Home > Externalities > Nutrient emission reduction scenarios in the North Sea – Cost of Reduction v Cost of Damage.

Nutrient emission reduction scenarios in the North Sea – Cost of Reduction v Cost of Damage.

Last week I attended a PD for Teachers hosted by the University of Waikato Economics Department. Amongst the presentations was one on Developments in Environmental Policy. Questions were asked as to what is the Economic Way of Thinking about Pollution:

* What is the ‘efficient’ level of pollution?
* Rarely zero – choices have to be made* How should we get there?
* How can this be achieved at least cost?
* Who should bear the cost?

One particular example that was presented was the “Nutrient emissions reduction scenarios in the North Sea”. Ultimately for economists it is a cost benefit analysis with – Marginal Abatement Costs v Marginal Damage Costs (See graph below).

Theoretical representation of different management positions based on economic considerations and different interpretations of the precautionary principle (assuming that all cost can be expressed in monetary terms). Marginal abatement costs (ranging between AC1 and AC2) and marginal damage costs to the environment (ranging between DC1 and DC2) are shown

MDC v MAC

The letters on the horizontal axis represent the following:

A = Strict Precautionary Principle (As near as possible to pristine condition)
B = Precautionary Principle implemented through the best available technology
B – C = Safety Margin
C – E = Risk threshold zone of uncertainty
D = Implementation of the best available technology not entailed excessive costs for society
F – G = Economic Optimal zone
H = Implementation of the best available technology not entailing excessive private costs

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