1. 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

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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