Costs of Nutrient Management with Technological Development and Climate Change
This chapter examines the implications for the cost-effective management of nitrogen and phosphorus, in the presence of uncertain climate change effects on nutrient pools in a eutrophied sea. It investigates the impact of uncertain development on nutrient abatement technologies. A dynamic cost-effectiveness model to account for differences in the sea’s adjustment to the loads of the two nutrients is used to study uncertain climate change effects with probabilistic constraints on nutrient pool targets and uncertain technological development in a mean–variance framework. Empirical application to the Baltic Sea indicates that climate change and technological development can reduce total abatement cost by half, but also increase it by 125% when uncertainty is included. Poland faces the largest cost burden—approximately 50% of the total cost in all scenarios.
KeywordsEutrophication Climate change Dynamic cost-effectiveness model
We are much indebted to the EU-funded BONUS project BaltCoast and to the Swedish Environmental Protection Agency Grant No. 15/24 for financial support, and to Tomasz Zylicz for valuable comments at the workshop on environmental challenges in the Baltic region at Södertörn University, 11 May 2016.
- Azar, S. A. (2010). Bounds to the coefficient of relative risk aversion. Banking and Finance Letters, 2(4), 391–398.Google Scholar
- Birge, J., & Louveaux, F. (1997). Introduction to stochastic programming. New York: Springer.Google Scholar
- Elmgren, R., & Larsson, U. (2001). Eutrophication in the Baltic Sea area. Integrated coastal management issues. In B. von Bodungen & R. K. Turner (Eds.), Science and integrated coastal management (pp. 15–35). Berlin: Dahlem University Press.Google Scholar
- Gilbert, P. M. (2007). Eutrophication and harmful algal blooms: A complex global issue, examples from the Arabian Seas and including Kuwait Bay and an introduction to the global ecology and oceanography of harmful algal blooms (GEOHAB) Programme. International Journal of Oceans and Oceanography, 2(1), 157–169.Google Scholar
- Gren, I.-M., & Lindkvist, M. (2014). Cost-effective management of a eutrophied sea in the presence of uncertain climate change and technological development. Working paper no. 2014–1. Department of Economics, Swedish University of Agricultural Sciences, Uppsala.Google Scholar
- HELCOM. (1988, 2007, 2013). Baltic Sea Action Plan. Helsinki Commission, Helsinki, Finland. http://www.helcom.fi/baltic-sea-action-plan/nutrient-reduction-scheme/. Accessed 7 January 2014.
- Lindkvist, M., Gren, I.-M., & Elofsson, K. (2013). A study of climate change and cost-effective mitigation of eutrophication in the Baltic Sea. In B. R. Singh (Ed.), Climate change—Realities, impacts over ice cap, sea level and risk (pp. 459–480). Prague: INTECH.Google Scholar
- Lindkvist, M., & Gren, I.-M. (2013). Cost-effective nutrient abatement for the Baltic Sea under learning-by-doing induced technical change. Working paper 01/2103, Department of Economics, Swedish University of Agricultural Sciences, Uppsala, Sweden.Google Scholar
- Panzar, J., & Willig, R. (1981). Economies of scope. American Economic Review, 71(2), 268–272.Google Scholar
- Rosenthal, R. (2008). Gams—A user’s guide. Washington, DC: GAMS Development Corporation.Google Scholar
- Taha, H. (2007). Operations research. An introduction (8th ed.). London: Macmillan Publishing Co.Google Scholar
- Tesler, L. G. (1955–56). Safety-first and hedging. Review of Economic Studies, 23(1): 1–16.Google Scholar