Game-theoretic analysis of Baltic Sea eutrophication: policy instruments for burden sharing of reduced eutrophication in the Baltic Sea

Yulia Pavlova1, Lassi Ahlvik 2

 

1 LUKE, Helsinki, Finland

2 NHH, Bergen, Norway

 

Protection of the Baltic Sea from eutrophication requires substantial reductions of nitrogen and phosphorus and calls for joined action by all countries in the region. In this paper architecture of a viable agreement on reducing eutrophication in the Baltic Sea is analyzed using various game-theoretic modelling. Financial instruments of the EU, in particular, the Cohesion and Structural Funds and the European Agricultural fund for Rural Development, are examined from the perspective of focusing on measures and activities of nutrient pollution flow into the Baltic Sea. Our findings are three-fold: First, we show that there is coherence between water treatment investments originated from the EU fund, social welfare generated in Baltic Sea by reduced eutrophication and the game-theoretic recommendations of coordinated actions. Secondly, we suggest that reduction of nitrogen is close to the equilibrium game-theoretic level, while further reduction of phosphorus loading in to the Baltic Sea is necessary. Finally, empirical game-theoretic findings and relevant EU financial instruments, compared against history of nutrient loading into the Baltic Sea, brings a conclusion that Helsinki Commission targets are only partially consistent with the ‘polluter pays’ principle.