ABSTRACT
This chapter compares the total effects, including direct and indirect costs, of a nitrogen permit trading market on four regions – the Baltic States, Poland, Denmark and Sweden. It focuses on nitrogen as the effluent because it is currently the limiting nutrient in the largest part of the Baltic Sea. In order to carry out computable general equilibrium (CGE)-modelling a description of the goods transported between different sectors and for consumption and exports, a so called social accounting matrix (SAM) is needed for all countries. Government services are excluded from the analysis in all countries, because the Swedish SAM only includes producing sectors. There are two effects from implementing a permit market that drive most of the results. The first is that the marginal cost of production increases in the polluting sectors, since they now have to buy permits for all their emissions. The second effect of implementing a permit market is that an abatement activity begins to demand resources.
