Exploring industry specific social welfare maximizing rates of water pollution abatement in linked terrestrial and marine ecosystems

Abstract

Marine ecosystems are severely affected by water pollution originating from coastal catchments, while these ecosystems are of vital importance from an environmental as well as an economic perspective. To warrant sustainable economic development of coastal regions, we need to balance the marginal costs from coastal catchment water pollution abatement and the associated marginal benefits from marine resource appreciation. Water pollution abatement costs are, however, not equal across industries and, consequently, the question arises to what extent marine water quality improvement can efficiently be pursued across industries. In this paper we develop an optimal control approach to explore, analytically as well as quantitatively, social welfare maximizing rates of water pollution abatement across industries. For a case study of Dissolved Inorganic Nitrogen (DIN) water pollution in the Great Barrier Reef region of Australia, water pollution abatement cost functions for two agricultural industries are estimated to, in turn, explore social welfare maximizing rates of water pollution abatement per industry. Results for the Tully-Murray catchment show that DIN water pollution can be reduced by about 25% through the adoption of win-win management practices in the sugarcane industry. However, when taking into account the benefits from reduced DIN water pollution in the downstream marine environment, this study shows that maximum social welfare gains can be obtained by reducing DIN water pollution through a reduction in the agricultural production area in combination with the adoption of lose-win management practices in the sugarcane as well as the grazing industry