An assessment of the effectiveness of water policy in
water usage efficiency at the EIP of Kalundborg
Alex Nap 10375902 Earth Science
Karlijn Peters 10450777 International Business Administration
Bram Röst 10460144 Earth Science
Tutor & Expert Supervisor: Koen van der Gaast MSc & Dr. Crelis Rammelt Word count: 7102
CONTENTS
Abstract
Methodology ………..…………..p5
Theoretical Framework ……….……….….p6
Trends and Results ..………...p11
Discussion………....………..………....p20
Conclusions………..……..p21
Reference List………...p22
Abstract
The Kalundborg EIP, in which industrial symbiosis is put in practice, has faced increasing groundwater scarcity throughout recent years. With a focus on the water flows, this research aims to investigate what effect water policy has had on the water usage in the Kalundborg EIP. By quantifying the economic and resource efficiency of the water flows and analyzing the current water policy in Denmark, an opportunity for the analysis of policy effectiveness arises. By assessing the water flows from the integrated economic and earth scientific perspective of Kaldor Hicks efficiency, the effectiveness of water policy is analyzed through the Kaldor Hicks
Tableau framework, which makes the financial, resource, and political perspective come together in this interdiscplinary research.
Introduction
As the issues related to climate change are becoming more commonly acknowledged and acted upon worldwide, environmental policies and economy models evolve. Demanding
adaptation to the current and future state of affairs. This is captured by the manifesto for a resource efficient Europe by the European Commision in the following statement:
"In a world with growing pressures on resources and the environment, the EU has no choice but to go for the transition to a resource-efficient and ultimately regenerative circular economy." (EU COM, 2012)
This illustrates the recognition for the need of a different business model than is currently being implemented by European members. This interdisciplinary project focuses on the development of more sustainable industrial practice within the scope of the circular economy. The
interdisciplinary project does this by focusing on the concept and functioning of Ecological Industrial Parks (EIP). Especially with regard to their efficient use of resources.
As has been acknowledged by many institutions such as the UN, EU and the FAO, freshwater is becoming an ever increasingly valuable resource. This valuable resource is being used in industrial activities on a large scale as can be derived from figure 1.
Figure 1: Industrial water usage Source: UN world water development report 2003
This especially holds true for high-income countries, with industrial water usage making up for up to 59 percent of the total water usage (UN world water development report, 2003).
In order for industry to become more sustainable, the start of a solution has been found in the development of an eco-industrial park (from now on EIP) in Kalundborg, Denmark. There have been other EIPs besides the one in Kalundborg, however, the EIP of Kalundborg is widely regarded as one of the first spontaneously developed EIPs and as such, a lot of academic research has been done on Kalundborg. At the EIP of Kalundborg an industrial symbiosis has been created in which the participating companies strive to operate in a cycle that becomes as ‘closed’ as possible. By closing flows of heat, energy, water, and waste, an EIP is able to decrease the burden on the environment to a large extent.
The efficient use of water will take center stage during this project as water is the resource that is used by all the enterprises found on the Industrial Park of Kalundborg, forming a so called shared demeanor. By analyzing the definitions of efficiency from an earth scientific and economic perspective, an integrated definition of efficiency was found in the concept of Kaldor Hicks efficiency. According to this definition, and its additional framework, the water efficiency at Kalundborg was assessed all the while looking at the effectiveness of the Danish water policy had on the water usage in the EIP.
The main research question that this paper will focus on is: “How does water policy influence the efficiency of the water usage in the Kalundborg EIP?”
In order to answer the research questions, multiple subquestions will be used. Firstly, the focus will be on how the water flows can be quantified?”. Secondly, the politics aspect will be analyzed by assessing what water policies are in effect?. Finally, the assesment of the Kaldor Hicks Tableau will lead to the final conclusion.
The following chapter will provide an introduction with regard to the concept of an EIP. An introduction to EIPs
Increased awareness for sustainability has lead to increased attention for Eco-Industrial Parks. EIPs are created on the basis of the underlying notion that they have the potential to be both economically beneficial and environmentally less burdening than ordinary industry parks (Richards & Allenby, 1994). The US Environmental Protection Agency defines EIPs as being ‘‘a
community of manufacturing and service businesses seeking enhanced environmental and
working together, the community of businesses seeks a collective benefit that is greater than the sum of the individual benefits each company would realize if it optimized its individual
performance only’’ (Cheremisinoff, 2003, pp. 85).
An important characteristic of EIPs is their regional nature. Heeres et al. (2004), argue that the closeness of the companies involved in an EIP is a decisive factor in their ability to create more cost- and environmentally efficient exchange relations.
The Kalundborg EIP is a special case because, in contrast to most other EIPs, the Kalundborg EIP was not planned but evolved from a regular industry park into an EIP. In the 1970s, the park started to evolve gradually when multiple companies discovered that collaboration could potentially lead to economic benefits while complying with new, stricter environmental regulations. At that time, the four main industries in Kalundborg were the Asnaes Power Station, a coal-fired power plant that is now at the heart of the EIP, the Statoil oil refinery, the pharmaceutical company Novo Nordisk, and the plasterboard manufacturer Gyproc
(Ehrenfeld & Gertler, 1997).
Throughout the years, multiple companies have joined the EIP, leading to increased waste and cost reduction. In 2006, the waste exchange within the EIP amounted to 2.9 million tons a year, the use of water has been reduced with 60% by the involved power station, and overall the companies have been able to decrease their water consumption by 25% (Saikku, 2006). Furthermore, in 2008, a reduction of 720,000 tonnes of CO2 has been achieved by the EIP in its entirety. Currently the estimated cost savings of the EIP amount between $72 million and $87 million a year (Zawadzki, 2015).
Figure 2: An overview of the EIP of Kalundborg including flows Source: Kalundborg Symbiosis Center
Methodology
In order to answer the main and sub research questions, academic literature was reviewed. The majority of the used literature on the EIP of Kalundborg is related to the economic, the resource perspective and the policy perspective. These perspectives were quantified and qualified using data found during the literature review. The theoretical framework is based on the academic literature in search of clear definitions and a good framework to base the further research case of Kalundborg on.
Theoretical Framework
The theoretical framework will provide an overview of the terminology that play a central role in this research paper. Starting by explaining the core principle of an EIP, industrial symbiosis, followed by the defining of the relevant earth scientific and economic efficiency definitions. Industrial Symbiosis
After the World Commission on Environment and Development Report, also known as the Brundtland Commission Report in 1987, Frosh and Gallopoulos envisioned the concept of an industrial ecosystem in 1989 (Chertow, 2007). They framed it as “the consumption of energy and materials is optimized, waste generation is minimized and the effluents of one process (…) server as the raw material for another process.”
During that same year, a collective of companies based in Kalundborg, Denmark, started to intensively share resources (Chertow, 2007). The process that these companies became involved in was known as a concrete example of the industry ecosystem that was referred to as Industrial Symbiosis (Chertow, 2007).
The term Symbiosis refers to the symbiotic processes as found in nature, where “two otherwise unrelated species exchange materials, energy or information in a mutually beneficial manner – the specific type of symbiosis know as mutualism”(Chertow, 2007).
Chertow (2000) described the definition of Industrial Symbiosis as being the following: “traditionally separate industries in a collective approach to competitive advantage involving physical exchange of materials, energy, water and by-products. The keys of Industrial Symbiosis are collaboration and the synergetic possibilities offered by geographic proximity.”
Industrial symbiosis is also known as by-product synergy or BPS as described by Baas & Korevaar (2010). However Chertow’ definition of Industrial Symbiosis will be used as it
encapsulates a more precise and relevant meaning in the context of Eco Industrial Parks. The definition of Industrial Symbiosis by Chertow is supported by additional criteria, as to differentiate Industrial Symbiosis from other forms of exchange. In order for Chertow et al. (2007) to define an exchange as a form of Industrial Symbiosis, a minimum of 3 entities are to exchange at least 2 resources amongst each other. This prevents simple linear one-way exchanges to become part of the scope and moves the scope towards more complex
relationships. This symbiotic relationship among entities is perceived to have mutually beneficial effects on the entities involved.
Generally speaking, the process of Industrial symbiosis provides three opportunities to create a beneficial exchange relationship among entities. This could be done by sharing
infrastructure, reusing resources/by-products or engaging in the joint provision of services (Chertow, 2007).
There appear to be different driving forces behind an industrial symbiosis.
Environmental arguments can be made, however as industrial parks are generally comprised out of commercially run companies, the business aspect of an industrial symbiosis is the most prevalent driver. Desrochers (2002) argues that the inter-firm recycling linkages are mostly the spontaneous result of bilateral deals among companies seeking ways to reduce waste and disposal costs, and generate income from production residue while saving energy costs and gaining access to cheaper materials.
This was also found to be the case in Kalundborg. As the chief executive officer of the Industrial Development Council of the Kalundborg region explains: “the Symbiosis project is originally not the result of a careful environmental planning process. It is rather the result of a gradual development of cooperation between four neighboring industries and the Kalundborg Municipality” (Desrochers, 2002). The bilateral agreements between the independent
companies were focused on creating revenues or savings for the companies involved and did not evolve with any academic knowledge of scientific environmental network theories, but as good business management (Desrochers, 2002).
Another driving force behind industrial symbiosis is the attempt to keep the cost of compliance with new stricter environmental regulations to a minimum (Parto, 2000).
What is Efficiency?
Efficiency is the “the ratio of the effective or useful output to the total input in any system” (Oxford dictionary, 2016), which means as well that the more efficient a system is the smaller the discrepancy between input and output is. Efficiency can be applied to a large amount of systems, whether it be in biology, physics, earth science or economics. This paper is an effort to combine the different approaches of efficiency according to earth scientists and economic scientists regarding Eco-Industrial Parks.
Companies who are involved in Eco-Industrial Parks are primarily focused on the financial advantages of working together by using the waste and by-products and thus making their production process financial more efficient. Secondarily the environmental aspects of Industrial Symbiosis are taken into consideration by the involved businesses, making more efficient use of resources and reducing waste production. Putting financial component before the environmental component could ensue conflicts inside the Industrial Symbiosis. It is important to define the different views on efficiency in the economical and earth scientific discipline, creating a clear framework from which the efficiency question can be approached. Efficiency; an Earth Scientific perspective
In Earth Science there is not one clear definition of what efficiency in this discipline means. Mostly due to the fact that non-living nature does not have to be efficient because it lacks a purpose. However the input/output ratios can be measured and therefore there is also an efficiency component in most earth scientific processes. The best example of this is the ratio in which the sun uses its resources and turns it into energy.
There is a myriad of different efficiencies in the Earth Science discipline, but the main part of these focus on the more practical, anthropogenic sides of efficiency. In this paper four different efficiencies will be explained and used from an earth scientific perspective. These all have an anthropogenic source and here combine earth scientific and industrial processes. These different approaches to efficiency in this discipline are all necessary in this research to find a definition that can be used in this case study on Eco-Industrial Parks, because they explain how efficiency in is regarded in the smaller sub-disciplines of Industrial Ecology and Industrial
Symbiosis and the case for this study: the Kalundborg EIP. The four efficiencies that will be used and described in this part are Energy Efficiency and Material Efficiency. These Efficiencies were chosen because the water flows in Kalundborg meet these definitions either as energy flow, as material flow or itself in the case of water efficiency.
Energy efficiency
Energy Efficiency’s most simple explanation is to follow the efficiency definition and just fill in the energy input/output ratio for a certain process. However the situation is more complicated than that. Patterson (1997) describes four different components in energy efficiency, which are:
1) Thermodynamics, which are hard to measure due to the fact that in almost all industrial processes the energy input differs from the energy output. This makes it hard to
translate an input into an output and measure both sides in the same way.
2) Physical-thermodynamics, this means the material input/output ratio, thus input is measured as energy or thermodynamics and the output in physical units.
3) Economic thermodynamics measure the input in thermodynamic units but the output in market prices.
4) Economics which measure both input as output in market prices.
For an earth scientific perspective the first two are most interesting because they include the natural features the most, while the last two are either entirely or partly anthropogenic.
Despite the criticism above for most industrial processes there are good systems to measure the energy input into a system and compare it with a more technological advanced system’s
input/output ratio.
Energy efficiency has two interesting sides, regarding resources and economics. Energy resources could be depleted less intensively due to the fact that the input/output ratio becomes smaller and thus more efficient. Economically seen the company would have to pay less for using less resources. This view is a bit simplistic however.
Material efficiency
Materials humans use for producing consumer goods can be divided into four sections: oil (plastics), ores (metals etc.), biomass (wood or paper) and water (Allwood et al., 2011). Of which the first two are nonrenewable and the last two are partly renewable. Material efficiency used to be important in the production process because resources were rare and therefore expensive, however since the industrial revolution resources have become more easy to reach and transporting them became cheaper. The demand for consumer goods has risen and this depleted the earth’s resources. But now awareness has grown about the fact that these resources are not infinite and that the amount of materials used for the production of goods should be reduced. One way to do this is to reduce the input/output ratio considering the materials used. There are a few ways in which material efficiency can be improved. According to Allwood et al. (2011) these four are the most important:
1) Longer life, more use, repair
2) Product upgrades, modularity and remanufacturing 3) Component re-use
4) Using less material to provide the same service
There are however a few barriers which make it difficult to induce the ways of material efficiency as described above. The first major point is economics, because companies tend to have their production process designed to do one process as economically efficient as possible, re-designing the factory in a fashion that enables material efficiency might be too costly. Secondly the policy-makers can make it difficult for example to re-use materials due to health and safety regulations or creating too much bureaucracy which makes the step to work more material efficient less feasible. And thirdly comes the consumer, who tends to buy a new product not when the good loses its utility but when the old product does not longer seem fashionably, convenient or simply because the consuming of goods has been culturally engraved in our systems (De Vries, 2008).
Efficiency; an Economic perspective
Economic efficiency is a broad term that can be broken down into many sub-layers of efficiency. However, the prevailing concept to analyze economic efficiency is Pareto efficiency.
Pareto optimality & Pareto superiority
Under the Pareto criterion, Pareto optimality is reached when a change in the allocation of resources leads to a situation in which at least one party is made better off without making anyone else worse off (Bishop, 1993). Pareto optimality is only reached when a situation has no Pareto superior alternatives (Coleman, 1979). In environmental economics, Pareto efficiency is highly criticized.
The first argument against Pareto efficiency is that it focuses on economic efficiency only and is built on the presumption that only human welfare counts and that only the goods
provided by the market should be taken into account. In this line of thought, something that does not have direct market value does not have a price, therefore the environment is not taken into account in reaching Pareto optimality (Kverndokk & Rose, 2008). Thus, environmental issues are not suitable to be weighed off against the Pareto efficiency principle, because externalities cannot fully be taken into account (Kverdokk & Rose, 2008, pp. 5). Stavins et al. (2003), argue that actual Pareto improvements do perhaps not exist and are at least
exceptionally rare.
Another argument against Pareto efficiency is its failure to take equity into account. According to Tadenuma (2002), creating a situation in which both equity and Pareto-superior efficiency are realized is unattainable.
Efficiency; an integrated perspective
As an alternative for Pareto efficiency, in environmental economics the concept of Kaldor-Hicks efficiency is endorsed. Within the Kaldor-Hicks efficiency, there is room for an earth scientific perspective. Because the Kaldor-Hicks efficiency works with stakeholders, one or more of the stakeholders could be inanimate actors such as the environment. In this way the earth scientific part is integrated in this efficiency, still however as a part of a cost benefit analysis, but one where costs are not only directly monetary but material costs are given a monetary value as well. This means that the Kaldor-Hicks efficiency could be used as the integrated efficiency for this project.
Kaldor-Hicks efficiency
Kaldor-Hicks efficiency is based on the assumption that in any situation the winners can fully compensate the losers for their loss, while still being better off than in an unaltered
scenario (Stavins et al., 2002). Within Kaldor-Hicks efficiency, Pareto-superiority can be reached when the sum of gains minus losses gives a positive outcome. However, it must be noted that the compensation is merely theoretical and that the actual compensation for the losers is left to politics (Coleman, 1980).
Kaldor Hicks Tableau
To be able to account for costs, benefits, stakeholder interest and externalities in practice, the Kaldor Hicks Tableau has been developed. This tableau aims to provide a framework for the evaluation of cost-benefit analyses and policies. In the tableau, the benefits, financing, and costs are offset against the stakeholders involved, resulting in a net outcome of the sum of the costs
and benefits. The tableau can be used to analyze the effectiveness of policy implementation, by comparing multiple scenarios (Krutilla, 2005).
A Kaldor Hicks Tableau looks like this:
Stakeholder A Stakeholder B Stakeholder C Net Cost Benefit Factor 1 C C B 2C+B Cost Benefit Factor 2 B -B C C Net C+B C-B B+C B+3C
In which each cell represents the benefits (B) or the costs (C) encountered by each specific stakeholder. All letters in the cell represent a monetary value.
Trends & Results
Qualifying and quantifying flows in KalundborgIn order to quantify the efficiency data for this research, the scope of the research has to be laid out. Quantitatively the water flows have changed significantly between 1990 and 2002. Even though Kalundborg has been used as a prime theoretical example of an EIP, there have been very few detailed quantitative analyses on Kalundborg (Jacobsen, 2006). The quantitative data
records of the period between 1990 and 2002 are the most recent data records that could be found in the academic literature with regard to water efficiency.
The focus of this research is on water, in particular the groundwater, surface water and wastewater replacements. Jacobsen’s (2006) research illustrated that water and steam flows are suitable resource flows for an in depth analysis. These resource flows make for a clear IS
exchange example, meeting the requirements with regard to geographical proximity, by product reuse and business to business resource optimization.
The Kalundborg region has a large groundwater deficit and the groundwater supplies have gradually decreased over the course of the last 20 years roughly, as the water consuming industries have expanded in size and consumption (Jacobsen, 2006).
Over the course of the years three strategies, spanning from 1961 to 1997, have been implemented to change water use in the EIP. Firstly, the consumption of groundwater was reduced by the introduction of surface water sources for the branches of industry that required most water. Secondly, the industries focussed on increasing the efficiency of its internal water usage and introduced diverse external water sources. By 1997 the surface water was upgraded to a higher standard by bringing it up to drinking water quality. There was also an increase in the import of groundwater from the neighbouring regions (Jacobsen, 2006).
An increased demand for water, caused by the addition of water consuming processes to the industrial park, forced the EIP to rethink their water flows. A prognoses showed that the total of 1,069,000 m3 water consumed in the EIP in 1988, would almost triple and amount to 3,000,000 m3 in 2000 (Jacobsen, 2006). To facilitate this growth, the high-quality groundwater had to be replaced by other types of, low-quality water.
Groundwater → Surface Water
Lake Tissø is situated near to Kalundborg and has provided the EIP with water, ever since its transition from groundwater to surface water. From an economic perspective, the shift to surface water has lead to a large cut in costs. From 1990 to 2002, 30,000,000 m3 of water has been saved due to this transition. Regarding the fact that in this time period groundwater was 3.2 to 2.3 times more expensive than surface water, this lead to annual savings of DKK 7,600,000 (≈ $965,000)1in 2002. The costs to change from groundwater winning to surface water
extraction from Lake Tissø come down to an investment in the pipeline system of DKK 32,000,000 (Jacobsen, 2006). Judging by the most recent data of 2002, this would mean the payback time would be a little over 4 years .
Surface Water → Cooling Water
Since 1988, surface water has been replaced by cooling water from the refinery to a large extent. The Asnaes power plant has been able to cut its surface water intake with
7,611,000 m3 from 1990 until 2002. The latest data of 2002 depict the annual savings generated by the substitution of surface water by cooling water amount to 483,000 m3 leading to savings of DKK1,800,000 (≈ $230,000).
The initial investments to realize the transition from surface water to cooling water come down to DKK 42,000,000 (≈ $5,300,000) of which DKK 2,000,000 was invested in
pipelining and other technical installations, whereas the other DKK 40,000,000 was invested in an installation that is able to make boiler-water quality from both surface and cooling water. However, it must be noted that in a non-EIP scenario an investment of roughly DKK 9,000,000 (≈ $1,100,000) would have been needed in a wastewater treatment facility to treat the cooling water before discharge (Jacobsen, 2006).
Surface Water + Cooling Water → Wastewater
1 All $ amounts have been converted from DKK to US$ by using the 2002 rate of the DKK as compared to the US$, being $1 = DKK 7.88
To be able to decrease even further, an investment of DKK 2,000,000 (≈ $250,000) was made to facilitate the piping of wastewater from the Statoil refinery to the Asnaes power plant. Statoil provides the wastewater to Asnaes free of charge, as the exchange is beneficial for both firms. Firstly, Asnaes can replace part of its surface water and cooling water with a free
alternative, which lead to savings of DKK 58,000 (≈ $7,500) in 2002. Statoil on the other hand avoids the discharge costs that are associated with the release of their wastewater. The discharge fee rate for wastewater is flexible, but measured from 1990 to 2002, the average discharge fee is 13.032 DKK/ m3 (≈ 1.65 $/m3). From 1992 to 2002, about 1,100,000 m3 wastewater was exchanged between the refinery and the power plant. Therefore Statoil’s estimated savings are DKK 14,335,200 (≈ $1,800,000) (Jacobsen, 2006).
Danish Water Policy - Taxes
Ever since the 1980’s the Danish government has given special attention to the aquatic
environment. This has resulted in implementing environmental legislation and policy that was focused on addressing the heavy eutrophication caused by the intensification of the agricultural sector that had started during the 1950’s. This scope was later broadened to include the
emissions of industrial and urban wastewater (Frederiksen & Larsen, 2013).
Policy and legislation took shape in the form of the first Action Plan for the Aquatic Environment (APAE), drafted in 1987. This action plan was largely focused on decreasing Nitrogen and Phosphorus emissions.
Since 1994, the Danish government has phased in a green tax on the supply of water. By the year 1998 the tax reached DKK 5 per m3(≈ $0.63/m3). As a direct result of this tax, the average Danish household water consumption decreased by 21 percent between the period of 1993 and 2002 (Lindhjem et al., 2009). A EU commission funded study on Environmental Taxes and Charges in the EU (Anderson, 2001), revealed that the water supply tax does not affect the industry as industry is exempt from these taxes.
Bragadóttir et al. (2014) describe how in 2012 an additional tax was introduced in order to protect the groundwater resources. This charge amounts to DKK 0,67 per m3 and is addition to the baseline of DKK 5,46 per m3 green tax charged for the supplying of water.
Bragadóttir et al. (2014) continues by explaining that initially the municipalities financed this charge through the supplying of water, and that this charge will be in place until 2017.
Besides the tax measures on the supplying of water and the abstraction of groundwater, a tax on wastewater was put in place. The wastewater tax was fully implemented by 1998 after being introduced in 1997 (Lindhjem et al., 2009). According to the Danish ministry of Taxation
(2009), this tax was introduced to provide wastewater treatment plants with an impulse to improve the existing cleaning technologies and to decrease the amount of wastewater. The content of the wastewater with regards to bio organic material, nitrogen and phosphorus levels determines the charge per unit of pollutant (Lindhjem et al., 2009). This results in a taxation of 11, 20 and 110 Danish Kroner per KG of pollutant respectively. These tax rates have been doubled as per the Danish Tax Reform agreement of May 2009(Lindhjem et al., 2009).
According to the Danish Ministry of Taxation(Anderson, 2001) the taxation system differentiates between household wastewater and industrial wastewater, resulting in the following scheme:
When the treatment plant receives in excess of 15 percent household wastewater, the treatment plant can choose to pay the wastewater tax according to the method of cleaning the water, with tax rates varying between DKK 0.5 and DKK 3.8 per m3(≈ 0.06-0.48$/m3). Whenever the amount of wastewater is 85 percent or more of industrial origin, the treatment plant pays 0.5 DKK per m3 if they have percolation permission. When the treatment plant does not have this percolation permission a tax rate of 3.8 DKK per m3 is upheld. These rates have also been increased as decided by the Danish Parliament, implemented by 2010 (Lindhjem et al., 2009).
When looking at figure 3 of the kalundborg wastewater production vs discharge fee it can be seen that the the wastewater discharge fee increased from DKK 12.91(≈ $1.64) in 1996 to
DKK 15.31(≈ $1.94) in 1997 and DKK 15.63(≈ $1.98) in 1998.
Figure 3: Wastewater production vs discharge fee (data)Source: Jacobsen, 2006
As the discharge fee increases, the wastewater production significantly decreases. The wastewater tax (introduced in 1997 and fully implemented in 1998) seems to have an effect. Even though there is no further data available to support this assumption and further research is needed, this trend should not be ignored.
Withana et al. (2014) describes how Denmark is the only European country that has both the economic (covering operating cost) and the environmental cost integrated into their water pricing system, providing an incentive for efficient water usage.
And this incentive is showing to influence behaviour, as a survey found that 45 percent of Danish households have installed water saving taps, 39 percent have invested in water efficient toilets, and roughly 50 percent have water efficient washing machines. Overall, 40 percent of the the interviewed said that the water price provided an important incentive for them to save water (Withana et al., 2014). This does clearly indicate the general impact that the tax incentives and environmental policy has had on the public perception with regard to efficient water usage.
However, due to the fact that the water supply tax allows for many exemptions with regard to industry, it does not promote the same efficient water usage in industry as has been seen with household water consumption efficiency. It is therefore argued by Anderson (2001) that that the fiscal considerations had the upperhand in the design of the water supply tax, while efficiency and environmental considerations were marginalized.
Obstructions in researching and retrieving data.
While analyzing and visualizing the data from Jacobsen (2006) a graph was visualized
combining the numbers found in that article. As can be seen above by raising taxes, the Danish Government also decided to increase the water price due to groundwater scarcity in certain regions (OECD, 2000; Danva, 2009). Since the early years of the 1990s this led to an increased price of water per cubic meter. This trend follows the same line as the increased use of surface water, which is cheaper and less clean than the potable groundwater used initially. Another interesting trend that can be viewed in the graph is the increased discharge fee and the decreased use of surface water and the decreased production of wastewater. Although these trends may seem logical given the higher prices and the behavior changes in Kalundborg there is a large deficiency in the data that was retrieved. The data from Jacobsen (2006) nowhere showed the initial and later groundwater use. To say anything about the trends of surface water use in relation to the increased prices is therefore an assumption which cannot be made into a full conclusion due to this lack of data. The groundwater usage numbers are necessary to compare the changes in overall water use to the water use with the increased water prices. This data which was lacking in Jacobsen’s article was tried to be obtained from different sources such as year reports from individual companies and from the Kalundborg site itself but was nowhere to be found regrettably. This could have several reasons which are assumptions as well. The main assumed reason is that the companies could either have not saved as much water as intended compared to the years the available data is from or that there has not been a report on Kalundborg’s recent water usage. The last option seems unlikely due to the fact that the website of the Kalundborg EIP (2016) shows a message where they write that in 2010 3 million cubic metres of water have been saved. However the results of this report are nowhere to be found, and even emailing with the Kalundborg EIP gave no clear answer.
Figure 4: Kalundborg water usage vs water prices (data)Source: Jacobsen, 2006
Kaldor Hicks efficiency and policies
To assess the effectiveness of water policy from an economic efficiency perspective, the Kaldor Hicks Tableau is used. To begin, the scenarios have to be established. A main condition is that data are available for these scenarios. Within the research on water flows in the Kalundborg EIP, two scenarios are apparent. Firstly, the a situation in which the three strategies of water flows would not have been applied is examined. In comparison, the second scenario is the scenario in 2002, in which the three strategies of groundwater, surface water, cooling water, and wastewater have been applied and data on the effects are largely available. The stakeholders identified in the Kalundborg EIP are firstly the businesses in the EIP itself, secondly the Government, and finally the Environment. The costs and benefits associated with the water flows in Kalundborg are listed in the table:
Scenario 1 cost-benefit:
EIP Environment Government Net
Groundwater input C C n.d. 2C
Surface water input C C n.d. 2C
Cooling water recycled Waste water recycled
Investment in pipelines Wastewater output C B B C+2B Wastewater tax Cooling water output C C n.d. 2C Net 4C 3C+B B 2B + 7C Scenario 2 cost-benefit:
EIP Environment Government Net
Groundwater input C C n.d. 2C
Surface water input C C n.d. 2C
Cooling water recycled B B 2B Waste water recycled B B 2B Investment in pipelines C C 2C Wastewater output C C B 2C+B Wastewater tax C B B C+2B Cooling water output C C n.d. 2C Net 6C+2B 5C+3B 2B 7B+11C Scenario 1 monetary:
EIP Environment Government
Groundwater
Price: 1.93 $/m3* = $3,600,000 more
Surface water input
Input amount: 3,840,000 m3/year Price: 0.82 $/m3* = $6,400,000 >2** Cooling water recycled 0 m3 Waste water recycled 0 m3 Investment in pipelines $0 <2** Wastewater output 1.40 $/m3* >2** n.d. Wastewater tax $0 <2** Cooling water output n.d. n.d. n.d. Scenario 2 monetary:
EIP Environment Government
Groundwater input
Input amount: n.d. Price: 1.93 $/m3*
= $3,600,000 less than in scenario 1
<1**
Surface water input
Input amount: 2,840,000 m3/year Price: 0.82 $/m3* = $4,700,000 $/year <1** Cooling water recycled 483,000 m3/year Waste water recycled 9,000 m3/year Investment in pipelines $9,600,000* in total >1** n.d. Wastewater output Output amount: 2,333,000 m3/year Discharge fee: 1.76 $/m3* = 4,100,000 $/year <1** B Wastewater tax n.d. >1** 39,300,000 $/year***
output 483,000 m3/year Price: n.d.
All data in this table have been retrieved from Jacobsen, 2006 unless specifically stated differently
*All $ amounts have been converted from DKK to US$ by using the 2002 rate of the DKK as compared to the US$, being $1 = DKK 7.88
** Because the environmental costs and benefits cannot be quantified, a comparison between the two scenarios depicts which costs or benefits are higher for which scenario.
>1 means that either the costs or benefits involved with this cell, as visible from the cost-benefits table, are higher in scenario 1 than in scenario 2.
<1 means that either the costs or benefits involved with this cell, as visible from the cost-benefits table, are higher in scenario 2 than in scenario 1.
*** Data retrieved from “Study on Environmental Taxes and Charges in the EU”, 2001
Due to the aforementioned lack of data, the actual cost and benefits cannot be calculated for each specific cell. However, parts of information are available from which the effectiveness of water policy can partially be assessed. Firstly, although the actual input of groundwater is unknown for both scenario 1 and scenario 2, the center for Industrial Symbiosis in Kalundborg has predicted the yearly groundwater savings to be 1.9 million m3 (The center for Industrial Symbiosis, 2004). For surface water, the annual savings come down to 1.0 million m3. These decreases in water use seem to be related to the price increase in both groundwater and surface water. Whether the price increases are related to supply and demand or to policy intervention is unknown. However, in both cases the increased scarcity of groundwater has lead to the
implementation of the adaption strategies resulting in a considerable decrease in the use of groundwater. Although the use of surface water has overall increased from 1,570,000 m3/year in 1990 to 2,840,000 m3/year in 2002 (Jacobsen, 2006), the new strategies have had its effect in decreasing the use of surface water, as the use of surface water would have been 3,840,000 m3/year in scenario 1. The environmental costs of extracting groundwater and surface water cannot be quantified due to the lack of data, however from the fact that in scenario 2 less of each type is used than in scenario 1 it follows that the costs for the environment in scenario 2 are lower. The role of the government in ground- and surface water inputs is not known because it is uncertain whether policy on ground- and surface water prices is in effect.
The cooling water and wastewater, that are both only being recycled in the second scenario , result in further benefits for the EIP because they prevent the EIP from having to use up other kinds of water resources that would have come to a higher cost. Furthermore, the environment benefits from recylcing because otherwise these water flows would have been discharged and more water would have to be taken from the environment. However, to facilitate the flows of surface water, cooling water and wastewater to and within the EIP, pipelines had to be built. These pipelines do not only account for a cost of $9,600,000 for the EIP, especially the pipeline from Lake Tissø to the EIP also negatively disturbs and therefore affects the
environment.
Water policy has lead to the increase of discharge fees for wastewater and to the
addition of wastewater tax to the discharge fee. The government benefits from this tax by adding the tax incomes to the national treasury. The national benefits for the government's, accrued from the waste water tax added up to $39,300,000 in 1998 (Anderson, 2001). The environment directly benefits from the waste water tax because the government revenue on the tax is
partially invested in groundwater resource protection. Furthermore a clear downwards trend in the production of wastewater is visible (Jacobsen, 2006), as visualized in figure 4.
When assessing the Kaldor Hicks efficiencies of both scenario 1 and 2, scenario 2 is clearly more Kaldor Hicks efficient. Firstly, scenario 2 has lead to seven benefits compared to only two benefits in scenario 1. Secondly, most costs are reduced for scenario 2 in comparison to scenario 1. Although four extra costs have been added in scenario 2, all these costs come either directly or indirectly from the building of the pipeline network that facilitates recylcing and downscaling water from high-quality groundwater to low-quality surface water, and therefore leads to new benefits generated for both the EIP and the environment. However, in scenario 2, one extra environmental cost is added in the form of the distortion of ecosystems because of the
pipeline from Lake Tissø to the EIP. According to the Kaldor Hicks principle, the environment has to be fully compensated for this cost. Even so, overall scenario 2 mainly saves natural resources and monetary resources and provides the option for the monetary resources acquired by the government from tax incomes to be put back into the ecosystem.
Discussion
Criticism on EIPsAlthough Eco-Industrial Parks within the concept of Industrial Ecology may sound as an
innovative and welcome change in the industrial sector there are some critical points that can be made about EIPs.
The foremost comment that is been explained is that companies involved in EIPs are mainly interested in the financial advantages of collaboration in EIPs (Tudor, 2007). This means that the sustainability incentive whereas companies use less resources and reduce the depletion of the earth come as a secondary reason to participate in these projects. When companies do not see a direct or short term effect considering the financial improvements they tend to leave the EIP although the energy or material efficiency was increased (Gibbs & Deutz, 2007). In
Kalundborg the financial incentive seems to be influential as well, because the companies do save considerable amounts of money by using each other’s waste and byproducts (Jacobsen, 2006).
Another part of the criticism on the EIP concept is that there is no clear definition or framework on what an EIP actually is or should be. Because of this, real estate investors and businesses use the name EIP as a marketing tool or as something to sell their products or receive tax benefits from the government (Gibbs & Deutz, 2004).
The EIP in Kalundborg is also still not a closed loop system at all, there is still a large flow of water outside the system as well as other materials that are used in the production processes. To be an ideal Eco-Industrial Park, which is impossible to achieve, all loops must be closed as is in a biological ecosystem. There are still many processes and factors to be enhanced to accomplish this.
Rebound effect
Apart from the different definitions question there is an additional issue that is larger than just Industrial Ecology and EIPs and addresses the eco-efficiency movement as a whole. When innovation leads to a more efficient way of using resources for products the consumer tends to use more of the product or use the product less economical because there is greater availability (Tollefson, 2011). Ehrenfeld (2004) acknowledges this theory for the Industrial Ecology concept, potentially diminishing the gains of the implementation of IE. However there has not been much research in the relation between these theories. Another factor is given by Bunker (1996), where he describes that the more efficient materials are used per unit the more units are used. Bunker writes that for a moral Industrial Ecology system the social groups where the raw materials are derived from should also be concluded in the process of the waste and resource reduction, because they tend to be at the ‘dirty’ start of production.
Data
Due to the fact that the most recent and groundwater data were missing and could not be found anywhere this report fails to give a clear statement about the influence on water efficiency by water policy changes. In further research, when this problem is acknowledged, the data could be retrieved by urging the companies individually to give their water usage data to the researchers or a deeper search in the archives of Kalundborg. This obstacle made it difficult to create a clear answer on the research question but nevertheless interesting assumptions and suggestions have been made.
Conclusion
A lack of data leads to the main verdict that no results found in this research can be established with certainty. However, many implied relations have been found that might lead to the answer to the research question after obtaining more data and doing follow-up research.
For now, the answer to the research question “How does water policy influence the efficiency of the water usage in the Kalundborg EIP?” comes down to assumptions. From the Kaldor Hicks Tableau analysis, it follows that the scenario (2) in which water policies have been implemented and the EIP has reacted to this by applying three water usage strategies, is significantly more Kaldor Hicks efficient than the scenario (1) without policy and strategy implementation. From the results follows the fact that policy implementation has positively influenced the water use in the Kalundborg EIP by creating a scenario in which a decrease in groundwater input and
wastewater generation is clearly visible and also the use of surface water is lower in scenario 2 than it would have been in scenario 1. It is assumed that water policy has been a triggering factor in decreasing water flows in Kalundborg and replacing high-quality water for low-quality water alternatives.
Further research should establish if water policy does indeed function as an incentive to decrease resource use and costs.
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