2 English summary, Miljøstyrelsen

Economic Valuation of Wastewater Discharges of Nitrogen, Phosphorus, and Organic Matter

2 English summary

The report presents the findings of the project Economic Valuation of Wastewater Emissions of Nitrogen, Phosphorus, and Organic Matter – a Literature Survey. The report is prepared as part of the co-operation between the Danish Environmental Protection Agency and the National Environmental Research Institute on cost-benefit analysis of the Danish wastewater tax. The report is prepared by Anders Branth Pedersen, the National Environmental Research Institute, Department of Policy Analysis.

Wastewater emissions of nitrogen, phosphorus and organic matter to aquatic environments may damage the ecosystem. For that reason it makes sense to economically valuate the negative environmental effects of the three types of pollution. Lack of Danish case studies in this field makes it necessary to examine the international literature.

The report presents a number of economic valuation case studies regarding pollution of aquatic environments. The case studies are based on three different valuation methods: The Hedonic Pricing Method, the Travel Cost Method, and the Contingent Valuation Method.

The study concludes that on the basis of the international studies it is not possible to estimate a specific Danish "willingness to pay".

First, all of the three valuation methods entail uncertainties. This is reflected in the fact that the case studies present very different willingness-to-pay-estimates.

Second, it is a specific characteristic for aquatic environments that the vulnerability to pollution varies quite a lot among different locations, making benefit transfer even more uncertain than normally. This points to the fact that there is a need for Danish case studies.

Due to these uncertainties, it is recommended that great caution is taken when using benefit transfer regarding aquatic environments.

Keeping in mind the uncertainties a couple of case studies can be singled out.

The Leggett & Bockstael (2000) study of the pollution of Chesapeake Bay (US) is a very interesting study using the Hedonic Pricing Method. The study shows that water quality has a significant effect on property values along the bay and could serve as a model for a Danish case study; with focus on the pollution of Mariager Fjord as an obvious possibility.

The Turner et al. (1999) study is the only one having a benefit estimate for reduction of nutrients (nitrogen and phosphorus) in Denmark. The study uses the Contingent Valuation Method and concerns a 50 percent. reduction of nitrogen and phosphorus to the Baltic Sea. Transferring Swedish and Polish willingness-to-pay mail questionnaires (1995), it is possible to estimate a surprisingly high Danish willingness-to-pay. Because of the uncertainties it cannot be recommended to make use of the estimate in a Danish context, but the Turner et al. study can be used as a starting point for a discussion of benefits regarding reduction of pollutants in Danish aquatic environments.