Katarina Elofsson May, 2000

Nutrient enrichment that leads to eutrophication is one of the major environmental problems in the Baltic Sea region. Uncertainty about annual loads makes it difficult for policy-makers to determine cost-effective policies. In the 1980s and 90s, various investigators have produced estimates of riverine loads that range from 719,000 to 1527,000 tons of nitrogen per year and from 53,020 to 80,600 tons of phosphorus per year.

The purpose of the following paper is to calculate cost-effective solutions to riverine nutrient load reductions to the Baltic Sea. The Baltic Sea region is divided upon 18 regions, which differ in their ecological and institutional properties. The costs of reducing the stochastic loads of nitrogen and phosphorus are computed using a chance-constrained model. Emissions from both point and non-point sources are included, and the cross-effects between measures are modeled explicitly. The model comprises 12 different abatement measures, some of which have an impact on only one of the nutrient loads, and others on both. Furthermore, some of the measures have an impact on the variance of loads, while others only affect average loads. Total and marginal costs for different load reductions are computed, and the implications for the use of economic instruments, such as taxes and the use of trading ratios, are investigated.