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Gains of integrating sector-wise pollution regulation: The case of nitrogen in Danish crop production and aquaculture

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  • Jacobsen, Lars-Bo
  • Nielsen, Max
  • Nielsen, Rasmus

Abstract

This paper extends the Orani-G Computable General Equilibrium model with an externality market. The externality market is modelled with a limited number of pollution permits that are traded between representative firms in different sectors. The model is applied to identify the gains of a common nitrogen regulation system for Danish agriculture crop and aquaculture production. Common regulation across the two sectors is found to increase GDP by euro 32 million, corresponding to 2.2% of their initial GDP contribution. The direct effect in the two sectors is euro 39 million, where the spill-over effect is −7 million. Full use of recirculation technology in aquaculture entails a further increase in GDP to 106 million. The introduction of a common regulatory system and recirculation technology, simultaneous with a reduction of the common nitrogen cap of 17.6%, corresponding to the current policy objectives, is found to increase GDP by 52 million, 4.1% of their initial contribution. Hence, introducing a common regulatory system and taking advantage of the new technology more than counterbalances the negative socio-economic effect of a cap reduction. The analysis points to the importance of introducing more coherent regulatory frameworks that include all polluters under the same regulatory system.

Suggested Citation

  • Jacobsen, Lars-Bo & Nielsen, Max & Nielsen, Rasmus, 2016. "Gains of integrating sector-wise pollution regulation: The case of nitrogen in Danish crop production and aquaculture," Ecological Economics, Elsevier, vol. 129(C), pages 172-181.
    • Handle: RePEc:eee:ecolec:v:129:y:2016:i:c:p:172-181
    DOI: 10.1016/j.ecolecon.2016.05.009
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    2. Rasmus Nielsen & Jesper Levring Andersen & Peter Bogetoft, 2014. "Dynamic Reallocation of Marketable Nitrogen Emission Permits in Danish Freshwater Aquaculture," Marine Resource Economics, University of Chicago Press, vol. 29(3), pages 219-239.
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    7. van Heerden, Jan H. & Blignaut, James & Horridge, Mark, 2008. "Integrated water and economic modelling of the impacts of water market instruments on the South African economy," Ecological Economics, Elsevier, vol. 66(1), pages 105-116, May.
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    Cited by:

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    2. Rui Zhu & Liyu Long & Yinghua Gong, 2022. "Emission Trading System, Carbon Market Efficiency, and Corporate Innovations," IJERPH, MDPI, vol. 19(15), pages 1-22, August.
    3. Hu, Yucai & Ren, Shenggang & Wang, Yangjie & Chen, Xiaohong, 2020. "Can carbon emission trading scheme achieve energy conservation and emission reduction? Evidence from the industrial sector in China," Energy Economics, Elsevier, vol. 85(C).
    4. César Salazar & Roberto Cárdenas-Retamal & Marcela Jaime, 2023. "Environmental efficiency in the salmon industry—an exploratory analysis around the 2007 ISA virus outbreak and subsequent regulations in Chile," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(8), pages 8107-8135, August.
    5. Bohnes, Florence Alexia & Rodriguez, U-Primo & Nielsen, Max & Laurent, Alexis, 2020. "Are aquaculture growth policies in high-income countries due diligence or illusionary dreams? Foreseeing policy implications on seafood production in Singapore," Food Policy, Elsevier, vol. 93(C).
    6. Nielsen, Rasmus & Hoff, Ayoe & Waldo, Staffan & Hammarlund, Cecilia & Virtanen, Jarno, 2019. "Fishing for nutrients – economic effects of fisheries management targeting eutrophication in the Baltic Sea," Ecological Economics, Elsevier, vol. 160(C), pages 156-167.

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    More about this item

    Keywords

    Computable General Equilibrium model; Externality market; Nitrogen regulation; Sector economic costs; Agriculture; Aquaculture;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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