Costs and Benefits of Instruments to Reduce Nutrients in the Lake Winnipeg Basin: Using an ecological goods and services approach - Synthesis Report

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ICF Marbek
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Environment Canada
This work focuses on strategies for reducing eutrophication of Lake Winnipeg caused by excess nutrients discharging to the lake as a result of various human activities. Eutrophication poses a serious threat to water quality and imposes economic costs on residents of the basin. Eutrophication is characterized by the development of algal scum (including blooms of toxic algae), changes in the abundance and composition of aquatic animals including an increase in the numbers of coarse fish, declines in oxygen in the lake water, and taste and odour problems of drinking water supplies. In order to choose the most effective and efficient nutrient reduction program package, decision-makers need to understand the costs imposed by poor water quality and its corollary, the benefits of reversing the problem. The very large ratio of Lake Winnipeg’s land drainage area to surface water area, coupled with its relatively shallow depths, make the lake particularly vulnerable to contaminant loadings from land activities and uses. Given the location and size of Lake Winnipeg’s drainage area, the majority of agricultural lands on the Canadian Prairies drain to the lake. Both the Saskatchewan and Red Rivers are tributaries to Lake Winnipeg and flow through both agricultural and urban land development areas in western Canada and the U.S. A third tributary, the Winnipeg River, drains to the lake from the east through smaller lakes, forests and municipalities on the Pre-Cambrian Shield. This report summarizes work to date to assess the ecological goods and services associated with reducing phosphorus loads from two sources in Manitoba: municipal wastewater effluents from medium and small communities; and, agricultural sources in Manitoba. This report provides synopses of the two key studies regarding reduction of phosphorus loading to Lake Winnipeg from agricultural practices and wastewater from small and medium sized communities. The objective of the first study, Agricultural Beneficial Management Practices for Lake Winnipeg – Cost-benefit analysis using an ecological goods and services approach (Thomsen, Kulshreshtha, Lobb, Flaten, and MacDonald (2010)), was to assess the costs and benefits of agricultural beneficial management practices (BMPs) for Lake Winnipeg in physical and economic terms, with an emphasis on the co-benefits in terms of ecological goods and services (EG&S). The project focused on the non-market benefits to nutrient reduction, but also included the market benefits. Benefits were compared against the costs of each beneficial management practice. The scope of all calculations and assumptions pertain to agricultural practices in Manitoba. The analysis included estimation of the following aspects of implementing the BMPs: goods production, carbon sequestration benefits, energy use and greenhouse gas emissions, soil erosion changes resulting from use of the BMPs examined, soil nitrogen changes, water regulation services, changes in pollination services, cultural and aesthetic services, other natural support services (such as refugium and nursery habitat). The second study, which was built from a study conducted by ICF Marbek in 2008 for Manitoba Water Stewardship, evaluated nutrient reduction strategies for wastewater treatment facilities suitable for small communities in Manitoba. These strategies specifically focused on phosphorus removal options. Subsequently, Environment Canada commissioned an analysis that applied Environment Canada’s analytical framework for decisions involving EG&S to the costs and benefits for five different wastewater treatment strategies (Biological Nutrient Removal (BNR) and Sequencing Batch Reactors (SBR), Free Water Surface Wetlands, Land Application and Chemical Precipitation). These options were assessed for three community sizes: 500, 2,000 and 10,000 people. In order to synthesize and compare the nutrient reduction strategies from the case studies examined, we converted the results to a common metric of annualized net cost per tonne of phosphorus reduced. This common metric facilitates a comparison across nutrient reduction strategies of their cost-effectiveness for achieving a given level of reductions in phosphorus loadings into Lake Winnipeg. The net cost per tonne of phosphorus reduced is calculated by first estimating the total cost of each nutrient reduction strategy for the given analysis period. We next subtract from this total cost the value of the environmental co-benefits (i.e., increases in EG&S) associated with each nutrient reduction strategy, except those relating to reduced phosphorus loadings. To estimate the value of the environmental co-benefits of the nutrient reduction strategies, the case studies identified the affected EG&S and which ones could be quantified. Next, because the case studies conducted cost-benefit analyses of the nutrient reduction strategies across different numbers of years, we convert all total costs to annualized values, using a 3 percent discount rate. Lastly, we divide the annualized net cost for each nutrient reduction strategy by the annual tonnes of phosphorus it will remove to obtain the annualized net cost per tonne of phosphorus removed. The BNR/SBR plant strategy has by far the highest annualized net cost per tonne of phosphorus removed, followed by the pivot system strategy for land application. Because the vegetated filter strips and crop selection strategies have a net benefit (i.e., have improvements in EG&S that are greater than their costs), their resulting annualized net cost per tonne of phosphorus removed is negative. Lastly, we conducted various sensitivity analyses to demonstrate how results would change under different assumptions on the amount of phosphorus removed by the agricultural BMP strategies, and under different assumptions of the values of pollination services, nitrogen, and carbon. We also examined the impact of the choice of discount rate on the results. The sensitivity analyses showed that the results were fairly robust, with the rank ordering of the cost-effectiveness of the strategies remaining largely unchanged. For the wetland-low cost strategy, the annualized net cost per tonne of phosphorus removed became negative (i.e., the benefits exceeded the costs) under the high-cost assumptions for the values of nitrogen and carbon.
Lake Winnipeg, Costs and Benefits, Ecological goods and services approach