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We assess the physical potential to reduce nutrient loads from waste water treatment plants in the Baltic Sea region and determine the costs of abating nutrients based on the estimated potential. We take a sample of waste water treatment plants of different size classes and generalize its properties to the whole population of waste water treatment plants. Based on a detailed investment and operational cost data on actual plants, we develop the total and marginal abatement cost functions for both nutrients. To our knowledge, our study is the first of its kind; there is no other study on this issue which would take advantage of detailed data on waste water treatment plants at this extent. We demonstrate that the reduction potential of nutrients is huge in waste water treatment plants. Increasing the abatement in waste water treatment plants can result in 70 % of the Baltic Sea Action Plan nitrogen reduction target and 80 % of the Baltic Sea Action Plan phosphorus reduction target. Another good finding is that the costs of reducing both nutrients are much lower than previously thought. The large reduction of nitrogen would cost 670 million euros and of phosphorus 150 million euros. We show that especially for phosphorus the abatement costs in agriculture would be much higher than in waste water treatment plants.

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This paper puts forward a model for managing eutrophication that integrates the salient ecological and economic characteristics of a coastal area suffering from severe nutrient enrichment. The model links the development of phosphorus concentration over time to nutrient emissions from agriculture and habitation. It accounts for differences in agricultural and municipal abatement options and their costs, as well as the need to undertake irreversible investments to set up wastewater treatment facilities. Furthermore, it considers sediment release of phosphorus as a function of annual nutrient loads. The model is parameterized for a 30-km-wide area off the Finnish coast of the Gulf of Finland. The socially optimal policy, which minimizes the sum of monetary damage caused by eutrophication and the costs of nutrient abatement over time, is determined using a dynamic programming approach. The results suggest that considerable investments are warranted to bring wastewater treatment facilities up to date. Continued efforts to reduce agricultural nutrient loading are nevertheless also called for. The analysis provided is a first step toward an integrated analysis of eutrophication that accounts for complexities inherent in the problem, such as sediment release of phosphorus and irreversible investments in abatement technology. The results are sensitive in particular to ecological assumptions and parameterization, and further research is needed in these areas.

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