Abstract
We examine how nutrient load compensation could help a firm expand its production when production is a source of nutrient loads, threatening the ecological status of a water body. We ask whether compensation is technically feasible and whether it can be made in an ecologically sustainable way. Credits for compensation may be provided by point or nonpoint sources. We apply our approach to the case of Finnish Lake Kallavesi, where the Supreme Administrative Court, based on the Water Framework Directive, refused an environmental permit for a plan to build a large pulp mill. We employ a lake nutrient response model to determine water quality using probabilistic analysis of the ecological status of the lake. The supply potential of phosphorus credits from point sources was too low to keep the lake in good ecological status with at least 80% probability and must be complemented by credits from agricultural nonpoint sources. Using a trade ratio of 1:1.2 to reflect uncertainty on credits from nonpoint sources suggests that the reduction in agricultural phosphorus loading would suffice on its own to ensure the good ecological status by 90% probability. The cost of buying nutrient reduction credits would be at most 2% of the investment.
Highlights
The ecological status of surface waters in the EU has not improved as originally planned in the Water Framework Directive (WFD)
In the spirit of the WFD, deteri oration here refers to a quality reduction in any of the indicators included in the definition of the ecological status of water bodies
We examine how nutrient load compensation could work as a solution to an expanding or new firm when it must fulfill the requirement that water quality in a water body in question is not allowed to decrease
Summary
The ecological status of surface waters in the EU has not improved as originally planned in the Water Framework Directive (WFD). Not yet legally allowed in Finland but provided that it is made feasible, these firms could buy nutrient reduction credits to maintain the current water quality and expand their production. Producing nutrient reduction credits for compensating water pollution currently takes place in water quality trading (WQT) programs, which concern phosphorus, nitrogen and sediment, which are located mostly in the US (Selman et al, 2009) Many of these programs impose mandatory policies via a cap on point sources and allow voluntary participation for nonpoint sources (for reviews on WQT schemes in the US, Canada, Australia and New Zealand, see Shortle, 2013 and Selman et al, 2009).
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