Edited by David Pearce
Chapter 15: Cost–Benefit Analysis and the Prevention of Eutrophication
15. Cost–benefit analysis and the prevention of eutrophication 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...
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