International Versus National Actions Against Nitrogen Pollution of the Baltic Sea

Large nitrogen loads to the Baltic Sea play an important role for currentdamages caused by eutrophication: large sea bottom areas without anybiological life, low stocks of cods, and toxic blue green algae. In spite of therelatively large supply of biological and physical data on the sea,difficulties remain with respect to linking costs of nitrogen reductions withthe dispersion of associated benefits among countries. The purpose of thisstudy is therefore to analyse and calculate efficient nitrogen reductionsand associated net benefits under international co-ordination of nitrogenreductions and single country actions for two different specifications ofmarginal benefits: uniform and differentiated. Further, comparisons aremade with the current ministerial agreement of 50 per cent nitrogenreduction to the Baltic Sea. The empirical results show that total netbenefits under internationally co-ordinated actions are considerablyhigher than when countries act on their own. Another result is thatdifferentiated benefits give higher total net benefits than uniform, and alsoimply larger differences in net benefits among countries. However, resultsindicate that uniform marginal benefits generate net benefits for allcountries from co-ordinated actions as compared to single country actions. Copyright Kluwer Academic Publishers 2001