EFFICIENCY IN GREAT BARRIER REEF WATER POLLUTION CONTROL: A CASE STUDY FOR THE DOUGLAS SHIRE

Abstract

ABSTRACT. . Despite the lack of adequate economic evidence, water pollution from economic activities in Great Barrier Reef (GBR) catchments is often regarded excessive. In this paper marginal benefits from terrestrial (agricultural) water pollution and associated marginal marine costs from GBR degradation are estimated and used in an optimal control approach to determine optimal levels of water quality. Results, for a case study in the Wet Tropics in Australia, show that locally optimal levels of (fine sediment) water pollution are close to current levels, indicating that increased rates of (agricultural) water pollution lead to a decrease in local economic welfare. Globally optimal levels of water pollution are, however, below current levels, indicating that (inter-) national compensation for beneficial spillovers from reduced GBR degradation can increase global economic welfare.