Animal Feeding Operations (CAFOs). Research done by Segerson "demonstrated that taxes-based approaches on ambient water quality can achieve an efficient level of nonpoint pollution, with a uniform tax appropriate for heterogeneous farmers only when marginal benefits of abating pollution are constant." When marginal damages from pollution are uncertain, a cost-effectiveness approach is often the most useful framework. The most cost-effective policy is one that has the smallest deadweight loss in achieving certain policy goals. One case study in Salinas Valley in California shows a water-only tax at about $0.21/mm-ha would achieve a 20% reduction, cost roughly $138 in tax payment; a nitrogen-only tax at $0.76/kg associated with a tax bill of $79 could also achieve a 20% reduction. Subsidies Subsidies are the converse of taxes. Corporate investments beneficial to the environment can be encouraged by providing companies with public funds, tax breaks, or other benefits to subsidize such activities. In the past, subsidies frequently promoted environmentally destructive activities. Elimination of such subsidies can be a means to promote environmental protections. However, subsidy programs are not without problems. They are often difficult to revise or abandon, may result in a free-rider effect, and may have unintended effects that negate some benefits The federal government has provided a number of subsidies to state NPS programs. The CZMA, for example, provides funds for state coastal NPS programs. Deposit refund systems A deposit-refund system for contaminants like pesticides, which is similar to current programs for beverage containers could potentially reduce uncontrolled disposal, over-use, and recycling for pesticides. For example, the retail dealer could pay a deposit when purchasing pesticides, and pass the deposit to consumers, who could receive a refund when he or she returned the container to dealers. Liability rules and insurance requirements Some statutes strengthen common law rules imposing liability for environmental damage. Regulations issued under other statutes are intended to increase the effectiveness of liability rules by requiring that facilities seeking permits to handle hazardous materials have sufficient insurance or other resources to pay for potential damage caused by their activities. Liability guides compensation when polluters are sued. Liability could be strict (pay for any damages), or negotiable with the victims. However, private lawsuits are a difficult way to resolve nonpoint source pollution because it is difficult to prove NPS pollution was the proximate cause of damages. The inability to trace nonpoint sources could greatly weaken the effectiveness of liability. Agriculture