1. Cost-Effectiveness Analysis when implementing the WFD in Denmark
Senior Researcher Brian H. Jacobsen
Institute of Food and Resource Economics
University of Copenhagen

2. Content Danish analyses - past and present
2. Reflections on cost effectiveness
3. Reflections on EU guidelines
4. Conclusions

3. Analyses prior to WFD implementation
Denmark has implemented 3 action plans with focus on nitrogen (50% reduction in N-leaching). Large effect on point source (P+N).
Action Plan II in 1998 was followed by both a preliminary, mid-term and ex-post analysis of cost-effectiveness
- See FOI report 169 for a summary
Action Plan III in , based on detailed work on scenarios and economics of different measures. Midterm review in 2008.
- see FOI report 167 and

4. N-surplus, N-leaching and N-loss in DK (kg N/ha)
WFD target

5. Steps in WFD implementation in DK
Target 2015
Baseline 2015
Action Plan III
Scattered housing and sewage
Present condition
Nitrate directive

6. Steps in implementation of WFD in DK (N)
Target 2015
N-quota model
No Autumn cultivation
Buffer strips
Wetlands
Catch crops
Baseline 2015
Action Plan III
Sewage from
scattered housing
Present condition
Nitrate directive

7. Reduction required to reach target
Share (%)
Streams (km)
Target not met
Improve physical
conditions
4.000 40
Lakes:
Reduction (ton P)
25-40 30
Fjords :
Reduction (ton N)
19.000
80-90

8. 4 water districts and 23 main catchment areas
Fødevareøkonomisk Institut
Denmark
4 water districts and 23 main catchment areas
One trans-boundary catchment. Much local co-operation needed.

9. Choosing measures in DK
Step 1: Make a list of all possible measures
Step 2: Analyse the effectiveness and costs of selected measures also looking at :
- Budget and welfare-economic costs
- Side effects (CO2, NH3, pesticides, Biodiversity)
- Shadow value of side-effects
- Certainty with respect to estimates from research
NERI (DMU) report no. 625 from 2007
POM: Single indicator – Single measure cost-effectiveness approach (not a package)
Detailed analysis on the use of cost-effectiveness in FOI report no. 191.

10. Choosing measures in DK
Step 3: Select the most cost-effective measures for detailed analyses in 3 regions in 2008
- regional effectiveness and costs
- likely potential of each measure
- administrative costs
- control issues
Step 4: An element in Green Growth (2009)
- Water, CO2, NH3 and Biodiversity plans
- Search for synergies
- Reduction requirements in catchments
- Focus on financing (EU, state, local)
- Wider economic effects (employment)
Step 5: dRBMP and PoM ( )

11. Content in Danish PoM (Roskilde) - N, P, physical issues and costs
1.Diffuse losses
Buffer strips, catch crops etc.
2. Groundwater
Moving abstraction sites
Pumping out water
3. Physical conditions in streams
Maintenance and restoration
4. Point source
Basin for overflow of rainwater
Wastewater treatment plant (higher capacity) 11

12. Division of marine area according to knowledge level (uncertainty): V1-area (10%) V2-area (20%) V3-area (30%) In the 1st plan period , focus is mainly on measures in V1 and V2

13. Reduction requirement
Efterafgrøder
FOI og DJF antager få sædskifteændringer og jævn placering i DK
DMU angiver at der er plads til flere efterafgrøder ( ha)
Andel stiger fra 10/14% op til et gennemsnit på ca. 22%. (maks. 37%) (V1+V2 er 70% af det samlede areal)
Arealet med yderligere 24% efterafgrøder er ca. 6% af arealet (Jylland). Areal med yderligere 0-5% er noget større.
Stor geografisk forskellighed

14. Cost efficiency (€ / kg N) – Green Growth
General measures
Efficiency
(kg P/ha)
Costs (€/ha)
(kg N /ha)
€ / kg N
Limit ploughing in the Autumn
0.2
1.2 7
Limit ploughing of grass
9.0 15
0.6
Catch crops
56.4 14
4.1
10 meter buffer strips (N+P) 3
277 48
5.8

15. Cost efficiency (€ / kg N) – Green Growth
Specific measures
Efficiency
(kg P/ha)
Costs (€/ha)
(kg N /ha)
€ / kg N
Targeted catch crops
56.4 14
4.1
Wetlands (N)
1.043
113
9.2
Tradable quotas (N)
4.8 – 20

16. Cost efficiency (€ / kg N) Green Growth
Other measures
Costs (€/ha)
Efficiency
(kg N /ha)
€ / kg N
Biogas 2
Organic dairy farming 37 9 4
Energy crops (willow)
188 17 11
Reduced N-norm (10%) 26

17. Cost efficiency Lakes (€ / kg P)
P-measures
Costs (€/ha)
Efficiency
(kg P /ha)
€ / kg P
P-wetlands
457 10 46
Grass to reduce erosion
388
0,16
2.550
Non farm measures
Sewage from scattered housing
<800
Waste water treatment
Rain water storage

18. Catch crops in water plans 2010
Efterafgrøder
Add. Catch crops (%)

19. Location of measures - different retention and loss of income will affect CEA ranking
(Jacobsen and Abildtrup, 2003)

20. Ranking is easy ?

21. When ranking becomes more difficult !
One source (e.g. N) in one area is easy
Two sources in one area is possible (e.g. N and P) – eutrophication index
Several sources in several areas with interaction (up-down stream) and synergies between measures - as well as side-effects, then ranking is not straight forward.
Is the ranking at national, regional or farm level ?
How do you explain the ranking to others?

22. Reflections with respect to EU guidelines
Good basic material
Not enough detail when the actual work is underway
Too few examples of best practice
National differences are large and make it difficult to give a unified approach
Commission seems to be reluctant to give clear guidelines (e.g. disproportionate costs)
“No single approach to CEA should be desired or expected” (CEA drafting group, 2006) 22

23. Conclusions on CEA in DK
CEA has played a central role in DK for a number of years
Ranking of supplementary measures using
single indicator – single measure approach
- model for N-quota model is not decided
Implementation at the field level – is it possible ?
Financing is an important issue (80 mio. €/yr)
Cost effectiveness analysis should be the starting point for the cost-benefit analysis
- What about welfare economics ? 23

24. Conclusions on WFD
More examples of Best Practice and more exchange of ideas between countries
Minimum standards on e.g. cost definitions and what to include
“New” terminology like environmental and resource costs are not easy to use
Future work requires both economists and those involved in interdisciplinary work

25. More on www.foi.dk or contact brian@foi.dk