1. Swedish Environmental Protection Agency
Costs and benefits from reduced eutrophication in the Stockholm archipelago
Kerstin Blyh
Swedish Environmental Protection Agency
Workshop on Disproportionate Costs, 10./ Copenhagen

2. Introduction Main methodological issue tackled
Affordability in the disproportionality analysis (4.5)
Use of instruments (Annex VI part B) to tackle affordability issues
Relevance in respect to the request of the Water Directors
(4) When is affordability relevant?
(5) Example on approach on financing mechanisms
(6) Costs of non-action
Workshop on Disproportionate Costs, 10./ Copenhagen

3. Overview of the Case Study
North Baltic river basin district: 6 main catchment areas, 33 sub-catchments
Main pressures: agriculture, waste water discharges, pop. 2,9 millions
Impact: eutrophication – moderate status
Measures: supplementary measures in waste water treatment plants, wetlands, less use of fertilizers
Note: Independent study, used in this context to illustrate principal issues!
Workshop on Disproportionate Costs, 10./ Copenhagen

4. Workshop on Disproportionate Costs, 10./11.4.2008 Copenhagen

5. Key message with case study
“Ability to pay should not water down the ambition of the Directive”
Thus, affordability should not be decisive when justifying less stringent objectives, when measures are cost-effective and reaching the objective generates welfare gains
Workshop on Disproportionate Costs, 10./ Copenhagen

6. Estimated costs and benefits
Cost-effective abatement measures:
- suppl. measures waste water treatment
less use of fertilizers
creation of wetlands
Reduced
eutrophication
Total Costs:
ca 6 million Euro/year
Total Benefits:
ca 55 million Euro/year
Workshop on Disproportionate Costs, 10./ Copenhagen

7. Results cost-effective combination of measures to reach the objective
Wetlands
Catch crops
Cost/kg
Marginal cost
Objective
Cost effective measures
Not cost effective measures
Suppl measures in WWTP
Marginal
cost
Reduction % (kg)
Workshop on Disproportionate Costs, 10./ Copenhagen

8. Cost-effectiveness versus possible distributional effects
Cost-effectiveness from target perspective
Possible distributional effects
(v.)
Construction costs for wetlands are high for concerned farmers
From a buisness economic view wetlands might be too expensive
Cheaper for concerned farmers to cultivate catch crops
Wetlands are cost-effective
Catch crops are not cost-effective
Can these affordability issues be mitigated, thus reaching objective in a cost-effective way?
Workshop on Disproportionate Costs, 10./ Copenhagen

9. Possible instruments to reach objective cost-effectively and to mitigate distributional effects
Agricultural sector not negatively im-pacted
Individual farmers not negatively im-
pacted
State financed
Financed by actors
Actors choose to pay charges or take measures
Cost-effective measures, but..
Burden on tax payers
PPP (cost-recovery) not achieved
Cost-effective measures, and..
No burden on tax payers or state budget
Costs of measures at expense of polluters
Subsidies Compensation to farmers for wetlands
Charge system on nutrients Polluter pays for share of nutrient contribution. Income from charges used to finance wetlands
Workshop on Disproportionate Costs, 10./ Copenhagen

10. Policy instrument, example self-financed system
Cost/kg
Authority
Marginal cost
Charge fee
Compensation
Reduction % (kg)
Cost effective measures
Not cost effective measures
Workshop on Disproportionate Costs, 10./ Copenhagen

11. Conclusion and Outlook:
Consequences if lowering objectives due to affordability
No need for action – No incentives for policy instruments!
No need for action – No incentives for technical development!
Cost-effective measures risk not being taken
Documented welfare benefits to society will not be realized
Legitimate opportunity for strong lobby-groups
Workshop on Disproportionate Costs, 10./ Copenhagen

12. Recommendations for guidance document
Affordability issues should not be decisive when considering less stringent objectives
Disproportionality under Art should be based on whether costs significantly exceed benefits
There is a difference between reaching objectives later or not reaching them at all, thus justifying a different approach on the concept of disproportionality between 4.4 and 4.5
Art. 9 gives leeway to mitigating affordability issues using e.g. policy instruments, i.e. administrative measures in PoM
3) WITH THIS NOT MEANT THAT THE LOWERED OBJECTIVE WILL NOT BE RECONCIDERED
IS ABOUT ESTABLISHING A PRINCIPLE THAT CAN HAVE THIS EFFECT !
Workshop on Disproportionate Costs, 10./ Copenhagen

13. Thank you for your attention
Contact for further details on the Case Study
Stockholm
 , 
Workshop on Disproportionate Costs, 10./ Copenhagen