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Environmental Valuation in Developed Countries

Case Studies

Edited by David Pearce

This is the second of two volumes of case studies that illustrate how environmental economists place values on environmental assets and on the flows of goods and services generated by those assets. This important book assembles studies that discuss broad areas of application of economic valuation – from amenity and pollution through to water and health risks, from forestry to green urban space. In this, his last book, the late David Pearce brought together leading European experts, contributors to some two dozen case studies exploring the frontiers of economic valuation of natural resources and environmental amenity in the developed world.
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Chapter 15: Cost–Benefit Analysis and the Prevention of Eutrophication

Ian Bateman, Brett Day, Diane Dupont, Nuno Gonçalo Matias and Sanae Morimoto


Ian Bateman, Brett Day, Diane Dupont, Stavros Georgiou, Nuno Gonçalo Matias, Sanae Morimoto and Logakanthi Subramanian INTRODUCTION The eutrophication of water bodies is a natural phenomenon, but over the past few decades, this pollution problem has increased significantly due to the large additions of nutrients from human sources. Eutrophication can affect a receiving ecosystem in a number of ways, especially with respect to the quality of water and the uses to which that water can be put. Policymakers are thus increasingly faced with the question of what, if anything should be done about this problem. With respect to any policy analysis of the eutrophication issue, the economic perspective can help policy-makers and society more generally to identify allocations of economic resources that maximize social welfare and design policies that achieve these allocations. Social welfare is defined here in terms of individuals’ utility or ‘preference satisfaction’. Since people value environmental as well as consumer goods, then economic analysis seeks to allocate resources such that welfare is maximised over both types of goods. The economic approach involves trying to balance the opportunity costs of resources used for environmental protection, with the social welfare benefits provided by such protection. A cost–benefit analysis of any pollution control policy requires information both on baseline loadings and on the various changes in these loadings and associated costs and benefits. This chapter undertakes a cost–benefit analysis of eutrophication prevention measures for rivers and lakes in East Anglia. The remainder...

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