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Policy Goals for Improved Water Quality in the Baltic Sea: When do the Benefits Outweigh the Costs?

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  • Kari Hyytiäinen
  • Lassi Ahlvik
  • Heini Ahtiainen
  • Janne Artell
  • Anni Huhtala
  • Kim Dahlbo

Abstract

This paper develops and applies a spatially explicit bioeconomic model to study transboundary nutrient pollution of the Baltic Sea. We combine catchment, marine and economic models covering the entire Baltic Sea region to weigh the costs of nutrient abatement and the benefits of improved water quality and solve for the optimal level of water protection. The overall benefits of the Baltic Sea Action Plan, the present convention on nutrient abatement, clearly outweigh the costs. Nevertheless, the total cost could be almost halved if the mix of measures and the regional targets were planned in a spatially cost–effective manner and if the consequent reductions of nitrogen and phosphorus, the two nutrients causing eutrophication, were better balanced. Policy optimizations, however, suggest that the optimal level of nutrient abatement is somewhat lower than the more ambitious level envisaged by the convention. The welfare gains from cost sharing that makes the optimal level of nutrient abatement worthwhile for all littoral countries would be 170 million euros annually. Copyright Springer Science+Business Media Dordrecht 2015

Suggested Citation

  • Kari Hyytiäinen & Lassi Ahlvik & Heini Ahtiainen & Janne Artell & Anni Huhtala & Kim Dahlbo, 2015. "Policy Goals for Improved Water Quality in the Baltic Sea: When do the Benefits Outweigh the Costs?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 61(2), pages 217-241, June.
    • Handle: RePEc:kap:enreec:v:61:y:2015:i:2:p:217-241
    DOI: 10.1007/s10640-014-9790-z
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    2. Chai, Yuan & J. Pannell, David & G. Pardey, Philip, 2023. "Nudging farmers to reduce water pollution from nitrogen fertilizer," Food Policy, Elsevier, vol. 120(C).
    3. Soile Oinonen & Lone Grønbæk & Marita Laukkanen & Polina Levontin & Marko Lindroos & Emmi Nieminen & Katja Parkkila & Pedro Pintassilgo & Henni Pulkkinen & Atso Romakkaniemi, 2016. "International Fisheries Management and Recreational Benefits: The Case of Baltic Salmon," Marine Resource Economics, University of Chicago Press, vol. 31(4), pages 433-451.
    4. Chai, Yuan & Pannell, David J. & Pardey, Philip G., 2022. "Reducing Water Pollution from Nitrogen Fertilizer: Revisiting Insights from Production Economics," Staff Papers 320519, University of Minnesota, Department of Applied Economics.
    5. Scharin, Henrik & Ericsdotter, Siv & Elliott, Michael & Turner, R. Kerry & Niiranen, Susa & Blenckner, Thorsten & Hyytiäinen, Kari & Ahlvik, Lassi & Ahtiainen, Heini & Artell, Janne & Hasselström, Lin, 2016. "Processes for the sustainable stewardship of marine environments," Ecological Economics, Elsevier, vol. 128(C), pages 55-67.
    6. James Shortle & Richard D. Horan, 2017. "Nutrient Pollution: A Wicked Challenge for Economic Instruments," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 3(02), pages 1-39, April.
    7. Ahlvik, Lassi & Hyytiäinen, Kari, 2015. "Value of adaptation in water protection — Economic impacts of uncertain climate change in the Baltic Sea," Ecological Economics, Elsevier, vol. 116(C), pages 231-240.
    8. Janne Artell & Anni Huhtala, 2017. "What Are the Benefits of the Water Framework Directive? Lessons Learned for Policy Design from Preference Revelation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(4), pages 847-873, December.
    9. Ahlvik, Lassi & Iho, Antti, 2018. "Optimal geoengineering experiments," Journal of Environmental Economics and Management, Elsevier, vol. 92(C), pages 148-168.
    10. Savitri Jetoo, 2019. "An Assessment of the Baltic Sea Action Plan (BSAP) Using the OECD Principles on Water Governance," Sustainability, MDPI, vol. 11(12), pages 1-23, June.
    11. Nurmi, Väinö & Ahtiainen, Heini, 2018. "Distributional Weights in Environmental Valuation and Cost-benefit Analysis: Theory and Practice," Ecological Economics, Elsevier, vol. 150(C), pages 217-228.
    12. Artell, Janne & Ahtiainen, Heini & Pouta, Eija, 2019. "Distance decay and regional statistics in international benefit transfer," Ecological Economics, Elsevier, vol. 164(C), pages 1-1.

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