The impacts of allocation strategies for spatially regulated chemical use

Spatial regulations can restrict chemical use more efficiently by linking local benefits to local costs. California has instituted such a spatially based regulation of an agricultural fumigant to meet air quality standards. We examine the implications of alternative allocation mechanisms: allocation of use based on a first come, first served basis; on quotas linked to historical use; and on the highest-value use. Although there are distributional impacts by crop, the overall change in aggregate value from using a highest-value use mechanism rather than a first come, first served approach is estimated to be less than $9 million of a total potential regulatory cost of $65 million.