Ecological Economics 30 1999 419 – 431
ANALYSIS
Value of land as a pollutant sink for international waters
Ing-Marie Gren
a,b,
a
Department of Economics, Swedish Uni6ersity of Agricultural Sciences, Box
7013
,
750 07
Uppsala, Sweden
b
Beijer International Institute of Ecological Economics, Royal Swedish Academy of Sciences, Box
50005
,
104 05
Stockholm, Sweden Received 8 July 1998; received in revised form 30 December 1998; accepted 4 January 1999
Abstract
The purpose of this paper is to analyse and compare the values of a marginal change in the area of land as a pollutant sink under different decision-making contexts and objectives: international coordination versus national
policies for pollutant reduction, and maximization of net benefits versus minimization of costs for pollutant reductions. The analytical results show that a coordinated policy between countries generates a higher value of a
marginal change in the supply of land as a pollutant sink than an uncoordinated policy. It is also shown that the value is lower higher under the decision objective of maximizing net benefits when the efficient pollutant load is
higher lower than the load target under the cost effectiveness approach. An application to the Baltic Sea drainage basin land as a nitrogen sink for the management of eutrophication reveals that the differences between values under
different policy contexts and objectives can be quite large in magnitude. © 1999 Elsevier Science B.V. All rights reserved.
Keywords
:
Transboundary pollutants; Pollutant sinks; Coordination; Net benefit maximization; Cost effectiveness www.elsevier.comlocateecolecon
1. Introduction
Over the past 20 years, the benefits of various land uses have been recognized, not only with
respect to their traditional harvest yields, but also with regard to their ability to act as a pollutant
sink for water management. One example is pro- vided by wetlands’ capacity to purify water by
reducing leaching of pesticides and nutrients to downstream watersheds e.g. Mitsch and Gos-
selink, 1986; Kusler and Kentula, 1990. Gren et al. 1997 showed that land cover types such as
wetlands, grassland and energy forest provide low cost options for the achievement of nutrient re-
ductions to the Baltic Sea. The value of land acting as a pollutant sink should then be ac-
counted for when considering its conversion into other uses. However, a comparison of net benefits
from alternative land uses requires an appropriate
Correspondence to Uppsala address. E-mail address
:
ing-marie.grenekon.slu.se I.-M. Gren 0921-800999 - see front matter © 1999 Elsevier Science B.V. All rights reserved.
PII: S 0 9 2 1 - 8 0 0 9 9 9 0 0 0 0 7 - 5
measurement of the net value in all uses. The purpose of this paper is to analyse and estimate
the value of land as a pollutant sink under differ- ent decision contexts and objectives.
When we regard an ecosystem’s capacity to reduce leaching of pollutants as an input for the
production of water quality its value can be calcu- lated as associated impacts on net welfare by
means of the production function approach Ma¨ler, 1991a; Barbier, 1994, 1997; Gren, 1995;
Bystro¨m, 1999. The value of the pollutant sink functioning is then determined by the valuation of
water quality, the effectiveness in producing water quality, and the cost as compared to other pollu-
tant reduction measures. The optimal choices of inputs and water quality are, in turn, determined
by type of decision framework. In this paper, two classes of decision contexts and objectives are
identified for the management of international waters. The alternative decision contexts are coor-
dinated and uncoordinated choices of water qual- ity improvement options, and the objectives to be
achieved are formulated either as maximization of net benefits or as minimization of costs for achiev-
ing a certain water quality target.
As demonstrated in Barbier 1997 and Free- man 1991, the design of property rights for a
common property resource and associated deci- sion context affects the value of an ecosystem as
an input into the production of a common prop- erty resource. The difference with this paper as
compared to the approach of Barbier and Free- man is the large-scale international aspect. There
is a relatively large literature on net benefits from emission reductions under different international
cooperative frameworks Barett, 1990; Kaitala et al., 1991; Ma¨ler, 1991b; Hoel, 1992. There are
also numerous studies on the valuation of ecosys- tem life support values, especially wetland valua-
tion see Gren and So¨derqvist, 1994, for a survey. However, the combination of ecosystem valuation
and transboundary environmental impacts, which is the approach applied in this study, is rare.
The paper is organized as follows. The first two sections contain an analytical decomposition of
factors affecting the value of land as a pollution abatement option. Next, the approach is applied
to the valuation of Baltic Sea coastal wetlands as nitrogen sinks. The paper ends with a brief sum-
mary and some concluding comments.
2. Basic model and decision framework
