Taxing interacting externalities of ocean acidification, global warming, and eutrophication

Abstract

We model a stylized economy dependent on agriculture and fisheries to study optimal environmental policy in the face of interacting external effects of ocean acidification, global warming, and eutrophication. This allows us to capture some of the latest insights from research on ocean acidification. Using a static two‐sector general equilibrium model we derive optimal rules for national taxes on CO 2 emissions and agricultural run‐off and show how they depend on both isolated and interacting damage effects. In addition, we derive a second‐best rule for a tax on agricultural run‐off of fertilizers for the realistic case that effective internalization of CO 2 externalities is lacking. The results contribute to a better understanding of the social costs of ocean acidification in coastal economies when there is interaction with other environmental stressors. Recommendations for Resource Managers: Marginal environmental damages from CO 2 emissions should be internalized by a tax on CO 2 emissions that is high enough to not only reflect marginal damages from temperature increases, but also marginal damages from ocean acidification and the interaction of both with regional sources of acidification like nutrient run‐off from agriculture. In the absence of serious national policies that fully internalize externalities, a sufficiently high tax on regional nutrient run‐off of fertilizers used in agricultural production can limit not only marginal environmental damages from nutrient run‐off but also account for unregulated carbon emissions. Putting such regional policies in place that consider multiple important drivers of environmental change will be of particular importance for developing coastal economies that are likely to suffer the most from ocean acidification.

Integrating Arid Areas in the Global Bioeconomy: Opportunities and Challenges toward Sustainable Biomass Generation and Management

“…The production of these fertilizers generate coproducts and their use increase soils' acidity and contribute to eutrophication. 77 Furthermore, when fertilizers run into waterways, algae blooms responsible of oxygen depletion from water can be generated. Other issues are the high upfront capital costs to set up indoor farms as well as their dependence on energy, which can substantially reduce their sustainability and financial viability.…”

“…Regarding the challenges toward sustainable indoor farming, one of the major environmental hazards is associated with the high requirement for human-made fertilizers, mainly containing nitrogen, phosphate or potassium macronutrients (such as ammonium nitrate). The production of these fertilizers generate coproducts and their use increase soils’ acidity and contribute to eutrophication . Furthermore, when fertilizers run into waterways, algae blooms responsible of oxygen depletion from water can be generated.…”

Ocean Acidification and Aquacultured Seaweeds: Progress and Knowledge Gaps

“…Their responsibilities should include ensuring the sustainability of aquaculture practice while adhering to existing regulatory policies [129,161]. Based on this approach, carbon tax implementation can be expanded globally to manage CO 2 release in order to reduce greenhouse gas emissions despite a rapidly growing and developing economy [162][163][164].…”