate expected total nitrogen use or expected nitrogen leaching for risk neutral and most of risk averse farmers. -from Authors