UMBC ECON 699 - The Costs of Nitrogen Control from Point Sources in the Chesapeake Bay Region (13 pages)

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The Costs of Nitrogen Control from Point Sources in the Chesapeake Bay Region



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The Costs of Nitrogen Control from Point Sources in the Chesapeake Bay Region

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Pages:
13
School:
University of Maryland, Baltimore County
Course:
Econ 699 - Seminar in Economic Policy Analysis
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The Costs of Nitrogen Control from Point Sources in the Chesapeake Bay Region Estimates from Wastewater Treatment Plants in Maryland Amanda Otis Econ 699 Proposal Advisor Virginia McConnell Economics 699 Professor Brad Humphreys March 11 2004 1 Issue Statement The purpose of this project is to study the costs associated with clean up of the Chesapeake Bay Specifically it will look at the costs of reducing nitrogen and phosphorus levels for wastewater treatment plants in the Bay area This project will estimate cost functions for capital and operation and maintenance O M costs for the major plants that employ nitrogen and phosphorous controls in the Chesapeake Bay region After estimating the marginal costs of nitrogen reduction at successively higher levels of control this project will estimate the extent of economies of scale for nitrogen control Finally the costs of different types of nitrogen control will be estimated For almost all pollutants the marginal costs of greater levels of control are increasing It is hypothesized that this will be the case for nitrogen controls at wastewater treatment plants as well It is also predicted that wastewater treatment plants exhibit economies of scale meaning that larger plants in terms of flow size will have lower costs per unit reduction at any level of reduction Finally to the extent data are available this paper will explore which biological nutrient reduction technologies have the lowest average cost of removal Significance Many factors contribute to the health of the Bay s waters like nutrient level sediments dissolved oxygen level and salinity One of the biggest problems is that levels of nitrogen and phosphorus are too high Nitrogen and phosphorus stimulate the growth of algae blooms which cloud the water of the Chesapeake Bay The cloudiness prevents sunlight from penetrating to 2 underwater vegetation a habitat for aquatic life Morgan 2001 In addition the dead algae sink to the bottom of the bay and decompose using dissolved oxygen that aquatic organisms require to live Already some areas of the Chesapeake Bay are completely without dissolved oxygen Stephenson 1996 Wastewater treatment plants contribute the majority of nutrients flowing into the Bay Stephenson 1996 Wastewater treatment plants are designed to remove harmful chemicals from residential commercial and industrial wastewaters before they are released back into rivers lakes or the ocean Removal processes focus on the reduction of total suspended solids five day biological oxygen demand total phosphorus total nitrogen ammonia nitrogen and oil and grease CGER 1996 Currently no specified limit is imposed on the amount of nitrogen and phosphorus allowed in effluent concentrations from wastewater treatment plants but the Chesapeake Bay Foundation has set target effluent levels in the range of three to eight mg l for nitrogen and 1 0 to 0 1 mg l for phosphorus Nutrient 2002 Biological nutrient removal BNR is a specific technology that is currently utilized in sixty five of Maryland s 269 wastewater treatment plants BNR technology uses natural microbes to remove harmful nutrients from water before it is released in to a river The processes allow water to flow through a series of tanks each with a different type of microbe The microbes change ammonia nitrogen into a harmless nitrogen gas that can be emitted into the atmosphere without damage Blakenship 1997 With no treatment effluent is about 18 mg l or more BNR can reduce nitrogen to 8mg l or less Ideally the Chesapeake Bay Foundation would like concentrations to reach 3 mg l Blankenship 2003 3 Other methods of removing nutrients include chemical treatments sludge treatments and filtering These methods are not specifically measured in the data available and are not as widely used as BNR Reducing nitrogen and phosphorus levels will help prevent the Bay s water quality from further deterioration It is the duty of the wastewater treatment plants to reduce the levels of nitrogen and phosphorus This project s estimates of reduction costs will help policy makers determine efficient levels of reduction for the funds they have available to build or improve plants This project will provide insight into the costs of BNR technology compared to other removal techniques to help policy makers decide whether or not to upgrade the plants to include this technology Although this study only focuses on data from the Maryland area Maryland is currently one of the few states with widespread use of BNR technology and is one of the leading states in improving water quality This project s results will be useful as a future model for estimating costs for other states Literature Review There has been no past empirical work examining the cost of nutrient removal but other studies have looked at the costs of reducing BOD and the benefits of nutrient removal Fraas and Munley 1984 estimated municipal wastewater treatment costs for controlling pollutants They calculated the marginal costs per pound of cleaning up BOD Capital costs and O M costs for BOD were estimated separately because capital costs are a function of design flow and performance of the plant while O M costs are associated with actual flow and performance Ordinary least squares was used to 4 estimate a log linear cost function with costs as a function of plant flow influent concentration and effluent concentration Economies of scale were found for both capital and O M costs and the coefficient on effluent was negative as expected and significant The average values of influent and flow variables were averaged across all the plants in the sample These averages created an estimated equation that could be used calculate the marginal costs of control from varying plant sizes The result is that marginal cost estimates for BOD reduction rise sharply as effluent reductions increase An expansion of this paper was done by McConnell and Schwartz 1991 which treats effluent levels as endogenous in order to model how regulators choose levels of BOD pollution reduction from wastewater treatment plant design Treating effluent levels as endogenous provided an unbiased measure of marginal costs of pollution control The cost function also provides a price estimate for pollution reduction for regulators to use as an estimate for pollution control demand Unlike in Fraas and Munley it is demonstrated by McConnell and Schwartz that effluent flow should be treated as endogenous Removal of BOD by wastewater treatment


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