The Economics of Dead Zones: Linking Externalities from the Land to their Consequences in the Sea
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The purpose of this review and analysis is to provide a basic understanding of the issues related to worldwide hypoxic zones and the range of economic questions sorely in need of answers. We begin by describing the causes and extent of hypoxic zones worldwide, followed by a review of the evidence concerning ecological effects of the condition and impacts on ecosystem services. We describe what is known about abatement options and cost effective policy design before turning to an analysis of the large, seasonally recurring hypoxic zone in the Gulf of Mexico. We advance the understanding of this major ecological issue by estimating the relationship between pollutants (nutrients) and the areal extent of the hypoxic zone. This “production function” relationship suggests that both instantaneous and legacy contributions of nutrients contribute to annual predictions of the size of the zone, highlighting concerns that ecologists have raised about lags in the recovery of the system and affirms the importance of multiple nutrients as target pollutants. We conclude with a discussion of critical research needs to provide input to policy formation.