Midterm results

Evaluating the current economic policy mix and new instruments to support sustainable blue growth – Midterm results of BlueAdapt work package 3


Response to research targets so far

Research work of WP3 has focused on studying the economic aspects of policies regulating the blue economy sector and their impact on achieving blue growth. We have also studied possible instruments to enable sustainable blue growth in food, energy and tourism sectors.

In order to evaluate the current economic policy mix, we conducted a survey for companies operating in the food, energy, and tourism sectors (Ryytty, 2019). We found that all three sectors find their current economic profitability good but are lacking interest towards international markets. As to policies imposed on the blue economy sector, the companies agreed that innovation funding and a more corporate friendly legislation should be favored when developing regulation in the sector. The respondents also thought that the government has completely failed in implementing policies promoting blue economy and blue growth.

Furthermore, we studied nutrient load compensations as a possible new policy instrument as a response to the Water Framework Directive and Weser Ruling. In the first case study on the lake Kallavesi (Lötjönen, Kotamäki & Ollikainen, Manuscript), we examined how nutrient compensations could work as a solution to an expanding or new firm (e.g. a pulp mill), when it must fulfill the water quality requirements. We demonstrated that offset supply depends on the abatement technology and the price of offsets. Demand for offsets in turn depends on the offset price and abatement possibilities. In the case study, the supply potential of phosphorus offsets proved too low for the required compensation to keep the lake in good ecological status with a 90% probability.

Currently, nutrient load compensations are not legally allowed, thus enabling compensations could be one step towards more adaptive management and governance of our waters. The second compensation case study concerning fish farming is still in progress.

Photo by Markus Spiske on Usplash

We also studied joint climate-water initiatives from the perspective of how accounting for either climate or water target, or both targets simultaneously, affects optimal environmental policies for agriculture (Lötjönen and Ollikainen, 2019) and the optimal management of a dairy farm (Lötjönen et al., 2020). We found that accounting for multiple pollutants is important, and, for the measures considered, that promoting one goal profits the other. Whether water or climate policies alone reduce nutrient loading more depends on the used marginal social damages for nutrient runoff and climate emissions. Accounting for cobenefits leads to a higher cap or tax on the pollutant on the policy focus. As to dairy farm management, we suggest that policies towards crop production farms (using mineral fertilizers) and dairy farms (using manure as fertilizer) should differ, since optimal policy does not require constant manure application but spatially differentiated application rates.

Finally, as a first step to analyzing the growth potential of the blue economy sector, we carried out a study determining the macroeconomic value of the blue economy sector in Finland (Heikkinen, 2019). The blue economy sector contributes more than 2% to the national GVA, GDP, and employment. Therefore, we conclude that it is important to acknowledge the significance of the blue economy sector in policymaking. Future policies regulating the maritime should bear in mind the economic importance and potential of the sector, as well as its role in climate change mitigation and other environmental policy goals.


The way forward

We do not yet fully understand the potential of nutrient load compensations. Many aspects are to be analyzed for the compensation market as a whole, as well as regarding our case studies. We will continue our compensation research, and also focus on alternative technologies and policy instruments for consolidating economic growth and the good ecological status of waters. Furthermore, we will focus on analyzing the growth potential of blue tourism, and the effects of water quality changes to the development of the tourism sector. We will also conduct a socio-economic study regarding fish farming and alternative cultivation technologies.


Contact persons

Professor Markku Ollikainen, University of Helsinki, markku.ollikainen@helsinki.fi

Doctoral Student Sanna Lötjönen, University of Helsinki, sanna.lotjonen@helsinki.fi

Research Assistant Essi Heikkinen, University of Helsinki,