Schou, J.S., Neye, S.T., Lundhede, T., Martinsen, L. & Hasler, B. 2006. NERI Technical Report No. 592. 69 p.
This report documents the revised cost-minimisation model for reducing nutrients loads to the <st1:place w:st="on">Baltic Sea</st1:place>. The work is part of the MARE-project (see www.mare.su.se ), and the key issue for the development of the cost-effectiveness model is to enable consistent modelling of the costs and the effects on nutrient loads of various measures implemented in the regions contributing to nutrient loads.
The purpose of the cost-minimisation model is to establish a framework for prescribing cost-efficient scenarios of reduced nutrient loads to the <st1:place w:st="on">Baltic Sea</st1:place> . Nutrient loads derive from emissions both airborne and waterborne but in this work we focus on emissions only from countries with coastlines adjacent to the <st1:place w:st="on">Baltic Sea</st1:place> , or with water drainage and transport to this sea region. Further, it demonstrated how secondary environmental effects, e.g. climate gas emissions, can be included in the welfare economic abatement costs.
The geographical boundaries of the model consist of the 9 countries surrounding the <st1:place w:st="on">Baltic Sea</st1:place> divided into 24 drainage basins. The <st1:place w:st="on">Baltic Sea</st1:place> is divided into 8 sea regions enabling setting up regional environmental standards for each sea regions. The division into drainage basins and sea regions reflects that emissions from each country contribute differently to the loads of the different sea regions because of retention, i.e. dilution and de-nitrification during transport to the sea regions, but also between the water bodies in the sea regions. Thus, the model solutions reflect regional differences in costs and loads. Cost functions and load reduction functions are developed for six different measures (establishment of wetlands, reduced livestock production, catch crops, reduced nitrogen fertilisation, sewage treatment, and NOx abatement), and for each measure a maximum level for implementation is defined at the national level.
An essential feature of the model is how the costs are modelled. For some of the measures with limited impact implemented at small scale it may be reasonable to assume marginal costs to be constant, i.e. the total costs are a linear function of the abatement level. However this model operates at national scales with measures which should result in environmentally significant changes in the nutrient loads to the <st1:place w:st="on">Baltic Sea</st1:place> . Therefore, total costs are likely to be marginally increasing with the scale of implementation of each measure. This means that the extra cost of reducing loads by one extra unit are increasing, and non-linear costs functions are therefore implemented for those measures where the necessary data are available. This approach is in line with economic theory and general recommendations.
The result is presented as an aggregate cost estimate for the countries in the Baltic Sea region. However, this should not be interpreted as an indication of which countries should eventually bear the costs. This is important to note when passing the results to policy makers, as the model prescribe how the effort should be mixed in order to reach the least cost solution but not how this solution is reached in a political economic context.
Full report in pdf format (917 kB)
