A Strategic Analysis of Eutrophication Abatement in the Baltic Sea

Abstract

Cooperation between the littoral countries of the Baltic Sea to mitigate eutrophication has proven difficult in the past. In this study, we explore the countries’ incentives to free-ride on agreements, find stable coalitions where free-riding is deterred, and propose alternative ways of designing stable agreements that would reduce eutrophication in the sea. We conclude that strong free-riding incentives for some countries preclude the socially optimal solution in the absence of an enforcing authority. A stable agreement can, however, be formed with some loss in efficiency. The research shows that a treaty with modest abatement targets between all the littoral countries would be more efficient than a coalition between fewer countries but with more ambitious targets. We compare the two international institutions involved in the protection of the Baltic Sea—the intergovernmental Helsinki Commission and the partly supranational European Union—and show that the European Union would not benefit from enforcing an agreement among its member states on the Baltic without Russia being involved in the conservation efforts. Our results suggest that efficient abatement and full participation could be achieved by using the power the European Union has to enforce such an agreement among its members and, simultaneously, negotiating with Russia within the Helsinki Commission.

Appendices

Appendix A: Cost and Benefit Function Parameters

See Tables 5, 6, 7, 8, 9, 10, 11, 12, 13 and 14.

Table 5 Parameters $e_{ij}^l$ for $l=N$

Table 6 Parameters $f_{ij}^l$ for $l=N$

Table 7 Parameters $g_{ij}^l$ for $l=N$

Table 8 Parameters $e_{ij}^l$ for $l= P$

Table 9 Parameters $f_{ij}^l$ for $l= P$

Table 10 Parameters $g_{ij}^l$ for $l=P$

Table 11 Parameters $a_{ij}^l$ for $l=N$

Table 12 Parameters $b_{ij}^l$ for $l=N$

Table 13 Parameters $a_{ij}^l$ for $l=P$

Table 14 Parameters $b_{ij}^l$ for $l=P$

Appendix B: Stable Focal Treaties

See Tables 15 and 16.

Table 15 Internally and externally stable focal treaties without side payments

Table 16 Potentially internally and externally stable focal treaties when side payments are allowed

Appendix C: Payoffs for the Nash–Cournot Game

See Tables 17 and 18.

Table 17 Annualized payoffs after size payments and sizes of side payments (in brackets) for all environmental agreements to mitigate eutrophication in the Baltic Sea (in $10^{6}$ Euros) for the Nash–Cournot game

Table 18 Total emission of nitrogen (N) and phosphorus (P) to the Baltic Sea in all environmental agreements to mitigate eutrophication in the Baltic Sea (in 1,000 kg per year) for the Nash–Cournot game