Living in a bubble: potential gains from flexible water management policies

We study Swedish implementation of the European Union’s Water Framework Directive, and compare the current implementation strategy with more flexible ‘bubble’ schemes, where measures can be traded among various locations within the same river system to reach the overall environmental target. Two different Swedish river systems, the Mörrum system with small-scale hydropower plants, and the Ångerman system with larger plants, are studied. We find that the environmental benefits that current policies are likely to accomplish could be achieved at well under half the cost in the Mörrum system, and at less than a tenth of the cost in the Ångerman system.