Integrated environmental-economic modelling for cross sectoral water policy evaluation

The Water Framework Directive (WFD) has set a deadline for 2027 to reach at least good ecological status (GES) in coastal waters in the EU. As nutrient pollution (eutrophication) is one of the main pressures in most EU coastal waters, and Danish waters in particular, significant nutrient reductions are required. In this paper, we take an integrated environmental-economic modelling approach to assess alternative strategies to mitigate non-point source nutrient pollution. A spatially explicit optimization model, TargetEconN, is implemented at the Danish national scale and extended to include mussel production as a marine water quality improvement measure. Different eutrophication mitigation strategies investigated in the model are characterized by whether nitrogen emissions are reduced at the source, between the source and the recipient e.g., by establishing wetlands, or in the recipient itself. We run scenarios exploring the uncertainty in baseline load assumptions and the effects of mussel farming. The results show that the potential for marine measures depends on the baseline load assumptions and that marine measures have a limited impact on the overall costs of achieving GES. The results also show that including marine measures has a significant indirect impact through the influence on the spatial distribution of land- based measures. We conclude that including mussel farming in policy initiatives to meet WFD targets has potential, but that the distributional effects across sectors and spillover effects to other policy targets should be a central part of the ex-ante policy discussions. We argue therefore that spatially explicit integrated modelling, as the model developed for this paper, can offer useful insights to manage the unescapable trade-offs in effective policy design to meet the WFD.