Heterogeneity in shadow prices of water pollutants: A study of the seafood processing industry in Vietnam

Abstract

Water pollution poses a critical challenge, especially in fast-growing regions, with profound implications for human well-being. Marginal abatement cost (MAC) estimation is crucial for designing efficient water pollution control policies. This study applied the directional distance function to estimate MACs for three water pollutants (Biochemical Oxygen Demand, Chemical Oxygen Demand, and Total Suspended Solids) within Vietnam's seafood processing industry. Additionally, the paper conducted a regression analysis to investigate the determinants of these MACs, utilizing primary data from 116 seafood processing plants in the Mekong River Delta. The median MACs for Biochemical Oxygen Demand, Chemical Oxygen Demand, and Total Suspended Solids were 2451 US$/ton, 3983 US$/ton, and 5519 US$/ton, respectively. The results revealed substantial MAC heterogeneity. Capital-intensive firms, less labor-intensive entities, those with a more complex ownership structure, entities not situated along the seashore or riverside, export-oriented firms, and those demonstrating higher compliance exhibited consistently lower MACs for the three water pollutants. These findings challenge the efficiency of uniform standards or environmental fees in controlling pollution, suggesting that a tradable permit system could offer a more cost-saving alternative.