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GEP6: Eutrophication
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What are the costs of nutrient emission reduction? ... The issue: The Rhine ... lags behind the 50% (-70%) goal for 1995 (2000); main culprit: agriculture ... – PowerPoint PPT presentation
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Title: GEP6: Eutrophication
1
GEP6 Eutrophication
- The issue
- Why are excess nutrient emissions and
concentrations an economic problem? - What are the costs of nutrient emission
reduction? - How to trade off the costs and benefits of
nutrient emission reduction? - What are the gains and losses of countries and
sectors from nutrient emission reduction?
2
The issue The Rhine
- Total nitrogen emissions were 400 (520) kT/yr in
1995 (1985), 40 (35) of which from agriculture,
35 (40) from sewage treatment plants - Total phosphorous emissions were 32 (60) kT/yr in
1995 (1985), 32 (17) of which from agriculture,
46 (51) from sewage treatment plants - Although there is progress, particularly nitrogen
lags behind the 50 (-70) goal for 1995 (2000)
main culprit agriculture
3
The issue Solutions
- Eutrophication is hard to solve because sources
are diffuse - It was relatively easy to take the phosphates out
of washing powders There are a handful of
producers only, and they just had to be induced
to switch to an alternative technology - Sewage is harder, as there are more and more
diverse operations, but in the end it is just a
matter of forcing them to filter better
4
The issue Solutions -2
- Agriculture is hard because it is diverse and
because there are many small firms monitoring is
hard, dialogue is difficult, technology may be
inappropriate - A complication is that environmental regulators
are stuck in the past, when environmental
problems had point sources of toxic materials,
while today we have diffuse sources of indirectly
harmful substances
5
The issue Eutrophication
- Eutrophication is a problem because
- It affects human health
- Drinking water
- Blue babies
- Algal blooms
- It affects human recreation
- Turbidity
- Fishing
- Nature
- It affects nature
6
Drinking Water
- Assessing the costs of eutrophication to drinking
water is straightforward - Drinking water quality is measured by the MFI, an
index for the concentrations of colloid and
suspended materials - Intake water quality is measured by Chlorophyll A
concentrations - The company is obliged by law to deliver water of
a certain quality if the chlorophyll
concentrations go up, it simply has to filter more
7
Drinking Water -2
- In Andijk, the relationship is as follows
- Log(MFI) C bX 8.38 10-4 ChlorophyllA 8.99
10-2 Fe(II)SO4 1.14 10-2 Fe(III)SO4 error - R2 0.77 n272
- That is, if one wants to keep MFI the same, then
FE(II)SO4 (FE(III)SO4) should go up by 0.0093
(0.0735) g/m3 if Chlorophyll A goes up by 1 mg/l - FE(II)SO4 (FE(III)SO4) costs 7 (43) ct/kg
8
Recreation
- Recreation is more difficult because behaviour
changes with quality and price, and the market is
partially implicit - However, people spend money and time on
travelling and entrance fees and this is a
measure for the price they are prepared to pay - From this, one can derive a demand function
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Visitor Numbers
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Travel Costs
Visits/1000 300 7.755 Travel Costs
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An Entrance Fee
So now we have two points on our demand curve.
12
Recreation -2
- The problem is that one would need recreation
sites with different levels of eutrophication in
order to estimate how much additional time and
money people would be prepared to spend in order
to avoid eutrophe waters - Alternatively, one would need good time series,
controlling for all else - Alternatively, one would use a survey with a
hypothetical case
13
Recreation -3
- In two surveys of visitors to recreation areas,
people were asked who how much they would be
prepared to pay more in entrance/parking fees to
cover the costs of measures to increase the
turbidity of the water - In Zwemlust, people would pay some additional 50
(6) cents per visit - In Wolderwijd, swimmers would pay some 49 (9)
cents per visit sailors some 29 (17) surfers
some 31 (9) cyclists some 28 (7) and fishers
some 23 (37)
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Total Benefits
- The total benefits of recreation and drinking
water are pretty small - This is not a big surprise, as eutrophication
only has a limited influence - Eutrophication only affects a small part of the
Rhine catchment, mostly the lakes fed by the
river because of the water flow, the effects in
the main river are limited - The real issue, perhaps, with eutrophication is
in coastal waters beyond the current study
15
Nutrient emission reduction
- There is a large number of potential measures to
reduce nutrient emissions - For hen and pig farms change in diet, washing
manure, drying manure, closure - For dairy farms change in diet, manure flushing,
chemical treatment, keeping cows inside, farm
closure - For arable farms less fertiliser, different
timing, farm closure (note soil) - For sewage plants extended mechanical and
biological treatment
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Broiler Farms
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Emission reduction costs
- All these things cost money, some a little, some
a lot - Note that farm closure may be cheaper than some
of the other interventions - Emission reduction costs money because of the
assumption (?) that farmers are smart if they
could make money by reducing emissions, they
would do so - For instance, animal diets are optimised for meat
and milk production adding a nutrient constraint
reduces production
18
Emission reduction costs -2
- A smart farmer, when confronted with an emissions
constraint, would first implement the cheapest
measures, gradually moving to the more expensive
ones - The result is a cost curve in this study, the
cost curve from a linear programming study was
approximated by a quadratic cost function,
specific for sectors, soil type, location
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Policy analysis
- According to the Rhine and North Sea Action Plans
of 1987, nutrient loads to the North Sea have to
be cut by 50 in 1995 compared to 1985 - The planned way of implementation is to cut
emissions everywhere by 50 - This is a bit peculiar, as emissions and
concentrations are very different things - It reflects a primitive no envy outcome, so
often seen in international negotiations
21
Policy analysis -2
- Primitive no envy, because people presumably
care more about costs than about efforts - The suggested implementation would costs some
4238 mln Euro a year - Switzerland covers 490, Luxemburg 57, Belgium 8,
Austria 14, France 491, Netherlands 822 - Equity in effort does not imply equity in costs,
because cost functions differ
22
Policy analysis -3
- If we reallocate the emission reduction so that
costs are minimised, while the concentration is
still 50, costs fall from 4238 to 694 mln Euro - The bulk of this is sectoral reallocation if all
regions cut 50, costs fall to 953 mln Euro - The reason is that emission reduction is cheap in
sewage and arable farming, expensive in poulty
and piggory farming - Phosphate is more important than nitrate
23
Cost-Effectiveness Analysis
- The type of analysis above is called
cost-effectiveness analysis What are the minimum
costs to acheive a given target? - Most, but not all, people would agree that
cost-effectiveness is a good thing - (The exception being punishment)
- However, we talked about a reallocation
- Swiss sewage should cut 83 of ist phosphate
emissions, Bavarian hen farming only 1 -- rather
than 50
24
Policy Analysis -4
- In any policy analysis, one should always
distinguish between who is responsible (that is,
pays the costs) and who takes action (that is,
reduces emissions) - In our example, the Bavarians save a lot of money
while the Swiss have to spend more (even though
total costs fall) - The reallocation of effort to save costs should
be accompanied by compensation - In a cost-effectiveness analysis, this is
relatively easy, as everybody could gain
25
Policy Analysis -5
- In a cost-effectiveness analysis, we seek to meet
a given goal at the lowest possible costs - Where does the goal come from?
- In our example, the goal is reduce nutrient loads
by 50 -- apparently because this would return
the salmon to the Rhine - This claim, by the way, is unfounded
- Is it worth to spend 700 mln Euro on a fish? The
money could also be spend on AIDS, education,
highways, defense
26
Cost-Benefit Analysis
- In a cost-benefit analysis, we seek to set a goal
so as to maximise welfare (meeting that goal at
the lowest possible costs) - In order to do so, we would need to quantify
well-being, and express happiness in a single
dimension - This inevitably entails a loss of information
- In CBA, the metric is money and the projection is
linear - Other methods use other metrics and projections,
but the problems are the same
27
Cost-Benefit Analysis -2
- So, that is why we estimated the monetary costs
of eutrophication in the beginning - The estimated benefits of avoided eutrophication
were pretty trivial (1 mln Euro), not justifying
much action, but this is because the estimates
were very incomplete
28
Benefits are recreation and drinking water
purification only!
29
Cost-Benefit Analysis -2
- So, that is why we estimated the monetary costs
of eutrophication in the beginning - The estimated benefits of avoided eutrophication
were pretty trivial (1 mln Euro), not justifying
much action, but this is because the estimates
were very incomplete
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