Policy Analysis Environmental Costs of Freshwater Eutrophication in England and Wales J U L E S N . P R E T T Y , * ,†,‡ CHRISTOPHER F. MASON,‡ DAVID B. NEDWELL,‡ RACHEL E. HINE,† SIMON LEAF,§ AND RACHAEL DILS§ Centre for Environment and Society and Department of Biological Sciences, University of Essex, Colchester CO4 3SQ, U.K., and the Environment Agency, Wallingford, Evenlode House, Howberry Park, Wallingford, OX10 8BD, U.K.
Eutrophication has many known consequences, but there are few data on the environmental and health costs. We developed a new framework of cost categories that assess both social and ecological damage costs and policy response costs. These findings indicate the severe effects of nutrient enrichment and eutrophication on many sectors of the economy. We estimate the damage costs of freshwater eutrophication in England and Wales to be $105-160 million yr-1 (£75.0-114.3 m). The policy response costs are a measure of how much is being spent to address this damage, and these amount to $77 million yr-1 (£54.8 m). The damage costs are dominated by seven items each with costs of $15 million yr-1 or more: reduced value of waterfront dwellings, drinking water treatment costs for nitrogen removal, reduced recreational and amenity value of water bodies, drinking water treatment costs for removal of algal toxins and decomposition products, reduced value of nonpolluted atmosphere, negative ecological effects on biota, and net economic losses from the tourist industry. In common with other environmental problems, it would represent net value (or cost reduction) if damage was prevented at source. A variety of effective economic, regulatory, and administrative policy instruments are available for internalizing these costs.
Introduction Eutrophication has many consequences, but there are few data on the environmental and health costs imposed on other sectors and interests (1-5). Economic activities affect the environment through the overuse of natural resources or as a sink for pollution. The costs of using the environment in this way are called externalities. As they are external to markets and their costs are not part of prices paid by producers or consumers, they distort markets by encouraging activities that are costly to society even if private benefits are substantial (6-9). An externality is defined as any action that affects the welfare of or opportunities available to an individual or group without direct payment or compensation. Externalities in * Corresponding author e-mail:
[email protected]; telephone: +44(0)1206-873323; fax: +44(0)1206-873416. † Centre for Environment and Society, University of Essex. ‡ Department of Biological Sciences, University of Essex. § Environment Agency. 10.1021/es020793k CCC: $25.00 Published on Web 11/28/2002
2003 American Chemical Society
the water sector have four features: (i) their costs are often neglected, (ii) they often occur with a time lag, (iii) they often damage groups whose interests are not well represented, and (iv) the identity of the source of the externality is not always known. Industries and agriculture have few incentives to prevent nutrients escaping to water bodies as they do not pay the full cost of cleaning up the environmental consequences. Part of the problem is that we know too little about the value of ecosystem services and what happens when they are diminished or lost. Current systems of accounting consistently underestimate present and future values of environmental goods and services (10-12). Such valuation of ecosystem services remains controversial because of the importance these values have in influencing public opinions and policy decisions. The best and most consistent way to estimate damage is to calculate willingness to pay (WTP) to avoid damage or willingness to accept (WTA) compensation to tolerate it. In this study, we draw upon a wide range of published valuation studies that use a variety of methodologies. It is not our intention to evaluate these methods nor to address the many methodological debates (6, 13-16).
Development of Cost Category Framework We developed a new framework of cost categories derived from the pressure-state-response framework. The pressures driving eutrophication arise from both point and nonpoint sources of nutrients (2, 5, 17). Point sources include sewage treatment and industrial effluents. Nonpoint or diffuse sources of nutrients include agriculture, aquaculture and fish farming, forest management, transport sector (atmospheric nitrogen products), rural septic tanks, and natural sources (guanotrophy from bird roosts). We distinguish between two types of cost category: damage (or value-loss) costs (A) arising from reduced value of clean or non-nutrientenriched water and policy costs (B) incurred in responding to eutrophication damage plus the costs of changing practices to meet legal obligations. Damage costs cannot be added to policy response costs, as the latter are a measure of how much is being spent to deal with the eutrophication problem. Damage costs (A) represent a loss of existing value rather than an increase in costs and are divided into use values and nonuse values. Use values are associated with private benefits gained from use of ecosystem services and include private uses (e.g., agriculture, industry), recreation benefits (e.g., fishing, water sports, bird watching), education benefits, general amenity benefits, and option values (the desire of an individual to maintain the choice to use an ecosystem’s services in the future). Nonuse values comprise existence values (preservation of an asset, even though individuals do not envisage using it) and bequest values (attached to preservation so that a future generation has an option for use). We identify 10 types of use value (A1) for water bodies affected by eutrophication. Social damage costs comprise the following: (i) reduced value of waterside dwellings; (ii) reduced value of water bodies for commercial uses; (iii) drinking water treatment costs (to remove algal toxins and algal decomposition products); (iv) drinking water treatment costs (to remove nitrogen); (v) cleanup costs of waterways (dredging, weed-cutting); (vi) reduced value of nonpolluted atmosphere (via greenhouse and acidifying gases); (vii) reduced recreational and amenity value of water bodies for water sports, angling, and general amenity; (viii) net economic VOL. 37, NO. 2, 2003 / ENVIRONMENTAL SCIENCE & TECHNOLOGY
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losses for formal tourist industry; (ix) net economic losses for commercial aquaculture; and (x) health costs to humans, livestock, and pets. Ecological damage costs (nonuse values) (A2) comprise the damage caused to biota and ecosystem structure by nutrient enrichment. These values do not have market prices and include the negative ecological effects on biota, resulting in both changed species composition (biological diversity) and loss of key or sensitive species. We also assess costs arising from a policy response to the problems of eutrophication, as it is currently difficult to fully assess all damage costs in category A. When a water body is recognized in some way as being eutrophic, then costs are incurred through a variety of responses by both statutory and nonstatutory agencies. We divide these direct costs of responding to eutrophication and costs of changing behavior and practices into compliance control costs and direct costs incurred by agencies (B1 and B2). Although in this study, we only assess costs, we note there are also three benefits of eutrophication: (i) increased productivity of some fisheries, (ii) positive fertilization effect on farmland through the use of nutrient-enriched irrigation water, and (iii) improved sources of food for some wild birds. One reason it is difficult to put a cost on eutrophication is because there is no absolute definition of when nutrient enrichment causes adverse effects. A given level of nutrients in one water body may cause adverse effects with associated costs, but in another water body or the same one at a different time, there may be no effects and so no costs. Moreover, the threshold at which nutrient enrichment becomes a problem varies. The central problem is the nature of relationships between nutrient enrichment, the resultant effects, and costs. The simplest relationship has costs varying linearly with increasing nutrients. Another possibility has increasing nutrient content incurring no costs until a threshold is passed, after which costs increase linearly. Further possibilities include relationships in which costs increase more rapidly than nutrients at high levels of enrichment or where costs increase until an asymptote is reached, after which marginal increases in nutrients incur no marginal cost increases. It is impossible to say which of these relationships pertains in any given situation. As indicated earlier, some of the costs of eutrophication arise from responses to the problem, triggered by some given level of nutrients or their effects (e.g., algal blooms), and these too differ from place to place and over time. For a variety of reasons, economic data on eutrophication costs are limited. First, there are many different valuation methodologies, and these are not necessarily comparable across cost categories. Second, there are limited data for England and Wales, so some costs are drawn from elsewhere in the U.K. and the world. Third, some costs are for a wider problem (e.g., sewage treatment), of which only a proportion can be allocated to eutrophication. Fourth, for some cost categories, we have an example of costs but do not know the incidence of the problem per year or geographic extent (e.g., cost to angling of a fish loss due to algal toxins). Finally, for some categories we have no economic data but do know the extent of the problem, and for others the costs are known only for the whole U.K. system (e.g., cost of water treatment).
Environmental Costs of Eutrophication (A) Damage (or Value-Loss) Costs: Reductions in the Value of Nonnutrient-Enriched Water. The calculation of the valueloss costs requires an estimate of the extent and frequency of eutrophication. This could be expressed as the number of days of closure of a water body per season or per year or the probability of any water body suffering a problem leading to value loss. We used the U.K. Environment Agency’s 19901999 national data set on blue-green algal blooms to estimate frequencies of closure. Over this decade (1990-1999), 3993 202
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TABLE 1. Incidence of Reported Blue-Green Algal Blooms over 10 yr in Eight Water Regions of England and Wales, 1990-1999a
water region
no. of incidents (1990-1999)
no. of water bodies (1990-1999)
incidence of blooms per water body per decade
Anglian Midlands North East North West Southern South West Thames Welsh
624 928 365 486 95 649 551 295
440 635 241 305 85 452 368 184
1.42 1.46 1.52 1.59 1.12 1.44 1.50 1.60
3993
2710
1.47
total a
Calculated from Environment Agency data set.
incidents were reported in 2710 water bodies in England and Wales (Table 1). The average frequency of a blue-green algal bloom over 10 yr is 1.47 per water body. To calculate a closure rate, where the value of the water body is temporarily severely reduced by blue-green algal blooms, we make the following assumptions: (i) All blue-green algal blooms have been recorded (although we know that the 3993 reported incidents are an underestimate of the total). (ii) Some value losses will have accrued before the occurrence of a bloom, representing a further underestimate of the problem. (iii) On the basis of existing knowledge of incidence and duration of blooms, we estimate that 25% of blooms cause closure of a water body for 30 days, 50% cause closure for 15 days, and 25% cause closure for just 5 days each. With an average closure of 16.25 days for severe toxic blooms, this could be an underestimate as the effects can persist for many weeks. (iv) We calculate the frequency of closure for the summer season of 6 months and for the whole year. Most uses of water bodies and water courses occur during the summer months, although there are notable exceptions (e.g., angling, rambling, potable water supply), and most blooms occur in the summer months. The frequency of closure (fc) is thus
(IbgN)/(C(S1/2 or S1)Y)
(1)
where Ibg is the number of incidents of blue-green algal blooms, C is the number of water bodies affected, N is the number of days water body closed for each incident, S1/2 is the season length (days in half year), S1 is the season length (days in full year), and Y is the number of years of data. Thus, for a half-year season (S1/2), fc ) 0.0131 or 1.31%, and for a full-year season (S1), fc ) 0.0066 or 0.66%. We use the range 0.66-1.31% as the closure rate for water bodies and courses because of blue-green algal blooms to calculate value losses. Thus the probability of a water body having to be closed on any given day is between 1 in 76 and 1 in 151. (A1) Social Damage Costs. (A1i) Reduced Value of Waterside Dwellings. Water quality affects the value of property adjacent to or in the immediate vicinity of a water body. Residential dwellings with a waterfront generally have a higher value than equivalent properties without one, and this added value is estimated to be 0-15% for offices, 0-25% for leisure developments, and 10-40% for residential properties in the U.K. (18, 19). But waterfront properties can lose value if the quality of the water falls through an increase in turbidity, algal blooms, and unpleasant odors. In the U.K., there have been no national studies of value loss in waterfront
properties affected by eutrophication. One study found that leisure and residential property is devalued by 20% as a result of consistently poor physical water quality (18), offsetting any added value that properties receive for being located at the waterside. Studies elsewhere indicate that the losses arising from periodic and/or continuing eutrophication can be significant (20-22). To calculate the effect of eutrophication on property values, data are needed on the length of freshwater frontage impacted and the number of properties. Under the EC Urban Waste Water Treatment Directive, 2540 km of water courses is designated as sensitive areas (eutrophic), equivalent to 6.35% of all 40 000 km of rivers assessed by the Environment Agency. But waters classified as grades 4 and above (>0.1 mg of P/L) exceed the guideline value for eutrophic rivers in the Directive, and for 1993-1995, 51.6% of rivers were in these grades. Thus, the proportion of rivers deemed eutrophic ranges from 6.35% to 51.6%. There are also 6300 standing waters in England and Wales larger than 1 ha. We use a value of 10% for the loss in value per property, an average waterside property value of $140 000, and assume there are 75 000 waterfront properties exposed on the basis of an average density of 121 dwellings km-1 on built-up roads, assuming a density of half on waterfronts, and half of the 2540 km of sensitive water courses as built-up; and with a cross-check on the number of properties now located in flood-prone areas (150 000 in the 1990s) (23). The value-loss relationship is
VLA1i ) Pnfc × VLp) $13.76 (£9.83) million yr-1 (2) where VLA1i is the total value loss for waterside properties in England and Wales, Pn is the number of waterside properties, fc is the frequency of loss of value due to some eutrophication, and VLp is the value loss (£) per average 10 m of frontage. (A1ii) Reduced Value of Water Bodies for Abstraction, Livestock Watering, Navigation, Irrigation, and Industrial Uses. In addition to recreational uses, water bodies and wetlands have a wide variety of industrial uses. These include direct use of clean water for manufacturing, electricity generation, and farming, both for livestock watering and irrigation; the use of waterways for navigation and transport; and their value for waste treatment and attenuation (24, 11). Costs arise when nutrient enrichment reduces the value of clean water and when the biomass of aquatic algae and macrophytes increases such that waterways are impeded for navigation. Once water bodies are eutrophic, they may be less able to perform these functions effectively (though much depends on the specific circumstances, as some wetlands are naturally eutrophic and others are oligotrophic). The value-loss relationship for this category is
VLA1ii ) Vwfc
(3)
where VLA1ii is the reduced value of water bodies for abstraction, livestock watering, navigation, irrigation, and industrial uses; Vw is the value of water for industrial, farming, and navigation uses; and fc is the frequency of closure (prevention of use of water for demand use). There are no national data sets to calculate Vw, although case studies do indicate the importance of the problem in the U.K. and Australia (22, 26). A proxy for the value of water abstraction can be derived from the charges made for licenses (even though such licenses are a weak indicator of the value of water, which is best measured by what people are willing to pay for it), the total income for which is $89.34 (£6.67) million yr-1 (26). Using eq 3, this suggests a loss of $0.13-0.27 (£0.090.19) million yr-1. But, the cost to three paper mills from a single incident was $0.22 (£0.16) million (25). So if there were only two major incidents of this type each year out of the 400
algal blooms per year, then this suggests $0.7 (£0.5) million costs yr-1. Given the lack of data on losses to abstraction, livestock watering, navigation, irrigation, and industry, this requires further research. We adopt a low estimate of $0.71.4 (£0.5-1.0) million yr-1. (A1iii) Drinking Water Treatment Costs (Treatments and Actions To Remove Algal Toxins and Algal Decomposition Products). Nutrient enrichment and algal blooms cause problems for water supply and sewerage treatment operators. Some costs are to meet compliances established at national and European levels, especially for nutrients (see section B2ii), while others relate to the adverse effects of algal blooms and their decomposition products, resulting in potable water of an unacceptable quality (27, 20, 5). The damage cost relationship for this category is
DCA1iii ) (CoAp × ASPo) + (CcAp × ASPc) + Cr
(4)
where Co is the annual operating expenditure by water companies, Cc is the annual capital expenditure by water companies, Ap is the proportion of production liable to suffer from algal proliferation, ASPo is the proportion of algae sensitive production (ASP) operating costs for eutrophication, ASPc is the proportion of ASP capital costs for eutrophication, and Cr is the annual cost of reservoir management systems. We assume that 10% of the direct operating costs and 5% of the capital costs for ASP arise from eutrophication. The best information available on operating costs for water treatment is derived from the government’s Office of the Director General of Water Services company returns (28), which give the direct operating costs for England and Wales against “water resources and treatment” as $398 (£284) million yr-1. Thus, the additional treatment costs are $398 m × 0.33 × 0.1 ) $13.3 (£9.5) m yr-1. Capital expenditure (Capex) on water treatment has declined over the last two asset-management planning periods to $466.1 (£332.9) million. Assuming that this level of Capex still pertains, this yields additional expenditure as $466.1 m × 0.33 × 0.05 ) $7.77 (£5.55) m yr-1. The combined capital and operating costs of reservoir systems to prevent proliferation of algae and development of anaerobic conditions is $5.6 (£4) million yr-1 (29, 25). Thus DCA1iii ) $13.3 + $7.77 + $5.6 million ) $26.6 (£19) million yr-1. (A1iv) Drinking Water Treatment Costs (To Remove Nitrogen). Costs are incurred by water supply companies to comply with drinking water standards set out in EU legislation for pesticides and nitrates to remove pathogens, heavy metals, and soil from water. These costs are reported annually by each of the 28 water companies in England and Wales to Ofwat (30, 8). We assume the cost of compliance reflects the extent of nitrogen enrichment, as treatment costs are highest for water companies in regions with greatest nitrogen loads to water. We calculate from Ofwat returns for 1992-1997 that these water companies expended $28.1 (£20.1) m yr-1 on nitrate removal to meet compliances (8). The total U.K. cost of achieving the nitrate standard for potable water over the next 20 yr is £278 (£199) m (25). It could be argued that nitrate removal from drinking water supplies is solely for reasons of human health and not eutrophication control. However, it is included here as a cost arising from nitrogen enrichment. The damage cost relationship for this category is
CCA1iv ) NCo + NCc
(5)
where CCA1iv is the drinking water treatment costs (to remove nitrates), NCo is the annual operating costs of removal of nitrate by water companies, and NCc is the annual capital costs of removal of nitrate by water companies. Thus CCA1iv ) $28.1 (£20.1) million yr-1. VOL. 37, NO. 2, 2003 / ENVIRONMENTAL SCIENCE & TECHNOLOGY
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(A1v) Cleanup Costs of Waterways (Dredging, WeedCutting). U.K. policy is to maintain flood defense and preserve channel capacity through routine maintenance by cutting submerged and emergent vegetation on river beds and lower portions of banks and by desilting in culverts, clearance of weed screens at sluices, and vegetation clearance on river banks. It is almost impossible to separate the cost of dredging and weed-cutting because of eutrophication effects from the overall annual costs. Once again, there are no national data sets, and we have to rely on case material. An internal Environment Agency review of weed cutting put the annual cost at $404 000 (£286 000) for a river length of 285 km, and other cases indicate annual costs of $100-140 000 for a variety of catchments and canals, although individual restoration projects can be more costly (e.g., $3.4 (£2.4) m for the whole of Barton Broad) (31, 32). The damage cost relationship for this category is
∑W
DCA1v ) (
ci-j)P
(6)
where ∑Wc is the sum of cost of weed cutting for organizations i-j and P is the proportion of weed cutting that can be attributed to eutrophication. As there are only limited data to complete each component of this equation, we estimate average costs in the range of $0.7-1.4 (£0.5-1.0) million yr-1. (A1vi) Reduced Value of Nonpolluted Atmosphere (via Greenhouse and Acidifying Gases). An important cost of eutrophication arises from the emissions of two greenhouse gases, nitrous oxide (N2O) and methane (CH4), and the gas ammonia (NH3). Microflora in water courses produce ammonia, nitrogen gas, and nitrogen oxides, of which N2O is a greenhouse gas contributing to atmospheric warming as well as depleting stratospheric ozone. Methane is emitted from water courses where severe plant growth leads to build up of organic detritus. Greenhouse gases impose costs on the environment by contributing to climate change and ammonia can contribute to acidification (33-35). The value-loss relationship is
VLA1vi ) (ECH4PwCCH4) + (EN2OPwCN2O) + (ENH3PwCNH3) (7) where VLA1vi is the reduced value of nonpolluted atmosphere, E is the annual emissions of N2O, CH4, and NH3 (in t), Pw is the proportion of emission arising from water bodies and water courses, C is the environmental cost per metric ton of each gas (N2O, CH4, and NH3). Gaseous emissions are recorded in national and European inventories (36, 37) and put total emissions of methane at 3.7 million t yr-1, 1-2% of which arise from waste disposal and sewage treatment works (37-74 000 t yr-1). Total emissions of N2O are 189 000 t yr-1, of which just 200 t is released from water courses during waste treatment. Total ammonia emissions amount to 320 000 t yr-1, of which just 9600 t yr-1 arises from water bodies. Economic studies have put an external cost on these gases by analyzing impacts on climate; health; parasitic and vector-borne diseases; sea level rise; water availability; biodiversity; and storm, flood, and drought incidence (34, 38). Though uncertainty is still large, we use the Hartridge and Pearce (38) analysis of marginal costs: for CH4 these are $109.1 (£77.9) t-1, for N2O $4145 (£2961) t-1, and for NH3 $239 (£171) t-1 (by comparison, the damage cost of carbon dioxide (as C) is $41.7 (£29.8) t-1). Thus, using eq 7, the valueloss costs for this category are $7.17-11.19 (£5.12-7.99) million yr-1. (A1vii) Reduced Recreational and Amenity Value of Water Bodies for Water Sports (Bathing, Boating, Windsurfing, Canoeing), Angling, and General Amenities (Picnics, Walking, Aesthetics). There are extensive water-based recreational and amenity activities (for bathing, boating, 204
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windsurfing and canoeing) and for amenities at the waterside (for angling, dog-walking, rambling, and picnics). Eutrophication results in a loss of this value, particularly if water becomes turbid, emits unpleasant odors, and is affected by algal blooms (39). Thus value-loss costs are incurred when people are prevented from enjoying the quality of a water body. At high risk of harm are those engaged in swimming, diving, windsurfing, and water-skiing. At medium risk are canoeists, sailors, and walkers, and at low risk are those engaged in boating and pleasure cruising. Those people whose livelihoods rely on visitors who would have used the “clean” water body, such as instructors, boat owners, and hotel owners, suffer additional costs through reduced visitor expenditure (see section A1vii). There is no national database recording eutrophication effects on recreational and amenity value of water bodies. We draw on data from 37 studies (mainly in the U.K., United States, Canada, and Australia) to estimate the benefit derived from water courses by visitors in the U.K. (40). This is the individual WTP and is mostly in the range of $11.2-28 (£820) per person per visit (most values greater than $28 day-1 are from North America). The upper limit of $28 per person is consistent with a recent review of wetland studies across Europe, which puts the average value for water courses at £28 per person yr-1 and for wetlands at $34 (£24) per person yr-1 (41). In this study, we adopt a conservative range of $11-19 (£8-14) per person yr-1, noting also that there may be displacement when a toxic bloom closes one area with users simply moving to another site. This depends on availability of substitutes and whether saturation of sites has occurred. The value-loss relationship for this category is
VLA1vii ) Nv fcCs
(8)
where VLA1vii is the reduced recreational and amenity value of water bodies for recreation and amenity, Nv is the number of day and tourist-day visits to water bodies made each year, fc is the frequency of closure (% of days), and Cs is the consumer surplus (£ per day) for use of water-based ecosystem services. We use the Countryside Agency (42) and English Tourism Council (43) data derived from the U.K. Leisure Day Visits Survey and U.K. tourism surveys to calculate the number of visits made for water-based leisure and recreational activities (see section A1vii). In 1998, there were 1.261 billion touristday visits, of which 72% were to towns, 6% to the seaside, and 22% to the countryside. In addition to day visitors, 172 million tourist trips were taken by U.K. and overseas residents, in which one or more nights were spent away, putting the number of days spent at 707 million yr-1. This suggests that of the total 1.968 billion tourist-days in the U.K., some 551 million yr-1 are for countryside (433 million) and seaside activities (118 million). Not all of these though are for waterbased activities, and we use Countryside Agency (42) surveys to allocate proportions of countryside days and tourist-days to activities. These data indicates that 182.9 million days were spent in inland water-based leisure and recreational activities in 1998, with a further 118 million spent at the seaside (total 301 million days). As this study assesses only eutrophication in freshwaters, we use the figure of 182.9 million days to calculate VLA1vii ) NvfcCs (from eq 8) ) $13.5146.96 (£9.65-33.54) million yr-1. (A1viii) Net Economic Losses for Formal Tourist Industry (Inland and Coastal). This category refers to the direct revenue losses in the tourist industry arising from restrictions on water courses caused by eutrophication and algal blooms. When visitors access water courses for the recreational purposes listed in A1ii, they also spend money on accommodation, food, and other goods and services. When
eutrophication prevents access, then this revenue is lost. This may mean losses at some locations, although others may gain if recreationalists go elsewhere. Once again, there are no national studies of costs, but case studies indicate that the cost can be substantial, such as in Scotland (44, 25) and Australia (45). We again use data on day and tourist-day visits combined with expenditure per visit to calculate the total value of waterbased expenditures. Two different measures are importants the net economic value of tourism and the value of the total economic activity. The net economic value of tourism and day visit expenditure refers to the profits created by these activities: an expenditure of $100 on a meal in a waterside restaurant that cost $80 to prepare results in a net economic value (economic rent) of $20, as it is assumed that customers would have substituted their expenditure for something else had the restaurant been closed. But the $80 spent in the restaurant covering costs supports cooks and waiters employed by the business as well as local food suppliers. Such activity is technically not the value of the water body but is brought into existence by it. Thus, people spend money on goods and services as they use a water body and so create jobs and infrastructure. Loss of expenditure and jobs due to closure of a water body because of an algal bloom represents a local cost but at the national level may simply mean recreationalists go elsewhere. Measuring the loss of economic activity thus represents the local losses of income but does not aggregate well at the national level. It is not yet possible to assess the distributional and/or displacement effects of eutrophication and its consequences on tourism. These could be significant if rural poor areas dependent on tourism were to suffer disproportionately through expenditure losses. This requires further research. We describe the value-loss relationship for this category as
VLA1viii total ) Nv fcEday;
VLA1viii net ) Nv fcEdayP
(9)
whereVLA1viii is the revenue losses for formal tourist industry (inland and coastal), Nv is the number of day and tourist-day visits to water bodies made each year, fc is the frequency of closure (% of days), Eday is the total expenditure per day and tourist-day visit, and EdayP is the local profit arising from total expenditure per day and tourist-day visit (net economic value). We use the same data for day and tourist-day visits to water-based activities as in category A1vi. However, as daily expenditure varies considerably according to whether individuals are U.K. residents, overseas tourists, or U.K. dayvisitors, we calculate the annual total spent on freshwaterbased days to be $6.23 (£4.45) billion ($29.8 billion by U.K. day-visitors, and £3.25 billion by overnight U.K. and overseas visitors) (from refs 42 and 43). The total value of economic activity lost to eutrophication, VLA1viii total ) $6.23 (£4.45) billion × (0.0066-0.0131) ) $41.1-81.6 (£29.4-58.3) million yr-1. In the service sector, profits are in the range of 10-20%, and so the net economic value lost, VLA1viii net ) $6.23 (£4.45) billion × (0.0066-0.0131) × (0.1-0.2) ) $4.12-16.32 (£2.94-11.66) million yr-1. We use net value for the losses in this study, even though there may not be perfect displacement with local losses compensated for by gains in spending elsewhere in the economy. (A1ix) Net Economic Losses for Commercial Aquaculture, Fisheries, and Shell-Fisheries. Eutrophication frequently results in a reduction in the economic value of a fishery, with whitefish and salmonids being replaced by lower-quality cyprinids (27, 5). In addition, shell-fisheries can be adversely affected by toxins from blooms. Thus the livelihoods of those involved in commercial fishing can be
adversely affected, even though revenues from some fishing may rise. Fisheries have declined in the Dnieper Reservoirs in Central Europe due to eutrophication, shell-fisheries have been damaged in Chesapeake Bay, and algal blooms have caused fish deaths in the United States and Canada (46, 47, 20). Once again, there are no national data sets that record the extent of the problem of eutrophication in the commercial fishing sector. We describe the value-loss relationship as
VLA1ix net ) Vf fc
(10)
whereVLA1ix is the revenue losses for commercial freshwater aquaculture and fisheries, Vf is the value of commercial inland and shell-fisheries in U.K., and fc is the frequency of closure (damage to fishery). We assume that the closure rate (damage) holds for commercial fisheries, that freshwater fish account for only 10% of the total, and that the profit in this sector is 10-20%. So the net economic loss VLA1ix net is $40-165 000 (£29-118 000) yr-1. (A1x) Health Costs to Humans, Livestock, and Pets. Eutrophication carries three potential health risks to humans, livestock, and pets. These arise from high nitrate content of drinking water (no longer a problem in the U.K.) and toxic algal blooms (33, 48). Cyanobacteria have caused deaths of livestock at one reservoir in the U.K. and acutely poisoned soldiers at another (5, 27, 49). As these events appear to be rare, we take these again to be close to zero. (A2) Ecological Damage Costs. (A2i) Negative Ecological Effects on Biota (Arising from Changed Nutrients, pH, Oxygen), Resulting in Changed Species Composition (Biodiversity) and Loss of Key or Sensitive Species. The value-loss costs related to changes in species composition and loss in ecosystems affected by eutrophication are difficult to measure. Eutrophication has a direct effect on the primary production of plants and, through changes in pH, available light and oxygen concentration and indirectly affects the abundance and nature of organisms within it (5, 27, 32). However, several important water species and habitats adversely affected by eutrophication are listed in the U.K. Biodiversity, Species and Habitat Action Plans (50). We use these costed plans as a proxy for eutrophication costs, even though these would be less than the real cost of eutrophication if rational public policy were to institute programs only where benefits exceed costs. For those species and habitats for which eutrophication is identified as a factor causing problems, we have used these plans to estimate costs. The average cost of each SAP is $26 880 (£19 200) yr-1, and there are 13 BAP species affected by eutrophication. The cost for plans for eutrophic lakes is $0.53-0.92 (£0.38-0.66) m yr-1 (for 2000-2004) and for mesotrophic lakes is $0.45 (£0.35) m yr-1. But these figures underestimate total costs: plans for eutrophic lakes exclude the costs of full restoration of lakes to a favorable condition, and the mesotrophic lakes’ costs are based on only 50 sites. Individual costs for restoration can be highsmore than $11 (£8) million was spent in the Norfolk Broads over 5 yr to one water body to preeutrophic conditions (51), and English Nature is spending $2.1 (£1.5) million on BAP lakes during 2001-2003. On the basis of the range of costs incurred for lake restoration, we estimate that these costs need to be increased by a factor of 10 to give a fair estimate of value losses. The relationship for the value loss is
VLA2i ) Ce + Cm + (SCsP)
(11)
where VLA2i is the negative ecological effects on biota resulting in changed species composition (biodiversity) and loss of key or sensitive species, Ce is the average annual cost of HAP addressing eutrophic lakes, Cm is the average annual cost of VOL. 37, NO. 2, 2003 / ENVIRONMENTAL SCIENCE & TECHNOLOGY
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HAPs addressing mesotrophic lakes, S ) number of Species Action Plans potentially affected by eutrophication, Cs is the average annual cost of SAPs, and P is the proportion of SAP affected by eutrophication. Thus VLA2i ) (0.53-0.92 × 10) + (0.45 × 10) + (13 × 0.027 × 0.1) ) $10.28-14.17 (£7.3410.12) million yr-1. (B) Policy Response Costs: Costs of Addressing and Responding to Eutrophication. (B1) Compliance Control Costs Arising from Adverse Effects of Nutrient Enrichment. (B1i). Sewage Treatment Costs (To Remove Phosphorus from Household and Industry Point Sources). Sewage treatment companies incur costs to comply with environmental legislation for removal of phosphorus before it enters water courses. According to the water companies’ investment program for the period 2001-2005, capital expenditure on phosphorus removal will be $150 (£250) million. For 44 of the 65 sewage treatment works (STWs) where P removal has been approved due to the impact of discharges on sites of special scientific interest, the capital cost has been projected at $69 (£49) million yr-1, with an average annual operating cost of $0.08 (£0.06) million. However, the P removal at STWs that comes under the EC Urban Wastewater Treatment Directive is predicted to cost water companies $81-118 (£5884) million yr-1 for capital expenditure and $2.1 (£1.5) million yr-1 for operating expenditure during 2000-2010. We thus take annual capital expenditure to be $70 (£50) million yr-1 and operating costs to be $0.42 (£0.3) m yr-1. The compliance costs for this category are
CCB1i ) PCo + PCc
(12)
where CCB1i is the sewage treatment costs to remove phosphate, PCo is the annual operating costs of removal of phosphate by water companies, and PCc is the annual capital costs of removal of phosphate by water companies. Thus, CCB1i is $70 + 0.42 million ) $70.42 (£50.3) million yr-1. (B1ii) Cost of Treatment of Algal Blooms and In-Water Preventative Measures (Biomanipulation, Stratification, Straw Bale Deployment). Water delivery and management companies incur additional costs through a variety of physical, chemical, and biological preventative and restorative measures. These include enhanced flushing of lakes, artificial de-stratification of the water, water-level manipulation and sediment dredging, chemical treatment to seal phosphorus into sediments, and biomanipulation measures such as barley straw treatment, which costs British Waterways some $7-14 000 (£5-10 000) yr-1 per site affected (20, 32, 52). The damage cost relationship for this category is
DCB1ii )
∑C
ti-j
(13)
where ∑Ct is the sum of treatment costs by water companies i-j. There is no national database for these costs, nor are there available data for each of the organizations concerned with treatment. Although restoration through sediment dredging can be expensive, the total in this category appears to be small. We thus estimate costs to be $0.7 (£0.5) million yr-1. (B1iii) Costs to Farmers of Adopting New Farm Practices. Agriculture is a major source of nutrients in surface and groundwater (2, 5, 33, 47). Up to 50% of nitrogen and 60% of phosphorus applied to crops can be lost by leaching and soil erosion to water courses (5, 33). In the U.K., of the estimated 120 000 t of phosphorus applied to agricultural land (90 000 t as fertilizer and 30 000 t in animal feeds), omethird is transferred to surface water (25). In the past, policy measures have focused only on voluntary Codes of Good Agricultural Practice to limit the loss of nutrients. But these have failed to control losses, and so Nitrate Sensitive Areas 206
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and Nitrate Vulnerable Zones have recently been established over many sensitive aquifers. Although both schemes target drinking water quality rather than eutrophication, we use the costs of subsidising and enforcing schemes as a proxy for costs, which are $4.75 (£3.39) million yr-1 (13, 53). All 32 designated NSAs covering 35 000 ha fall within the 68 NVZs covering 600 000 ha. Farmers in NVZs are required to comply with mandatory measures to protect both groundwaters and surface water against pollution caused by nitrate. There are no mandatory measures for phosphorus. (B2) Direct Costs Incurred by Regulatory Bodies for Monitoring, Investigating, and Enforcing Solutions to Eutrophication. (B2i) Monitoring Costs for Water. Statutory agencies monitor water-bodies for the presence of both nutrients and algae and their decomposition products. These monitoring costs
MCB2i )
∑M
ci-j
(14)
where MCB2i is the monitoring costs for water, and Mc is the monitoring costs for organizations i-j. The Environment Agency spends $37 800 (£27 000) yr-1 on additional monitoring of nitrate and phosphate at the 8000 sites that are sampled monthly (25). In addition, the costs of monitoring sensitive eutrophic areas for the Urban Wastewater Treatment Directive have been estimated to be £210 000 for inland waters. Additional costs have been estimated by British Waterways to be £100 000 (19). Thus MCB2i is $0.62 (£0.44) million yr-1. (B2ii) Costs of Developing Eutrophication Control Policies and Strategies. The final category refers to the costs incurred by statutory agencies for development of eutrophication control policies and strategies. These can be broken down into national and local level activities. The development of the Environment Agency’s aquatic eutrophication management strategy cost $794 000 (£567 000) over 2 yr. Implementation of the strategy, including national policy and local level action plans, is estimated by the Environment Agency to cost $258 000 (£184 000) per year. For this category, we estimate costs to be $280 000 (£200 000) yr-1.
Research and Policy Implications These findings indicate the severe effects of nutrient enrichment and eutrophication. The damage costs are substantial, causing considerable loss of value to many stakeholders in the U.K. Table 2 contains a summary of the cost estimates for the 16 cost categories. The total damage costs of freshwater eutrophication are $105-160 (£75-114.3) million yr-1. The policy response costs are a measure of how much is being spent to address this damage, and these amount to $77 (£54.8) million yr-1. These costs are higher than those reported in a recent study of the external costs of U.K. agriculture (8). There still remains uncertainty over these costs, as we have had to extrapolate from specific data and case studies, use proxies for costs, draw on research findings from outside the U.K., and make assumptions about the gaps in knowledge over the extent of eutrophication and the direct relationship between nutrient enrichment and damage costs and value losses. The damage costs are dominated by seven items each with costs of about $15 (£10) million yr-1 or more: value loss in residential dwellings, drinking water treatment costs for nitrogen removal, reduced recreational and amenity value of water bodies, drinking water treatment costs for removal of algal toxins and decomposition products, reduced value of nonpolluted atmosphere, negative ecological effects on biota, and net economic losses from the tourist industry. The policy response costs illustrate how much is already being spent to meet legislative obligations and so cannot be
TABLE 2. Summary of Annual Costs of Freshwater Eutrophication in the U.K. range of annual costs ($ million)
cost categories (A) Damage Costs: Reduced Value of Clean or Non-Nutrient-Enriched Water (A1) social damage costs (i) reduced value of waterside properties (ii) reduced value of water bodies for commercial uses (abstraction, navigation, livestock watering, irrigation, and industry) (iii) drinking water treatment costs (treatment and action to remove algal toxins and algal decomposition products) (iv) drinking water treatment costs (to remove nitrogen) (v) cleanup costs of waterways (dredging, weed-cutting) (vi) reduced value of nonpolluted atmosphere (via greenhouse and acidifying gas emissions) (vii) reduced recreational and amenity value of water bodies for water sports (bathing, boating, windsurfing, canoeing), angling, and general amenities (picnics, walking, aesthetics) (viii) revenue losses for formal tourist industry (ix) revenue losses for commercial aquaculture, fisheries, and shell-fisheries; (x) health costs to humans, livestock, and pets (A2) ecological damage costs (i) negative ecological effects on biota (arising from changed nutrients, pH, oxygen), resulting in changed species composition (biodiversity) and loss of key or sensitive species total
13.76 0.7-1.4 26.6 28.1 0.7-1.4 7.17-11.19 13.51-46.96 4.12-16.32 0.04-0.17 near zero 10.28-14.17 $105-160
(B) Policy Response Costs: Costs Incurred in Responding to Eutrophication (B1) compliance control costs arising from adverse effects of nutrient enrichment (i) sewage treatment costs (to remove P from large point sources) (ii) costs of treatment of algal blooms and in-water preventative measures (biomanipulation, stratification, straw bale deployment) (iii) costs of adopting new farm practices that emit fewer nutrients (B2) direct costs incurred by statutory agencies for monitoring, investigating, and enforcing solutions to eutrophication (i) monitoring costs for water and air (ii) cost of developing eutrophication control policies and strategies
0.62 0.28
total
$77
added to damage costs. It would, therefore, be expected that as policy response costs increase, so the damage costs should fall. If damage costs (A) continue to exceed policy response costs (B), then it is worthwhile reducing the damage. In common with other environmental problems, it would represent net value (or cost reduction) if these losses were prevented at source. A variety of economic, regulatory, and administrative policy instruments are available to seek to internalize these costs, thus ensuring that both the “polluter pays” the cost and the “provider (of clean or unpolluted water) gets” the benefits (22, 26, 54-57). As a result of the identification of these costs of eutrophication, we identify five policy and research priorities. This study has mostly used aggregated national data to produce an estimate of the cost of freshwater eutrophication, as there is a lack of harmonized data on specific catchments and river basins. There is an urgent need for greater analysis of representative catchments in order to understand better nutrient budgets and loads, the costs being occurred, and the most beneficial and cost-effective actions, all of which are requirements under the new European Union Water Framework Directive (WFD). There is a need for model/pilot studies to be conducted on representative whole catchments or river basins to produce detailed nutrient budgets, predict eutrophication outcomes, and estimate the costs and benefits of prevention and remediation. This study examined the costs of cultural eutrophication in freshwaters. This inevitably leaves open the question of additional costs being incurred in marine and estuarine waters. The WFD requires management of estuaries and marine waters as well as freshwater, and so further research is needed on the degree of eutrophication in all U.K. waters and the costs currently being incurred both in the U.K. and in other European countries. There remains uncertainty over the definition of the point at which nutrient enrichment becomes a eutrophication problem with adverse economic
70.4 0.70 4.75
effect. This implies a need for further analysis of the nature of the nutrient-enrichment and eutrophication relationship and more coordination of data on eutrophication between agencies to ensure efficient responses. There are many gaps in the data sets held by a wide variety of agencies and organizations with both statutory and nonstatutory responsibilities in eutrophication. There is a requirement for improved harmonization of data on the extent of ecological and social damage and on the costs of in-water preventative and remedial measures. Finally, there remains considerable uncertainty over the specific effects of eutrophication on recreation and tourism and on the livelihoods of those living and working by affected water courses. Further research is needed on the value of waterbased tourism and sports and the site-specific value losses caused by nutrient enrichment and eutrophication.
Acknowledgments We are grateful to many people for their helpful advice on data sets and valuable comments on earlier versions of this paper. These include three anonymous referees together with Dick Ainsworth, Ian Ashcroft, Phillip Burgess, Lucy Cordrey, John Eaton, Jonathan Fisher, Andrew Grimmet, Clare Guy, Ashley Holt, Paul Lidgett, Chris Mainstone, Glen Miller, Grahame Newman, Graeme Peirson, Martin Perry, Matthew Saxon, Abigail Simpson, Keith Turner, Richard Tyner, Nick Walker, Keith Weatherhead, Sarah Wheeler, Stuart Wire, and Jonathan Woodcock. The work reported in this paper was funded by the Environment Agency and contributes to the implementation of its Aquatic Eutrophication Management Strategy. The views expressed are those of the authors and do not necessarily reflect those of the Environment Agency. Its officers, servants, or agents accept no liability whatsoever for any loss or damage arising from the interpretation or use of the information or reliance upon views contained herein. VOL. 37, NO. 2, 2003 / ENVIRONMENTAL SCIENCE & TECHNOLOGY
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Received for review June 19, 2002. Revised manuscript received October 21, 2002. Accepted October 25, 2002. ES020793K
