dorset voluntary agreement
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Evaluating Economic Policy Instruments for Sustainable Water Management in Europe
The research leading to these results has received funding from the European Community’s Seventh Framework Programme (FP7/2007-2013) / grant agreement n° 265213 – project EPI-WATER “Evaluating Economic Policy Instrument for Sustainable Water Management in Europe”.
DorsetVoluntary Agreement
Berlin, 26th January 2012
Colin Green, Christophe Viavattene, Simon McCarthy, Joanna Pardoe
Flood Hazard Research Centre Middlesex University
“Voluntary” agreement - Dorset
Groundwater in England
• Groundwater limited resource in England• Current abstraction 7 million m3/day from groundwater• 9% total groundwater abstraction in SW region• 30% of supply in SW is from groundwater• Majority of boreholes that have been closed are because
of cryptosporidium• 146 sites closed since 1975; loss of 425,000 m3/day
(approx domestic consumption of 2.4 million households)• 15% monitoring sites nitrates exceed limits• Majority of nitrogen load is organic?• Annual capital expenditure to deal with groundwater
c£15 -36 million; all costs since 1975 c£40 million/year i.e. low compared to all water supply costs
Potential N load
Gross nutrient balance (N/ha)
-50
0
50
100
150
200
Gross nutrient balance Nkg/ha
0
50
100
150
200
250
300
2000 2001 2002 2003 2004 2005 2006 2007 2008
Poland
Switzerland
Czech Republic
Luxembourg
Germany (including former GDR from1991)
Région wallonne
United Kingdom
Denmark
Norway
Belgium
Vlaams Gewest
Netherlands
Fertiliser use in England and Wales
0
20
40
60
80
100
120
140
160
180
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
kg/h
a
Nitrogen Tillage
Nitrogen Grass
Phosphate Tillage
Phosphate Grass
Fertiliser use England & Wales 2010
0
5
10
15
20
25
30
35
40
Jan Feb Mar April May June July Aug Sept Oct Nov Dec
month
%
all fertilsers
straight K
Transaction costs
• Costs of ‘ex’change
• Costs of exchange are why individuals cannot optimise resources
• Costs of exchange are why markets are not resource efficient
• Attention is absolutely scarce
• Internal (cognitive) efficiency does not result in external (resource) efficiency
Exchange surplus
Quantity
Frictional cost
Surplus from exchanges that do
take place
Exchange surplus
Quantity
F1
Surplus from exchanges that do
take place
Frictional costs after innovation
Transaction costs
B
A
If A > B then change worthwhile
Q – quantity available
Surplus from exchange
Quantity
What is the ‘Surplus’ from the exchange?
Consumer Surplus + Producer Surplus
In a perfectly competitive market this reduces to the Consumer Surplus
Surplus from exchange
Quantity
Q – quantity available
Maximum it is worth spending to get
efficient allocation
What are these costs?
Institutions
• Rules are about power• “Rules over” define incentives• “Rules to” define action space• Institutional mapping• Privatisation carried out without concern for
economic efficiency• Companies lack incentives to promote demand
management, SUDS, etc• Have incentives to install ‘end of pipe’ solutions
Policy issues
• Priorities
• Difficulty of change – dependency on Primary Legislation
Characteristics
• “Voluntary” agreement is actually means of reducing information costs so that farmers can use resources efficiently
• Changes that cost farmers money require subsidy – paid under the table
• Intervention by water company and not by the regulator (Environment Agency)
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