Economic analysis of the BSAP - a cost effectivenss approach Anette Gudum Economist, COWI AS Economic Analysis of the BSAP Stakeholder Conference, Helsinki 6. March 2007

Introduction Our assignment: Economic analysis of selected scenarios for nutrient reductions in the Baltic Sea Assessment of the cost effectiveness of different measures The aim of the analysis in connection to the BSAP: Assisting HELCOM designing the action plan that is cost effective (the improvements should be achieved in the cheapest way possible) Providing input about the distributional consequences of different solutions Economic Analysis of the BSAP Stakeholder Conference, Helsinki 6. March 2007

The problem The overall ”problem” from an economic point of view: Eco-system approach: targets set in terms of water quality. Can be reached in multiple ways Different kind of actions Addressing different types of pollution sources At different geographic locations Different combinations of actions will fulfil the targets but at different cost to the society And of course, the overall aim should be as low cost as possible! Economic Analysis of the BSAP Stakeholder Conference, Helsinki 6. March 2007

Evaluation on the CE of measures We address selected measures towards four polluting sources: Point sources: Improved WWT, p-free detergents Agriculture: Grassland, wetlands, reduced livestock, catch crops, reduced fertilizer use, manure handling NOx emissions from ships: Selective catalytic converter on ships Nox emissions from land-based activities: Selective catalytic converter on energy combustion plants and trucks For each measure, we evaluate cost and nutrient reductions in each of the Baltic Sea countries Economic Analysis of the BSAP Stakeholder Conference, Helsinki 6. March 2007

Conclusions Improved WWT: P-free detergents: large potential for nutrient load reductions. cost effective measure, although there is great variation, depending on the inititial treatment level, population density and geographic placement P-free detergents: May be cost effective measure, at least until improved waste water treatment is in place. CE decreases with the increase in WWT. It only addresses P. And it has to be introduced at country level Measures towards Agriculture: It seems relevant to address nutrients from agriculture as well from a CE point of view In the eastern part of the region generally low reduction potential due to low level of fertilizer use. Agricultural development may change this picture! In the western part potential for reduction due to high fertilizer use Some of the most cost effective measures relate to changes in the agricultural practices (e.g. manure storage) Economic Analysis of the BSAP Stakeholder Conference, Helsinki 6. March 2007

Conclusions (continued) NOx emissions from shipping Technological measures towards NOx emissions from shipping very cost effective Significant N load reduction potential (close to 20,000 tons - or 20% of the total N load reductions needed) However, regulating ship emissions is a complex matter due to the international nature of this activity NOx emissions from land-based sources Highly relevant to consider measures - but for other reasons than the Baltic Sea Economic Analysis of the BSAP Stakeholder Conference, Helsinki 6. March 2007

And a very general conclusion: It is difficult to present a general estimate on the cost effectiveness of a measure since it depends very much on the Geographic location Dosage (generally decreasing cost effectiveness when the dosage is increased) Economic Analysis of the BSAP Stakeholder Conference, Helsinki 6. March 2007

WWT scenario Definition: Improved WWT in Russia, Poland, Estonia, Latvia, Lithuania, Belarus and Czech Republic to the level of Sweden P loads are appox. reduced by the amount needed (13,000 tonnes). N loads reduced by approx. 1/3 of the amount needed (35,000 tonnes) The total annual costs are estimated to in between 1.5 and 3 billion Euro Economic Analysis of the BSAP Stakeholder Conference, Helsinki 6. March 2007

WWT scenario (continued) Costs and nutrient load reduction are divided as follows: Highest cost effectiveness in Russia and lowest in Lithuania The cost per capita (in the drainage basin) varies between EUR 16 and 98 (lowest in Estonia, highest in Belarus) Economic Analysis of the BSAP Stakeholder Conference, Helsinki 6. March 2007

P-free detergent scenario Definition: A ban on phosphates in household detergents in all countries (like in Germany) P loads are reduced by around 3.2 tonnes, corresponding to approx. 25% of the reduction needed. The total annual costs are estimated to around EUR 175 milllion Economic Analysis of the BSAP Stakeholder Conference, Helsinki 6. March 2007

P-free detergent scenario (continued) Costs and nutrient load reduction are divided as follows: Cost effectiveness highest in Belarus and Russia, lowest in Sweden The cost per capita (in the drainage basin) is approx. EUR 2 per year in all countries Economic Analysis of the BSAP Stakeholder Conference, Helsinki 6. March 2007