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Costs and benefits of reducing non-point pollution from farming. Nick Hanley Economics Department University of Stirling, Scotland. outline. Policy context – Water Framework Directive, Nitrates Directive
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University of Stirling, Scotland
The Water Framework Directive (2000/60) contains a number of ambitious aims for the future of water resource management in the EU. These include:
The Water Framework Directive requires Member States to put in place Programmes of Measures (PoMs), made operational through the implementation of three iterations of River Basin Management Plans starting in 2009 and ending in 2027. The Directive requires Member States to select measures on the basis of environmental, economic and social criteria, with the aim of achieving themost cost-effective combination of measures…..
And then assessing their costs and benefits to determine and justify exemptions.
We examine this, looking at 2 linked water quality problems, both associated with farming:
So pure economic instrument does best at lower standard, but mixed instrument better under higher standard
Absolute levels of instruments in Brothock – with no restriction on type of setaside
Ujn = Aj + k jk Xjkn +mm Smn +k kn Xjkn + jn
Aj is an alternative specific constant, Xjkn is the kth attribute value of the alternative j; βjk is the coefficient associated to the kth attribute, Smn is the mth socio-economic characteristic of individual n, m is the coefficient associated with the m individual socio-economic characteristic, kn is a vector of K deviation parameters which represents the individual’s tastes relative to the average () and jn is an unobserved random term that is independent of the other terms in the equation, and which is identically and independently Gumbel distributed. The coefficient vector jk varies among the population with density f(|θ), where θ is a vector of the true parameters of the taste distribution.
Normal Flow →
Note: “do nothing” option is constant across all choice sets, and corresponds to worsening of all environmental/social attributes
β(Motray) = β (Brothock) ……unusual!
Are the implicit prices different? Implicit price for attribute a = βa/βcost.
Test for implicit price (low flows, Brothock) = implicit price (low flows, Motray) ,and for ecological quality, using Poe et al (1994) test. Results: depends on whether use correlated attribute version of model or not.
With correlation: no differences in implicit prices for any attribute
Without correlation: jobs and big improvement in ecology are significantly different
Comparing the “pooled” model, which might be the benefits transfer system, with the two catchment models, also get transferable estimates with the un-correlated attributes version of the model, and signif. diff. for one attribute for each river with correlated preferences
Look at three hypothetical scenarios for improvements in water quality
Calculate the compensating surplus using:
Welfare Measures for three policy scenarios (£/household/year)