Gains of integrating sector-wise pollution regulation: The case of nitrogen in Danish crop production and aquaculture

Lars-Bo Jacobsen, Max Nielsen and Rasmus Nielsen

Ecological Economics, 2016, vol. 129, issue C, 172-181

Abstract: This paper extends the Orani-G Computable General Equilibrium model with an externality market. The externality market is modelled with a limited number of pollution permits that are traded between representative firms in different sectors. The model is applied to identify the gains of a common nitrogen regulation system for Danish agriculture crop and aquaculture production. Common regulation across the two sectors is found to increase GDP by euro 32 million, corresponding to 2.2% of their initial GDP contribution. The direct effect in the two sectors is euro 39 million, where the spill-over effect is −7 million. Full use of recirculation technology in aquaculture entails a further increase in GDP to 106 million. The introduction of a common regulatory system and recirculation technology, simultaneous with a reduction of the common nitrogen cap of 17.6%, corresponding to the current policy objectives, is found to increase GDP by 52 million, 4.1% of their initial contribution. Hence, introducing a common regulatory system and taking advantage of the new technology more than counterbalances the negative socio-economic effect of a cap reduction. The analysis points to the importance of introducing more coherent regulatory frameworks that include all polluters under the same regulatory system.

Keywords: Computable General Equilibrium model; Externality market; Nitrogen regulation; Sector economic costs; Agriculture; Aquaculture (search for similar items in EconPapers)
JEL-codes: C68 Q25 Q28 Q52 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolec:v:129:y:2016:i:c:p:172-181

DOI: 10.1016/j.ecolecon.2016.05.009

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