Optimal Control of Nutrient Pollution in a Coastal Ecosystem: Agricultural Abatement versus Investment in Wastewater Treatment Capacity

Abstract

We examine in a dynamic framework how public resources should be allocated to small-scale water protection efforts in agriculture or alternatively to investments in large-scale waste water treatment plants to control point source loads. The building of waste water treatment capacity is characterized by high set-up costs as compared to the operating costs. We determine the optimal timing of investment, the rate of nutrient load reduction from point versus non-point sources, and the optimal switching policies from control of non-point pollution only to control of both non-point and point sources. The results of the analytical model are illustrated with simulation of optimal abatement policies for the Finnish coastal waters in the Gulf of Finland.non-point source pollution, point-source pollution, timing of investment, Environmental Economics and Policy,