Targeted regulation of nitrogen loads: A national, cross-sectoral analysis

In Denmark, eutrophication of coastal areas is one of the major challenges in meeting the requirements from the European Water Framework Directive (WFD). This eutrophication is mainly a cause of excessive nitrogen loads from agricultural production, which can be reduced by implementing abatement measures. The cost-effectiveness of a land use policy may vary depending on the abatement measures used and where they are implemented. Taking account of the spatial heterogeneity of costs and effects in the choice of abatement measures significantly reduces the cost of meeting WFD targets. Targeting of regulation to identify least cost options to reduce nitrogen has for many years focused on agricultural abatement measures. However, the marginal costs of reductions in agriculture have now increased to an extent, where it has become relevant also to reconsider other sectors. We set out to compare nitrogen abatement measures across agriculture and waste water treatment at a national level, acknowledging heterogeneity in marginal costs across spatial location as well as differences in reduction requirements across catchments. In the analysis, we combine data on costs and effects of abatement measures at a fine spatial scale to estimate marginal costs within the two sectors at a national level for Denmark. The model minimizes the costs of meeting the specific required nitrogen load reduction targets for all catchments and finds the composition and spatial location of the optimal abatement effort. We find that waste water treatment abatement measures are only relevant in two coastal catchments, where they mainly serve as a supplement due to insufficient potential for agricultural land in rotation to provide all the N load reductions. Furthermore, we find that the pressure on agricultural land to reduce nutrient loads is very high in some catchments, implying that abatement measures such as land retirement where abatement costs are high enters the optimal solution due to their high level of effectiveness. Recommendations and average costs vary across catchments, indicating that results are not easily translated to generic national-level policy design.